How Much Beef Does Brazil Consume

Only two years since Chain Reaction Enquiry'due south report on cattle-driven deforestation, beef production in Brazil has expanded measurably nether favorable political, legislative, and enforcement changes. This development has occurred aslope increased deforestation, fires, and state-grabbing in the Amazon. Investors and buyers in global supply bondage accept responded past demanding more compliance and transparency from the cattle sector. This written report analyses the cattle supply chain and assesses the new political economic system and emerging legislative context that is driving its alter.

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Key Findings:

The Brazilian cattle manufacture continues to abound, contributing significantly to the national economy. In 2019, the livestock sector represented viii.5 pct of Brazil'due south Gross domestic product. A majority (76 percent) of beef produced in Brazil is even so consumed domestically, just exports have steadily increased, with key destinations People's republic of china, Hong Kong, Arab republic of egypt, Chile, the U.Southward., and the Eu.
Cattle ranching is a major driver of deforestation, accounting for 80 percent of Amazon woods clearing. Moreover, forest fires in the Amazon are more frequently occurring in beef-producing zones.
The iii major meatpackers in Brazil – JBS, Marfrig and Minerva – are not monitoring their indirect supply chains yet. Despite sustainability commitments that the companies have made since 2008, recent investigations still connect these meatpackers to purchases of "laundered" cattle originating from areas linked to deforestation, breaches of indigenous rights, or forced labor.
President Jair Bolsonaro's pro-business and anti-regulation policies have weakened enforcement and legislation designed to protect the Amazon. During his 20 months in office, deforestation, fires, and land-grabbing have increased, much of information technology straight attributed to cattle ranching. Reduced resource may further weaken supply chain monitoring.
Investors and companies printing for activity on deforestation and fires as concerns over fiscal and reputation risks grow. Some investors are putting new investments on agree or threatening to divest if the government does not act. Meanwhile, the endmost of the EU-Mercosur agreement is nether threat as deforestation rates increase.
Brazilian beefiness exports to Communist china showed a strong increment during the last year. However, geopolitical rivalries betwixt the U.S. and China, the impact of COVID-19 and the African Swine Fever could create ongoing market volatility.

Beef in Brazil: A primal economic sector with further growth expected

The livestock sector in Brazil has continued to expand and comprises an of import sector for the country'due south economy. In 2019, Brazil recorded the largest beef cattle herd in the world of 238 1000000 caput. Cattle ranching is most prevalent in the states of the North and Key-West regions, though information technology takes identify throughout Brazil. The manufacture's growth since 2016 tin be measured in terms of cattle stocks, beef produced, proportion of full beef exported, every bit well as the sector'southward share of the state's GDP. In all major areas, the cattle industry in Brazil has been growing.

Livestock sector: eight.5 per centum of Brazil's 2019 GDP

Beef production remains loftier and has steadily increased since 2016 (come across Effigy one). This expansion and forecasts for further growth into 2020 are the event of a diversity of factors. These include steady feed prices, increasing domestic demand, and strong demand from Communist china since the outbreak of the African swine fever in Baronial 2018 that decimated pork production across Asia and spurred an increase in Chinese beef imports. The Brazilian beef industry'south optimistic outlook in 2020 likewise stems from the U.S. opening up fresh beef imports from Brazil in February after a ban in 2017 due to concerns about abuse and its impacts on nutrient safety. The COVID-19 pandemic may, nevertheless, negatively touch on this outlook.

Figure 1: Brazilian beef and veal consumption, export data for 2000-20; key importing countries in 2019

Notation: Fresh beef includes chilled and frozen.
Source: USDA FAS , Product, Supply and Distribution information for "Meat, beefiness and veal," accessed online June 8, 2020; and ABIEC, 2020 .

Proportion of exported beef is increasing

Most Brazilian beefiness is still consumed domestically, but the share has decreased in recent years. In 2019, Brazilians collectively consumed almost 8 million metric tons of beefiness and veal – an annual per capita consumption of 38 kg. Stable domestic per capita consumption combined with increasing production means that total exports of beefiness, besides as the proportion of beefiness destined for export markets, have increased over the past v years, from 18 percent in 2015 to 23 pct in 2019. Brazilian consumption of beefiness is, however, projected to driblet past 10 pct in 2020 due to the economic impacts of COVID-19.

Brazil has been the largest exporter of beef in the world since 2017, surpassing its competitors India and Commonwealth of australia by at least 400,000 metric tons carcass weight equivalent (CWE) every year. In 2019, Brazil exported ii.three 1000000 tons, accounting for over 21 percent of total global beef exports. The U.Southward. Department of Agriculture (USDA) projected that Brazil would proceed its export growth trajectory for the adjacent decade, reaching 2.ix 1000000 metric tons, or 23 percent of the world'due south total beef exports, by 2028.

In 2019, fresh beef constituted 82 percent of exports, processed beef 10 percent, and offals and other cuts eight percent. The central importing countries differ considerably depending on the product category (come across Figure 1). Master importers of fresh beef in 2019 were Communist china, Hong Kong, Egypt, and Chile, which accounted for a combined 63 percent of fresh beef from Brazil. The primal importers of prepared or preserved meat, similar corned beef, are the U.S. and the European Union (EU), together importing 72 per centum of processed beef exports from Brazil.

A few large meatpackers go along to command bulk of domestic and export markets

Every bit cattle herds moved into the Amazon, so did the slaughterhouses. Brazil has a full of 265 beef slaughterhouses registered under Federal Inspection (SIF). SIF inspection allows trade across country borders, and frequently includes export approval. The Legal Amazon states, which overlap with significant parts of the Cerrado Biome, are home to 98 SIF slaughterhouses with an estimated daily chapters of up to 50,000 heads of cattle. The ten large meatpackers listed in Figure two account for an estimated 52 percent of this capacity.

Other slaughterhouses fall nether State Inspection (SIE) and take in-state market admission, or municipality inspection (SIM), which restricts their trading to within canton borders. In that location are likewise a number of uninspected plants in Brazil, though they tend to exist small, local abattoirs, and are more common in poor, remote locations with depression population densities.

A handful of meat processing companies continue to boss the Brazilian cattle manufacture, with JBS, Marfrig, and Minerva accounting for the largest capacity. JBS stands out with a daily capacity of 33,000 heads or upward to xviii percent of total domestic cattle slaughtering. Together, the top three operate 60 SIF-registered facilities throughout the country, of which 32 are located in the Legal Amazon states (Effigy 2).

Effigy 2: Leading Brazilian meat processors and their presence in Legal Amazon states, 2019

^aneAssuming 30 working days per month.
^two The Legal Amazon includes around 37% of the Cerrado Biome. States: Acre (AC), Amazonas (AM), Maranhão (MA), Mato Grosso (MT), Pará (PA), Rondônia (RO), Tocantins (TO).

³Minerva's Pará facility is a p re-shipment station and part for export of live cattle .

Source: MAPA ( 2020 ) Locations of SIF-facilities ; visitor websites.

Brazilian retailers remain a key beef sales channel

Supermarkets are the almost important distribution aqueduct for food in Brazil, accounting for more than l percent of food sales. Inside this channel, the leading retail bondage likely account for a big share of the beef volume sold in the country. Figure 3 lists the 5 leading supermarket groups in Brazil. Among them, foreign parents control the four largest retailers.

GPA and Carrefour have stores throughout the country, including several Amazon states. These stores may also source from SIE-controlled slaughterhouses in Amazon states. Grupo Large (formerly Walmart Brasil), Cencosud, and Grupo Muffato are not nowadays in Amazon states and can only source from SIF-slaughterhouses in the Amazon.

Figure iii: Summit 5 Retailers in Brazil, 2020 (estimates)

Source: Abrasnet (2020) ; company websites.

Brazilian beefiness supply chain drives deforestation and human rights abuses

The ongoing expansion of cattle ranching is a key driver of deforestation in the Brazilian Amazon. At that place are various programs to sever this link, just implementation and adherence accept fallen short.

Beef industry remains major driver of deforestation in the Brazilian Amazon

Areas of cattle ranching today overlap strongly with the Amazon and Cerrado biomes in usa of Acre, Maranhão, Mato Grosso, Pará, Rondônia, and Tocantins. Expansion of cattle herds since the 1970s have heavily concentrated in the northern and midwestern regions of the country, which contain the Amazon and parts of the Cerrado Biome. Amidst the almost recent moving ridge of expansion, Mato Grosso has get Brazil'south leading state for cattle product with xiv.1 percent of the land'southward 214.9 million head in 2018. The herds in the Amazonian states Pará and Rondônia grew past respectively 52 pct and 53 percent in the fifteen years since 2003, making them the fourth and sixth largest herds in the country.

Cattle ranching is the major crusade of deforestation in the wider Amazon region – cattle ranchers are responsible for 80 percent of land clearing in every country with Amazon forest cover. Cattle farms range in size, from large-scale company-run farms to small-scale ranchers. Motivations for cattle rearing are similarly diverse, and the beef industry is not ever the economical commuter that facilitates the conversion of forests into pasture. Oft, the key commuter of conversion is the underlying land, which can exist used for different bolt, and rearing cattle is a inexpensive fashion to prevent the forest from growing dorsum.

Figure 4 illustrates the overlap betwixt high concentrations of cattle (left) and loftier deforestation adventure in the Amazon and Cerrado (right).

Figure 4: Brazilian cattle herd, 2019 (heads of cattle) and cattle-driven deforestation risk per municipality

Source: ABIEC (2020) and Trase (2018).

Between 2006 and 2017, agricultural demography data testify that pasture area in the Amazon rose by 19 percent, from 42.iv to 50.6 million hectares (ha) or around 14 percent of the Brazilian Amazon Biome surface . At the commencement of the process, speculators purchase or seize country, sometimes illegally. After the timber is sold, cattle graze on the land for several years, and and so it may exist sold to a farmer. According to estimates, land in the Amazon is five to 10 times more than valuable afterward it has been deforested.

During the last fifteen years, Amazon deforestation rates initially declined from a high level in 2004, just it rebounded in 2013. Since then, woods loss in the Amazon has trended upwardly again, with 2019 seeing a particularly sharp increase, congruent with the Bolsonaro government coming into power (Figure five). Pará, a major cattle ranching state, saw a year-on-yr increase in forest loss of 52 percent. This development is the result of weakened enforcement of ecology regulations and a perception among perpetrators that they will not be penalized, resulting in an increase in illegal logging, ranching, mining activities, and human being-made fires for land clearing. The upward trend continued during the first five months of 2020, with deforestation increasing by 34 percent y-o-y.

Figure 5: Annual Amazon deforestation statistics, accumulated Baronial one through April 30

Source: INPE (2020).

Brazil sees an increment in fires events every year between July and October, just 2019 saw a particularly destructive fire season. These fires – which burned 3.7 percent of Brazil'due south landmass – were related to clearing for agricultural purposes, maintaining current areas for cattle grazing, and preparing land for tillage. On August 10, 2019, a 24-hour interval coined dia do fogo (fire solar day), farmers and land-grabbers planned coordinated fires to send a bulletin to President Bolsonaro to limited their shared involvement of expanding the agricultural frontier further into the Amazon. In Pará, fires in the municipalities of Novo Progresso and Altamira on that increased past 300 percent and 743 pct, respectively.

Figure 6: Estimated beefiness buying zones (left) overlapped with 2019 fire alerts in the Legal Amazon (right)

Source: The Guardian and the Agency of Investigative Journalism , 2019.

One analysis establish that fires betwixt July and September of 2019 were iii times more than common in beefiness-producing zones than in the rest of the Legal Amazon (Figure 6). Of the 376,000 burn down alerts institute in these boundaries during the study period, over 225,000 alerts were in JBS' estimated ownership zones, another 80,000 alerts in the estimated buying zones of Marfrig, and 66,000 alerts in the estimated ownership zones of Minerva.

In the major cattle-ranching states of Mato Grosso and Pará, 78 percent of the SIF slaughterhouses purchased cattle directly from properties that had a forest fire between January 2019 and early February 2020. Near all slaughterhouses (98 percent) processed animals raised by indirect suppliers with a recent forest fire. Again, many of these direct and indirect suppliers supplied JBS, Marfrig, and Minerva.

Political context: Undermining enforcement and weakening legislation

Since President Bolsonaro's inauguration in Jan 2019, conservationists and human rights advocates accept argued that his pro-concern, anti-regulation calendar has undermined environmental and social protections for the Amazon and its inhabitants. In detail, Bolsonaro'southward assistants has expanded the previous government's deportment to cut funding and enforcement policies of IBAMA. In 2019, IBAMA's budget shrunk by 25 percent as part of government-wide funding cuts, including a 23 percentage cutting in the funding for the prevention and command of forest fires. The drop in ecology fines since 2016 sheds calorie-free on how funding and staff cuts have impacted the bureau in the last four years. Environmental fines, although rarely paid, are i of IBAMA'due south principle tools for enforcing conservation laws. The records of these fines make it difficult for farmers to access rural credit lines. IBAMA handed out 12,266 fines across the state for environmental infractions in 2019, down 17 percent from the previous year. In the Legal Amazon states, fines fell past 25 percentage from 2018 to 2019, and the total may be lower in 2020 (Figure 7).

Figure 7: Ecology fines handed out in the Legal Amazon, 2000-2020

Source: Ibama , 2020; Note: 2020 figures run from January 1 to May 29.

Bolsonaro has proposed legislation to facilitate land-grabbing and allow logging, farming, and mining in forested areas. These initiatives are linked to his pro-growth economic agenda. In February 2020, Bolsonaro introduced a pecker to open protected indigenous territories to commercial mining, but information technology was recently accounted unconstitutional. In May 2020, the government transferred oversight of federal natural reserves – including public forests – from the Ministry building of Surroundings to the Ministry of Agriculture, setting a path for legal commercial expansion into previously protected areas. The regime also denounced a long-held deterrent machinery that allowed IBAMA to destroy illegal encroachers' equipment to safeguard protected areas and ethnic reserves. In July 2020, the authorities fired an official at the national infinite agency INPE, simply days after the agency published new figures on increased deforestation.

In the latest of these legislative developments, the Bolsonaro administration proposed a controversial country pecker that would fast-track regularizing deeds for seized country. It expands on a 2017 law granting amnesty to so-called "squatters" who illegally seized public rural lands between 2005 and 2011. Oft, squatters will clear the land to both merits the territory and raise its value for agribusiness and cattle ranching operations. The suggested nib elaborated on a policy that ecology advancement grouping Imazon had already warned volition accelerate deforestation in the Amazon of upwards to 1.vi 1000000 ha by 2027. Retailers, civil society organizations, and investors in Brazil and across the world oppose the proposed legislation, equally well as the Federal Public Prosecutor's Office. Even though voting on the beak was delayed and it ultimately expired, a new beak with comparable provisions has already been introduced.

Meanwhile, on July 6, the Brazilian Attorney General's Office called for the removal of Environment Minister Ricardo Salles for the "willful disruption of ecology protection structures." The accusations referred specifically to the driblet in ecology fines to their lowest level in 20 years while forest fires and deforestation take achieve tape levels. They also mentioned the sacking of ecology inspectors after they carried out successful raids against criminal groups.

Lagging implementation and enforcement undermine sustainability promises

Initiated by broad reporting and candidature to expose the cattle industry's practices of illegal deforestation and forced labor, major meatpackers signed two agreements in 2009. The four major beef producers (JBS, Marfrig, Minerva, Bertin – acquired by JBS later the same year) signed multilateral Cattle Agreements (G4) initiated by environmental NGO Greenpeace to increase sustainability in the sector. Legally binding Terms of Aligning of Conduct (TACs) with the Federal Prosecutor's Office of Pará every bit a federal analogue to the G4 (Box three) followed the initial agreements. The TACs commit the meatpackers to not buy cattle from illegally deforested areas, ethnic lands, conservation units, or areas with links to forced labor. Initially express to Pará, TACs have since expanded to other Amazonian states, including Acre, Amapá, Amazonas, Mato Grosso, Rondônia, and Tocantins.

More than than t en years on, a lack of political will, limited accountability, and inadequate monitoring contribute to lacking performance of the agreements. Periodic audits past the Federal Prosecutor'south part monitor enforcement of the TACs. Additional systems that are suitable to improve control implementation and adherence to the terms of the TAC and legislation be, but they are undermined past a number of key factors.

ane – Monitoring focuses on tier-1 suppliers

The cattle supply chain is circuitous as information technology often involves various locations from nascency to slaughter, leading to dissimilar levels of transparency and visibility. For each directly, tier-1 supplier of a meat processor, i or more than indirect suppliers may too be involved. The process may include several transactions of animals between birth (the calving ranches) and the fattening stage before slaughter (Effigy 8). Research indicates that fourscore pct of direct suppliers in the Amazon bought cattle from other properties earlier selling to a slaughterhouse. On boilerplate, a transaction with a direct supplier included purchases from 15 indirect suppliers.

None of the Brazilian meatpackers currently monitor their indirect suppliers. The G4 meatpackers say that they are confident that their cattle purchases exercise not come from areas that violate their sustainability agreements. However, they too admit that they cannot determine the origin of many of these cattle. Their monitoring systems to manage deforestation risk are largely limited to direct suppliers and still do not include auditable systems for indirect suppliers. BNDES' appear in 2009 that financial support to the major sector actors would depend on the implementation of full supply chain traceability from birth to slaughter via earring or chip past 2016, but the bank failed to attain this goal.

2 – Fraud in the Rural Environmental Registry (Car)

The G4 meatpackers made initial progress in monitoring suppliers past following the institution of new monitoring and enforcement protocols. The protocols required the registration of properties in the Rural Ecology Registry (Auto). Slaughterhouses use georeferenced information on holding boundaries from the CAR to monitor cattle suppliers. All the same, the federal government system is based on the cocky-declaration of properties and lacks independent verification for accurateness. The declaratory gear up-upwards of the CAR allows for partial registration. This means that landowners may create artificial administrative boundaries between parts of the farm that deforest and other parts of the farm from where cattle are supplied. This fix-up violates official rules for the CAR as it allows landowners to falsely leave illegally deforested areas out of their property. Thus, they are able to avoid being blocked in monitoring systems.

three – Cattle laundering

Cattle laundering includes animals being bred, raised, or fattened on ranches that are not complying past the G4/TAC agreements – that is, areas with contempo deforestations, embargoes, or without registration – and then sold to a "make clean" subcontract. Though this system, the cattle tin be channeled into the regular supply chains (Figure 8). The following strategies are used to wash cattle destined for a compliant abattoir:

Ranchers have multiple properties/Machine registrations. They heighten cattle on embargoed or otherwise restricted areas and move them to a compliant and Auto-registered holding of the same possessor. The same owners move cattle between multiple properties that they have registered in the CAR. This process is referred to as "triangulation."
Calving ranches and other intermediary cattle-raising locations sell cattle to intermediaries or tier-one suppliers that are not showing up on the Brazilian Environmental Institute (IBAMA) or land embargo lists. The intermediaries or tier-1 suppliers tin can and so sell to signatory slaughterhouses.

Considerable evidence in the last two years has shown that cattle-laundering practices are allowing beef raised on non-compliant lands to enter supply chains of TAC/G4 meatpackers, as well as existence exported to key markets.

Figure viii: Brazilian beef supply chain stages (2019 volumes)

Source: CRR, based on ComexStat data.

4 – Restricted access to Auto registrations and animal transport documentation

The restriction of public access to data regarding CAR registration and transport documents for movements of a herd of cattle between rural properties and from ranches to the meatpacking plants hinders the ability to uncover laundering practices. The Animal Transport Permit (GTA) is obligatory for veterinarian wellness reasons. State animal wellness command agencies outcome permits when animals are transported from one property to another. Meatpackers debate, all the same, that GTA data is non easily accessible to them for the purpose of supply chain monitoring. The Ministry of Agriculture argues that GTAs contain information that falls under privacy constabulary. In addition to the lack of transparency, some claims suggest that the lack of inspection could lead to a large number of registered animals being linked to a minimum piece of legal state. While implementation needs strengthening, integration of Auto and GTA could support a more robust monitoring of compliance with legislation and avoid laundering of illegally raised cattle. Various researchers are currently exploring methods to analyse property and animal transportation data for the purpose of supply chain monitoring.

5 – No sanctions are applied for breaches of the TAC

Lack of enforcement undermines the bear on of TACs. In 2018, the MPF published the results of the first TAC audits. While various links between TAC slaughterhouses and illegally produced cattle were uncovered, none of the affected slaughterhouses received a punishment. The agency considered the results of companies with upwards to 30 per centum of irregular purchases in 2016 to be satisfactory, but also did not apply sanctions to audited companies with shares higher than 30 percent. Seventeen TAC slaughterhouses acquired more than 245,000 head of cattle from irregular farms. Of this full, at to the lowest degree 146,000 animals came from locations that deforested in the Amazon. Other irregularities involved purchases from farms embargoed by IBAMA or from locations without a Automobile.

half-dozen – Not all slaughterhouses have signed the agreements

Slaughterhouses in the Amazon that have not signed agreements to tackle deforestation held 30 pct of agile slaughter capacity in 2016. According to Imazon enquiry from 2017, 23 of these active plants held licenses to export beyond state borders. They do not monitor the origin of cattle and create leakage of deforestation-linked beefiness. As the Public Attorney Daniel Azeredo said at the launch of the 2nd audit results in November 2019, "No company that today buys from the Amazon can say that it does not have cattle coming from deforestation (…) No meatpacking visitor and no supermarket either."

vii – Lack of regulation and monitoring in the Cerrado biome

Cattle-driven land conversion in the Cerrado is not regulated or monitored to the same extent equally conversion of areas in the legal Amazon. Sustainability commitments in the sector do not extend to covering cattle coming from land converted in the Cerrado, despite this biome being recognized as an of import biodiversity hotspot and a region in which cattle ranching is expanding.

Top-3 meatpackers demonstrate high compliance for direct supply chain just petty progress on indirect supply chain monitoring

TAC audits commissioned by the large meatpackers written report high levels of compliance for direct suppliers, but their connections to indirect supply remain largely out of sight. TAC signatories accept used a combination of tools, including geospatial and socio-environmental monitoring, to verify compliance against registers of ranches embargoed due to illegal deforestation, forced labor, or other problematic conduct. Nevertheless, these tools are withal limited to the directly supply chains, leaving out the large group of indirect suppliers.

JBS refuses to reply direct questions almost its share of beefiness sourced from indirect suppliers. The 2019 audit of commitments nether the G4 states that "[i]northward the instance of indirect suppliers, JBS has not nevertheless been successful in implementing traceability processes." The company highlights the demand to admission GTAs to exist able to identify indirect suppliers. JBS has discussed options for introducing a green GTA ("GTA Verde") with the Ministry of Agronomics, Livestock and Supply (MAPA). MAPA's GTA issuing organization would automatically cross-cheque data from the requesting farms with information on areas embargoed by the ecology authority IBAMA for illegal deforestation. JBS would then request that its direct suppliers purchase from only properties that sell animals with "GTA-Verde."

Meanwhile, the company further reduced its already express supply concatenation transparency. In 2019, JBS took down a website that permit customers search product codes for the proper name and coordinates of the terminal farm to rear the animal earlier slaughter. Customers are now redirected to another site, which only provides the name and municipality of the ranches simply no precise location. The company cited legal concerns based on the Brazilian Full general Data Protection Regulation. An upcoming CRR report on JBS shows that the deforestation exposure is significantly higher in its indirect supply chain than in its direct supply concatenation, and that large strands of native vegetation are at risk.

Marfrig admitted that 53 percent of its cattle in the Amazon is sourced from indirect suppliers. The company has only signed into the G4 public livestock commitment, but not the TAC in Pará. This means that it does non deliver audits to the Federal Ministry building.

Marfrig has used a voluntary self-declaratory machinery for its suppliers called a Asking Class of Information (RFI) since 2013. The company asks the subcontract delivering the cattle to provide the name of its supplier, including tax number and the proper name of the farm. In 2019, thirty pct of Marfrig's cattle supply from the Amazon came with the RFI. The company states that it aims for 100 percent of its indirect suppliers to be covered past an RFI by 2025. Similar to JBS, Marfrig says that it has no systematic verification of indirect suppliers amid "the lack of a nationally implemented public traceability policy [which] makes it difficult to implement such a verification."

In July 2020, Marfrig announced that information technology volition implement a five-year project to track cattle from disquisitional areas in the Amazon. The visitor fabricated this statement in parallel with its signing on to a business letter from 38 Brazilian and international companies that offered support to the federal authorities to discover solutions to sustainability issues, including combating illegal deforestation in the Amazon and other biomes. Traceability information published on Marfrig's website allows customers to identify the name of the last farm and the municipality, just no precise location.

Like its principal competitors, Minerva reports high compliance for its direct supply concatenation, but fails to monitor indirect supplies. In its latest audit report published in 2020, the accountant concluded that the company has non met standards on indirect suppliers, "given that the monitoring of these indirect suppliers depends on support and investments from the government in technologies that promote the traceability of cattle from birth to slaughter." Minerva has not made any statements on its share of indirect supplies in its cattle purchases.

Regarding transparency, Minerva offers an origination agenda for Pará on its website. Notwithstanding, Minerva merely offers the name of the municipality and holding. It also does not provide data on sourcing in other states.

In July 2020 , new supplier monitoring and protocols for TAC slaughterhouses were implemented. The new protocols, developed by the Ministry building of Agriculture, Livestock and Supply (MAPA) in cooperation with NGO Imaflora, meatpackers, and retailers, aim to standardize monitoring approaches across the industry. In addition to geospatial analysis to identify illegal deforestation or activities on ethnic lands and the checking against embargoed areas, MAPA added a new standard. It is a "theoretical index" of livestock productivity per hectare per year. Slaughterhouses will apply this alphabetize to identify suspected cases of laundering cattle. The property will exist classified as suspected and should exist delisted as a supplier if a livestock supplying property has productivity above the maximum quantity established and cannot justify it with the use of more than productive production systems such as confinement. However, this protocol only defines rules for straight suppliers. Rules for indirect suppliers will non be divers until the side by side phase of the project.

Laundering persists in beef supply chain

In 2017, the Common cold Meat ("Carne Fria") investigations by Brazilian government agencies in Pará revealed that JBS was among the meatpackers sourcing cattle from illegally deforested country . In the following year, the first audit of the TAC agreement was published covering 2016. JBS showed the highest absolute number of irregular purchases, equivalent to xix percentage of the company's purchases.

The 2d circular of TAC audits performed by the Federal Public Ministry (MPF) and published in Nov 2019 found irregularities in 6.25 percentage of cattle transactions in Pará. Companies that had less than 30 percent irregularities in previous audits were allowed to limit the new 1 to a sample of l per centum of the largest suppliers and v percent of the smaller suppliers. Other changes in the inspect rules, including a threshold of 6.25 hectares for areas to be considered deforested, may also have lowered the share of irregularities. The share of non-compliant purchases per company varied between 0-78 percent (Figure 8). While staying below twenty percent of non-compliant purchases, Frigol and JBS stand out with the highest accented numbers of cattle purchased in breach of commitments.

While meatpackers refer to a lack of data accessibility, none of them have signed upwards for an existing tool that allows computerized tracking of near indirect suppliers. The National Wild fauna Federation (NWF), in cooperation with researchers from Glue at the University of Wisconsin, developed Visipec, a computerized tracking tool that uses government data to document the movement of cattle from calving farms to the slaughterhouses. Linking CAR registries with the GTAs, it has the potential to increment the monitoring coverage from 17 percent to 85 per centum. Despite existence bachelor gratuitous of charge to major meatpackers since 2019, none of them are using it.

Figure 9: Irregularities in cattle purchases by TAC signatories in Pará –cattle heads/share in purchases

Note: Published in November 2019, referring to figures for 2017
Source: Ministério Público Federal , 2019

Frequent cases of laundering in supply chains of acme iii meatpackers uncovered

Investigations past journalists, researchers, and NGOs have regularly uncovered cases of non-compliance in cattle supply chains linked to leading meatpackers. Examples from 2020 illustrate the scale of the problem.

In March 2020, Gibbs Land Utilize and Surround Lab ( Gum ) published research on European union exports of beef linked to Amazon deforestation. The research is based on the SISBOV identification systems for bovines, which is obligatory for beef to be eligible for export to Europe subsequently slaughtering in SIF slaughterhouses under regulations to prevent pes-and-mouth illness. The system covers around 1 per centum of Brazil's cattle ranches. The research plant that 138 farms that sold cattle to EU-consign approved SIFs in 2019 purchased cattle from around 300 indirect suppliers with almost thirteen,000 ha of deforestation between 2010 and 2017. JBS, Marfrig, and Minerva were the only EU-exporting meatpackers that bought from the properties with Amazon deforestation in 2019.
In June 2020, Greenpeace published evidence that cattle grazing on deforested country within the Ricardo Franco national park in Mato Grosso was existence sold to JBS, Minerva and Marfrig. The cattle were laundered through a nearby farm called Barra Mansa, which sold cattle to slaughterhouses in Mato Grosso endemic by JBS, Minerva, and Marfrig between 2018-19.
Also in June, investigations by Repórter Brasil linked JBS and Marfrig to unauthorized deforestation in the Cerrado Biome. Both slaughterhouses received cattle from farms which deforested Cerrado vegetation between 2011 and 2016 without the required environmental licenses. JBS signed a more comprehensive understanding in 2011 that covers the so-called Legal Amazon and part of the Cerrado.
While commercial cattle ranching is illegal in reserves and ethnic territories, encroachment and murder have repeatedly been linked to cattle ranching in the Amazon. In July 2020, Amnesty International documented several instances of cattle from illegal ranching in reserves in the Amazon state of Rondônia that entered JBS' supply chain. In an investigation of cattle laundering published in June 2020, Repórter Brasil found that cattle existence raised on various farms in the indigenous territory of Apyterewa in Pará were sold to various nearby farms exterior the territory borders. These farms then sold cattle to slaughterhouses owned by meatpackers Marfrig, Frigol, and Mercúrio. In March 2020, Repórter Brasil alleged that JBS and Marfrig sourced cattle indirectly from land owned by a avoiding named de Souza. He was charged in 2017 with the murders of ix men who were squatting on remote forest land, known every bit the Colniza slaughter.

Brazilian retailers are highly exposed to deforestation risks in beef supply chain

Brazilian retailers as the central sales channel for domestically produced beef are highly exposed to deforestation risk in their supply chains. Risks are related to sourcing from the large meatpackers, and even more so from the 30 percentage of slaughterhouses not covered by cattle agreements. Nonetheless, due diligence procedures on compliance with ecology and labor law in Brazil are limited. Large retailers publish more often than not vague information about their meat supply chains. As a representative of meatpacker Mercúrio said, retailers seek quality just nigh importantly depression prices. Environmental bug are non on a priority when retailers make their purchases.

The case of French Casino group, the parent of Brazilian retailer GPA, illustrates the risk exposure of retailers due to their function in the meat supply concatenation. The French NGO Envol Vert published an investigation in July 2020 which links GPA's Brazilian beefiness supply chain with Amazon deforestation. In addition to reputation run a risk, the lack of supply concatenation monitoring and risk mitigation could too expose the company to legal risks as it may be in breach of French republic's due diligence law (come across beneath).

Operational, legal, and reputational risks for beef supply concatenation actors and investors continue to increase

The persistent agin impacts of the cattle supply concatenation on the environment could pose an existential threat to the Brazilian beef manufacture. Policymakers, investors, and buyers increasingly recognize sustainability risks that are contributing to deforestation and are starting to deed on them. These risks tin be categorized into policy and legal risks, marketplace risks and reputation risks, all of which may bring nigh material financial implications.

Policy and legal risks as due diligence laws and disclosure requirements are progressively tightened

Regulations in major consumer markets accept become increasingly tightened to reflect concerns over environmental and social impacts of international commodity supply bondage. This regulation includes requirements for supply chain monitoring as well every bit measures for fiscal institutions.

The French National Assembly passed a law in 2017 that requires larger companies to establish a "plan of vigilance" and a risk map for identifying risks of homo rights, health and security, or environmental violations in their global supply chains. This law could be the first of its kind.
In Germany, discussions on a due diligence law to come across human rights and fair competition standards are also advancing. In April 2020, the European Commission alleged that it volition introduce mandatory regulations requiring businesses to undertake due diligence to mitigate human rights and environmental abuses in their supply chains.
The EU non-fiscal reporting directive seeks to increase transparency on social and environmental challenges. Furthermore, the Eu is discussing regulatory and non-regulatory measures to achieve deforestation-free supply chains.
In the U.Due south., the Trade Facilitation and Merchandise Enforcement Human activity allows restrictions on the import of goods produced with forced labor.

Meanwhile, the closing of the European union-Mercosur agreement is under threat due to concerns of deforestation and forest fires in the Amazon. The bargain aims to cut or remove trade tariffs, reducing the price for imported products while also boosting exports for companies on both sides. Already in August 2019, members of the European Parliament called to block the deal unless the Brazilian government honors its environmental commitments. The current version of the agreement remains vague in relation to supply chain management though in that parties shall "[…] promote the voluntary uptake by companies of corporate social responsibility or responsible business practices."

Market access and fiscal risks abound every bit investors and buyers withdraw

Awareness of the bear upon of deforestation and fires on climate and biodiversity is increasing, leading to more calls from the business and finance community to human activity against deforestation. Ongoing reporting of increased deforestation and fires in the Amazon, encroachment into the Cerrado, and continued human rights abuses on both cattle ranching land and in meat processing factories has raised doubts about the effectiveness of current policies and implementation systems. It has also raised doubts virtually their ability to bargain with the complexity of the cattle supply chain.

Investors as well as companies accept called on the Brazilian regime to deed confronting deforestation and wood fires.

In December 2019, David Boyd, the United nations Special Rapporteur on Human Rights and the Environment, urged the International Finance Corporation (IFC) to reconsider its investment in Minerva. The Globe Banking concern's investment arm holds a 3 percent stake in the meatpacker and provided a USD 63 meg loan in 2013, of which 45 percent were outstanding in March 2020. In light of the global climate crisis, he stated that the Bank should divest from companies that fail to run across criteria of climate protection and respect for human rights.
In October 2019, a group of 244 investors representing more than than US$ 17 trillion in assets expressed business concern virtually the financial impact of deforestation and forest fires.
In May 2020, more than 40 European companies, including leading retailers like Tesco and Marks & Spencer, threatened to cold-shoulder Brazilian products if the country passes the controversial land reform that risks fueling further Amazon deforestation.
In June 2020, 30 leading international financial institutions managing more than USD 3.7 trillion in total assets expressed concern about the lack of a stable and predictable regulatory and environmental framework in Brazil and policies that are aligned with sustainability. Signatories are specially concerned virtually the beef industry, voicing their intention to divest from woods-risk sectors and regime bonds if no progress occurs in stopping the Amazon destruction. Some investors are putting new investments on concord or threaten to divest if the government does non deed.
In July 2020, a group of 40 national and international company and financial sector representatives delivered a letter to the Brazilian Vice President, calling on the government to gainsay illegal deforestation. CEOs of Brazilian companies met separately with the Vice President. In response, the authorities promised to step upwardly deportment confronting deforestation. Equally voluntary measures take non solved the problem, the CEOs also asked the authorities to implement legislation for supply chain tracking.
Too in July 2020, Nordea Nugget Management excluded JBS shares worth about USD 47 one thousand thousand from all of its funds. The asset manager pointed to the company'due south environmental record and response to the COVID-19 pandemic, and the unsatisfactory outcome of a catamenia of appointment.

In reaction to the concerns expressed by investors and companies, the Brazilian president issued a decree that bans the setting of fires in the Amazon for 120 days. This repeats a similar temporary ban instituted in 2019. Still, the electric current burn down season in the Amazon has seen the worst start in a decade, showing a 17 percentage increase y-o-y in the first 10 days of August.

Fiscal risks from stranded assets, increased financing costs, reputation damage

Fiscal stakeholders (shareholders, bondholders, banks) could face up increasing risk from violations in the meat supply concatenation. The value of their investments could be affected by stranded assets. The switch to competitors with ameliorate ESG credentials and to meat alternatives, too due to health reasons, could lead to lower volumes and earnings. Fines could also touch on earnings. Financing costs for companies active in the meat chain may increase, as lagging ESG ratings are increasingly linked to price of debt and price of capital letter. Finally, the overarching reputation value could be afflicted materially every bit meat and its supply concatenation could go the next "tobacco."

COVID-19 shocks global economy and trade; China plays key office in trade policy

The COVID-19 pandemic has already had a profound impact on the global economy and international trade. Companies are likely to endure losses as a event of foreign exchange fluctuations. In the example of Brazil, the weak Real has boosted the country'southward agricultural exports in recent months though. For the time being, the affect of the pandemic on global trade and markets remains highly unpredictable.

Brazil beef exports experience boom in showtime half 2020

While Communist china remains the key commuter of Brazil's beef export boom, the Ministry of Agriculture, Livestock and Supply in Brazil also reported an expansion of export authorizations in new markets and increasing purchases in other Asian and Middle Eastern destinations. Overall, Brazilian exports of fresh, chilled, and frozen bovine meat in the starting time half twelvemonth of 2020 showed a thirteen percent increase in volume compared to the same period in 2019. The minister speculated that some countries have increased imports of agricultural products due to concerns of possible shortages post-pandemic. However, this increase is coming at the expense of minimum germ-free measures, which often tedious down the production process and have in the past been used as trade barriers. Some in the industry also predicted stronger U.S. demand for beef imports amid worries about shortages due to virus outbreaks and deaths in meat processing plants in Apr. However, President Trump has since signed an executive gild effectively forcing U.South. meat processing plants to remain open among the pandemic.

Brazil currently has the second-highest number of COVID-xix-related deaths in the globe, with meat-packing plants condign a primal hub of outbreaks. Major processing plants in Brazil, including those owned by JBS, Marfrig and Minerva, have been ordered to close downward due to outbreaks of the virus on workers. A JBS plant in Rondônia shut down in May. All the workers tested positive for the virus and the outbreak at the found was accused as beingness the source of more than sixty pct of cases confirmed in the municipality. Prosecutors accept estimated that a quarter of the cases in the state of Rio Grande practice Sul can be linked to 24 meat plants.

Chinese trade policies may favor Brazilian beef merchandise; COVID-19 bear on remains erratic

Chinese trade policy has a profound touch on the global beef trade, as information technology is currently the largest importer of beef in the world, bookkeeping for USD eight.ii billion or 16.5 percent of the value of total fresh and frozen beef imports. Adverse effects of the pandemic on U.South. and Australian beef trade with China could potentially boost Brazilian exports to the country this twelvemonth and across, but information technology is besides early on to say. The beginning one-half year of 2020 saw an increase in the book of Brazilian bovine meat to People's republic of china by 148 percent compared to the previous year, while the value increased by 165 per centum. A potential trade understanding on agricultural products between the U.South. and China has allegedly been progressing, while Mainland china has updated its list of U.South. facilities that can export meat and other products. Nonetheless, the pandemic's effects on ascension tensions may yet curtail these efforts. The heightened geopolitical rivalries between the U.S. and Cathay has created opportunities for Brazil to constitute itself equally a long-term supplier to China.

However, concerns around COVID-19 have led to various Chinese import restrictions in recent months. In July 2020, Chinese customs authorities introduced a requirement for slaughterhouses to provide certification of coronavirus-gratis products and embargoed several slaughterhouses. Virus fears led to China'south almost populous province, Guangdong, announcing a suspension of imports of frozen meat on Baronial twenty.

Pressure from Mainland china in relation to deforestation is expected to remain low for now. Trade representatives stated that China is non going to interfere in domestic matters of other countries.

Notwithstanding, the COVID-19 outbreak may further stimulate consumer interest in constitute poly peptide-based meat alternatives. Notwithstanding their currently still small market share, dietary changes are expected to lead to a rapid growth of this market segment. Looking at China, even before the pandemic, the value of the country'due south market for alternative proteins was expected to grow from but under USD 10 billion in 2018 to about USD 12 billion in 2023.

It remains uncertain for now what the longer-term touch on of the COVID-nineteen outbreak volition be on trade and the global economy in general, and the Brazilian beef sector specifically. The COVID-19 crisis adds to other sustainability concerns linked to cattle ranching and the related conversion of natural habitats. Deforestation is not just linked to biodiversity loss and climatic change, but also increases the risk of future infectious diseases.

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Source: https://chainreactionresearch.com/report/brazilian-beef-supply-chain-under-pressure-amid-worsening-esg-impacts/