End of China quota to squeeze meatpacker margins further

China’s temporary halt to purchases of Brazilian beef after filling the quota imposed by the Asian country is expected to disrupt plans among Brazilian meatpackers and weigh, to varying degrees, on their margins. The expectation is that the 1.1 million-tonne quota subject to a 12% tariff will be filled by July. After that, sales beyond the limit will face an additional 55% tax.

Executives at exporting companies interviewed by Valor during Sial China in Shanghai last week said targeted operational adjustments at processing plants will be necessary to adapt to the new environment. In addition to the Chinese safeguard measure, the industry is being pressured by the weaker dollar, rising cattle prices, and elevated costs.

China is the largest buyer of Brazilian beef, and without the market, industry revenue could decline in 2026. Still, there is no sense of collapse. The expectation is that companies will make use of alternative export channels, avoiding abrupt production cuts while gradually reducing their exposure to the Chinese market.

The Brazilian Beef Exporters Association (ABIEC) expects shipments to China to be suspended between July and October, as the quota is projected to be fully used up with cargoes shipped through the end of June.

“We are going to face a few months with some storms and turbulence, but the sector is very stable and everyone is already prepared for this,” said Marcos Alexandre Domingues, president of Iguatemi Foods.

Luciano Pascon, CEO of Frigol, Brazil’s fourth-largest beef company with revenue of R$4.5 billion in 2025, said there is no single solution to address the situation, though he ruled out a deeper sector-wide crisis. “There will be extra demand and we will keep selling. I don’t see the sector collapsing because it has production and delivery capacity, and there is global demand,” he said.

He acknowledged, however, that uncertainty will increase after the end of July, which he expects to be a particularly “confusing” month marked by industry adjustments and market repositioning.

The company has been working to reduce its exposure to China. The country once accounted for 70% of sales, but in 2025 the share fell to 42%. The domestic market is expected to be stronger in 2026, while exports to other destinations are also increasing. The company is not considering slaughter reductions for now, but rather “finding opportunities to market production more efficiently,” Pascon said. In Brazil, the company is betting on expanding premium retail product lines with higher added value.

“This year will be a laboratory for us and for the Chinese,” said Flávio Silva, export manager at Masterboi, which operates plants in Pará, Maranhão, Tocantins, and Pernambuco. China accounts for 40% of the company’s export volume. Even so, there are currently no plans to halt production.

According to Silva, the company will pursue every possible avenue to increase sales through alternative channels and redistribute volumes.

The domestic market will be the main focus to absorb part of the impact of China’s absence, though with lower profitability. Since the cuts consumed locally differ from those exported to China, prices for barbecue cuts in Brazil are expected to rise as demand increases ahead of the World Cup and amid stronger money circulation in the economy in the run-up to the elections. The price increases would help offset lower revenue from forequarter cuts exported to China.

The general assessment is that cattle prices should decline at some point during the year. But last week, reports of negotiations with Beijing to ease the quotas led ranchers to reduce sales volumes, meatpackers said.

Pedro Bordon, CEO of Estrela Alimentos, said the second half of the year is more unpredictable, but the company has been locking in hedges for the dollar and cattle prices to ensure profitability and maintain a “breakeven point.” The company, whose processed products are sold at 15,000 retail outlets across Brazil, expects stronger domestic sales of that portfolio in the second half.

“We have been very conservative and pragmatic, trying to reduce our exposure as much as possible. We are not counting on the unpredictable; we are protecting results,” he said.

The squeeze on margins is expected to affect companies of all sizes. “Meatpacking has gone back to what it has always been: low margins. Meatpacking does not tolerate challenges. You cannot be heavily indebted; you need strong cash reserves—that is our culture. We are going to spend the year with low margins, and I do not expect any revolution,” said Pedro Emílio Franco Prado, CEO of Plena Alimentos.

Fabrizzio Capuci, executive director at Naturafrig, which operates plants in São Paulo, Mato Grosso, and Mato Grosso do Sul, believes there will be a 30- to 40-day adjustment period once the Chinese quota is reached. He does not plan to reduce slaughter volumes, an option he sees as costly given the company’s operational structure and supplier contracts. The company slaughtered 750,000 head of cattle in 2025 and expects to increase that pace by 10% this year.

“There will be commodity price adjustments, we will seek other sales channels during those 40 days and try to pass on costs,” he said. The main challenge in 2026, he added, will be securing cattle supply.

Historically, China accounted for 70% of Naturafrig’s exports. This year, after redirecting sales, that share is expected to fall to around 40%, Capuci estimated. In the second half, the company’s beef will supply Brazil, the U.S., Chile, Uruguay, Argentina, the United Arab Emirates, and other Asian countries. “It will still be a positive year for the beef supply chain compared with other agribusiness segments that suffered from indebtedness, weather issues, and costs,” he said.

Brazil’s elections this year could also help soften the impact of restrictions on sales to China. “With the elections, domestic consumption should increase, which provides some security, but the sector will remain under pressure. Since exports will be lower, production should decline somewhat, and beef prices in Brazil will remain high,” said Roberto Perosa, president of the Brazilian Beef Exporters Association (ABIEC).

The journalist traveled at the invitation of ABIEC.

Source: Valor International

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