PLEA BARGAINING
New shock was triggered when JBS executives entered into a
pleabargainagreementwith the Federal ProsecutionService. JBS is thebiggest companyof
the sector inBrazil, responsible for 25percent of all cattle slaughtered in theCountry and for
54 percent of exports. JBSbrothers Joesley andWesley Batista confessed, with an eye on an
agreement with the federal public prosecutor’s office, to keeping control over a corruption
scheme that involved, among others, the president of the Republic, Michel Temer.
This had again a strong impact upon the beef cattle market, and negatively affected ex-
ports. Themeatpacking plants of the groupbegan to experience difficulties inmaking down
payments on their raw material purchases, and the cattle breeders were not willing to sell
their cattle on credit, for fear of default. The negotiations, whose scales had been previous-
ly set, began to recede. Cattle ready for slaughter began to exert pressure on the supply side.
Withinthisscenario,othermeatpackingplantsadjustedtothenewrealityand,witha100
percent supply for a75percent slaughter capacity, another domesticmarket triggeredby re-
cession, they began to choose their lots and dictate the prices. The price per arroba went
down nearly 25 percent in some regions. The Brazilian cattle farming business, which was
signaling a recovery trend, was again hard hit. In the worst moment of the scenario, some
peoplewere estimating a ten-year setback inBrazil’s image and share in theworldmarket.
Antônio Pitangui de Salvo, president of the National Beef Cattle Committee (CNBC), at
the Brazilian Confederation of Agriculture and Livestock (CNA), has it that the supply chain,
from producer to industry, from input supplier to consumer, is again in search of an adjust-
ment. “Harmony is needed amongst the different links of the supply chain”, he summarizes.
Thereisnodoubtaboutit,Brazilwillsurmountthisdifficultmoment,andthisbounceback
is the fruit of a continuous and permanent process. But at what cost? How longwill it take? In
what way? These are answers that do not only interest the local supply chain. For its expres-
sion, with the biggest commercial herd in the world and the biggest beef exporter, Brazil’s ac-
tionsarereflectedandamplifiedatgloballevel,whichdemandsitsproductionandexpectsthe
Country toexpand its activitiesonbehalf of theplanet’s foodsafety concerns.
2
017 started with the expectation
that all concerns of the beef sup-
ply chain would be concentrated
on the variables of costs, prices, ex-
change rate and relationship be-
tween fat cattle versus reposition. A cycle in
whichbreeding animals are retainedwas pro-
jected, with reasonable chances for fat cat-
tle prices with tight margins, but remunera-
tive. The expectation consisted in solidifying
the Brazilian presence in the leadership of the
world beef trade, and a smooth relationship
betweensupplyanddemand.
Factors alien to these concepts contam-
inated the market and affected the income,
the prices and the supply and demand rela-
tionship.Besidesthelossesinthefirsthalfof
the year, which need to be recovered along
the cattle farming chain, the sector learns a
lessonthatitwillneverforget.Theunexpect-
ed events started on 17th March, with the
disclosure of “Operation Weak Flesh”, con-
ducted by Federal Police, which amounted
to 60 corruption indictments involving pub-
lic agents and a license liberating scheme
and irregular inspections of meatpack-
ing companies. In all, 21 companies are in-
volved in federal lawsuits in Paraná.
The sector’s economy reactedbadly, there
wasmountingdistrustinmeatinspectionpro-
cedures and quality, international markets
stopped buying from Brazil, tighter sanitary
standardswere required, andprices dropped.
Cattle breeders began to fear that the buy-
ers of their cattle would default on their pay-
ments. The supply chain reacted, making it
Keepingtheball
rolling
Factors alien to the
market hit the cattle
farming business in2017,
but there is credibility
and professionalismto
make up for lost time
and lost opportunities
cleartothepublicandclientsthattheseisolat-
ed cases would have negligible repercussions
inthevastdimensionofBrazil’smeatbusiness.
They argued that the move revealed the seri-
ous manner the sector’s inspection was con-
ducted and the degree of responsibility of the
sectoralagentsandthegovernment.
Nevertheless, the sector criticized the
way the matter was given publicity, paving
theway for countless, genericandequivocal
interpretations. Thanks to the image creat-
ed in a period of 30 years, and the fast reac-
tion by the sector, in some days Brazil man-
aged to reopen the doors to themarkets .
Sílvio Ávila
10
