Brazil's grass-fed cattle are its economic salvation - beef exports are soaring
Mad Cow Boosts Mr. Russo And His Grass-Fed Herd;
A Bullish Move in Israel One Alligator and 13 Rabbis
By MATT MOFFETT
Staff Reporter of The Wall Street Journal
June 22, 2004; Page A1
ANASTACIO, Brazil -- This western town has always attracted a special breed, from cowboys and outlaws to alligator hunters. But few have had quite the impact of the newest arrivals: 13 Orthodox rabbis who oversee a sprawling kosher meat plant.
The kosher butchers were brought here by Brazilian meat baron Antonio Russo, who is helping turn Brazil into a global beef power. His company, Independencia Alimentos Ltda., exports beef to more than 50 countries. In 2001, he traveled to Tel Aviv, amid a flare-up of violence between Israelis and Palestinians, and elbowed out an Argentine competitor to win a contract with a big Israeli meat distributor. Mr. Russo then adapted the Anastacio plant for kosher slaughtering and helped recruit a team of kosher butchers from all over the world.
Now the plant supplies 20% of the Israeli meat market, helping to maintain jobs for 760 workers in Anastacio. Mr. Russo has taken to wearing a yarmulke when visiting the plant, and the rabbis, who hail from Israel, Brazil and other countries, are adapting to local customs. One recently caught a 5-foot alligator with his bare hands.
Brazilian agriculture has the benefit of vast pasturelands, low labor costs and a talented entrepreneurial class. As trade expands and access to agricultural technologies improves, Brazil's growing role in the global food trade is helping reshape that market. This new competition is undermining the U.S.'s long domination of agricultural exports and the political clout that comes with it.
Since 1998, Brazil's beef exports have tripled, setting the country on course this year to pass Australia as the world's top exporter of beef, by volume, according to the U.S. Department of Agriculture. "Over the next couple of decades, [Brazil] is going to be a steamroller in beef production," predicts Michael Swanson, an agricultural economist for Wells Fargo & Co.
Brazil's kosher connection is testimony to the flair for marketing that has made the 62-year-old Mr. Russo a leading evangelist for Brazilian beef. In his Nova Andradina plant's offal room, where meat cutters prepare trimmings and organs, a worker extracts meat from the jaw and throat that will go to Russia to make sausage. Nearby, another employee carves out fat from the diaphragm, which will be sold to France and cooked in Stroganoff and other dishes. One cutter picks out skin fragments from the nasal cartilage, which will be shipped to Hong Kong for soup. Yet another worker removes the valves from the heart, which will go to Peru and be eaten as shish kebab.
For the many markets that buy its 2,800 products, Independencia packages the meat with a local label and a price embedded in a bar code. In its polyglot packaging room, labeling machines spit out stickers in Russian, Arabic, French, Italian, Dutch, Spanish, a variety of Scandinavian languages and Gandan, the native language of Uganda.
Amid safety concerns about traditional suppliers, consumers are hungry for natural products such as Brazil's grass-fed beef. Droughts have thinned world cattle herds and outbreaks of disease have afflicted traditional beef exporters such as the United Kingdom, Canada, the U.S. and Argentina. Europe's cattle industry is still struggling to recover from the impact of mad-cow disease, a fatal brain illness transmitted by cattle that ate feed contaminated with the remains of infected animals. When a single mad-cow case was discovered in Washington state last December, some 70 countries banned U.S. beef.
Brazilian cattle are prized for being "clean and green," meaning they're free of mad-cow disease and fed naturally. One Swedish importer of Brazilian beef deployed samba dancers in supermarkets to promote the product's healthiness.
Despite this success, Brazil faces some short-term obstacles. Key markets around the world, including the U.S., Korea and Japan, have barred imports of fresh Brazilian beef, citing health concerns. While Brazil hasn't recorded any cases of mad-cow disease, it has seen outbreaks of the highly contagious foot-and-mouth disease. Last week, Russia said it would temporarily suspend beef imports from Brazil due to an outbreak in an isolated area of the Amazon. Some Brazilian cattlemen say their government isn't dedicating enough resources to health inspections.
Taste is another concern. Because of their diet, Brazilian beef lacks marbling, the white flecks of intra-muscular fat that make meat more flavorful and tender. Soren Hjorth, a consultant for Danish Crown, a big Danish meat company that purchases from Independencia, allows that Brazilian beef is "still not as tender," as that of some competing producers.
But Mr. Hjorth has made several visits to Independencia over the past year and says, "every time I go back, they've made further progress improving quality." Through better breeding techniques, Brazilian farmers have cut the average slaughtering age of cattle to 2½ years from four, making for more tender meat.
As Brazil becomes a more powerful force in the beef industry, it is likely to increasingly clash with the U.S. in overseas markets. Many industry observers also expect the prohibitions against Brazilian exports to be eventually rescinded.
Independencia has seen its export revenue soar 47% to $160 million in the past three years. Brazil's grass-fed cattle have the added attraction of costing about half as much per pound to raise as grain-fed cattle. Slaughterhouse workers earn about $200 a month, allowing Independencia to more easily perform labor-intensive tasks such as slicing and packaging meat to satisfy its array of international customers.
"They can do a lot of specialty private-label things that we can't afford to do" because of labor costs, says Gary Kohake, vice president of international sales and marketing for Farmland Foods, a unit of Smithfield Foods Inc. of Smithfield, Va., and a visitor to the plant last year.
Mr. Russo figures Brazil has the pasture land and resources to double its herd, which at 170 million head is the world's largest. While dabbling in politics, Mr. Russo has been courted by Wall Street investment bankers who are making pilgrimages to Brazil in the expectation that Independencia will be sold to a multinational meat maker or launch an initial public offering. "This story is only just beginning," Mr. Russo says.
The beef business, along with other surging farming industries, has been Brazil's economic salvation at a time when other sectors of the economy have performed poorly. These days, rural Brazil, not the teeming cities of Sao Paulo or Rio de Janeiro, provides the dynamism in the country's labor market.
Many of Brazil's export markets are highly volatile. Jitters over terrorism can drastically affect demand from Egyptian hotels that depend on tourism. In Russia and Kazakhstan, with infrastructure shoddy and organized crime rampant, Independencia has to take care that containers don't go missing.
Yet, meat is such a coveted commodity that social turbulence might rev up a market rather than depress it. After Venezuela's leftist president, Hugo Chavez, survived a coup, he launched a food distribution program to boost his popularity. Mr. Chavez's government became one more customer for Independencia.
Mr. Russo, the grandson of an Italian immigrant, was introduced to the meat industry at an early age. An indifferent student, he took six years to finish the four-year Brazilian junior-high curriculum before dropping out to work in his father's butcher shop. By his early 30s, Mr. Russo owned nine Sao Paulo butcher shops and a fleet of meat-delivery trucks.
In 1971, heeding advice from the head of a meatpacking company, Mr. Russo sold everything and bought a spread in the still-wild Brazilian west. Mato Grosso do Sul, a hot, Montana-size province with prime grazing land, was one of the last regions of Brazil to be settled. The western part of the state includes some of the Pantanal, the Americas' largest wetlands. The eastern part of the state, where Mr. Russo built his ranch, is a type of savannah known locally as cerrado...
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Copyright 2004, The Wall Street Journal
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