JBS scandal might reduce Brazil meat supplies, industry group says

Sao Paulo/Cuiaba | Reuters — An unfolding corruption scandal involving meatpacker JBS SA may reduce meat supply in Brazil, potentially benefiting rivals of the world’s largest beef exporter, industry group Abrafrigo said.

Since the scandal broke, JBS and ranchers have been at odds, with the company deciding to stop buying cattle for cash and producers reluctant to sell on credit, analysts said.

In some parts of the country, JBS is the only buyer and ranchers are worried.

“In export markets, there is no substitute for JBS in the short term. In the domestic market JBS is likely to lose share,” said Pericles Salazar, head of Abrafrigo, which represents smaller meat processors. “There is plenty of idle capacity in the sector.”

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JBS’ future became uncertain after board chairman Joesley Batista admitted to paying bribes to politicians in exchange for favors that benefited his business interests.

The company announced late Friday that Batista has resigned as chairman and member of the JBS board.

Tarek Farahat, a JBS board member since 2013 and the company’s president of marketing and innovation since 2015, was elected chairman at a board meeting Friday, the company said.

“There is a significant amount of work to be done in order to regain the trust of our stakeholders,” Farahat said in a release.

On Thursday, Brazil’s Agriculture Minister Blairo Maggi said he had long worried about the size of the meatpacker and criticized state development bank BNDES for helping it build a dominant market position.

In the state of Mato Grosso, Brazil’s largest grains and cattle region, JBS accounts for 48 per cent of all cattle slaughtered.

JBS did not have an immediate comment on its relationship with ranchers.

Marfrig Global Foods SA, one of JBS’s largest rivals in Brazil, believes it is early to determine the impact on cattle supply stemming from potential issues opposing JBS and ranchers.

“We have not noted an impact on supply related to these commentaries,” Marfrig’s CEO Martin Arias told Reuters, in relation to market chatter.

Still, as JBS halted cash purchases of cattle, producers in Mato Grosso asked the government to eliminate the ICMS tax on interstate cattle sales.

The aim is to sell animals to processors willing to pay cash in other states, said Luciano Vacari, president of ranchers group Acrimat.

Wagner Bacchi, president of the Mato Grosso meat institute IMAC, said JBS’ competitors sought to take advantage of the turmoil caused by the company.

Since JBS’s revelations, competitors lowered the bid price for cattle cash purchases, putting pressure on Mato Grosso producers, Bacchi said.

Reporting for Reuters by Ana Mano and Roberto Samora. Includes files from AGCanada.com Network staff.

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