Two top Brazil beefpackers to keep supplying China despite mad cow-related ban

SAO PAULO (Reuters) -Two top Brazilian meatpackers said on Thursday they will be able to continue supplying China with beef despite the world’s largest beef exporting country’s self-imposed ban due to a confirmed case of mad cow disease.

Minerva SA and Marfrig said in separate statements they would use facilities in Argentina and Uruguay to offset the impact of Brazil’s ban, which was triggered by a bilateral sanitary agreement enforced in 2015.

Brazilian Agriculture Minister Carlos Favaro vowed to treat the case with the utmost transparency, adding he hopes the suspension can be lifted next month. The official declined to make any precise predictions, as he said similar previous bans have lasted between 13 and 120 days.

Favaro met with Chinese Ambassador Zhu Qingqiao to discuss the matter on Thursday, but the suspension remains in place.

“China and Brazil are heavily dependent on each other for beef trade, but China could use mad cow disease to bargain for low prices,” Santander wrote in a note to clients, adding the trade suspension will weigh on meatpackers’ first half results.

On Thursday, Minerva’s shares opened lower but ended up 3.5%, while Marfrig advanced 0.3%, reversing earlier losses of up to 3%. Shares in Brazil’s top meatpacker JBS rose 5.5%.

Of the listed meat companies affected by the ban, Minerva should be the most affected, followed by Marfrig and JBS, according to Santander analysts.

Minerva has the highest relative exposure to Brazil, with 36% of its 12-month revenues originated in Brazil compared with 30% for Marfrig in South America and 15% for JBS in Brazil, Santander said.

In its statement, Marfrig said it would use six plants in Argentina and Uruguay to supply the Chinese market. Minerva said it would use four plants in the same two countries while Brazil’s ban remained in force.

JBS, with the most geographic diversification among the three, should be the least impacted, according to analysts.

Brazil’s case of Bovine Spongiform Encephalopathy was discovered in a 9-year-old male animal in the country’s northern Para state.

Tests are pending to determine if this is an atypical case of mad cow or classic case, which could spark wider trade bans.

Brazilian authorities said there was a high probability of this being an “atypical” case.

Reporting by Gabriel Araujo, Ana Mano and Peter Frontini in São Paulo; additional reporting by Rodrigo Viga Gaier in Rio de Janeiro; Editing by Steven Grattan and Marguerita Choy