However, the scenario may change in 2025, when the cattle cycle is expected to result in lower availability and higher prices. In this case, a tax exemption would make a difference.

For chicken and pork, expectations are less promising, with the possibility of higher chicken meat prices, for example, if it is not included in the basic food basket.

A source from the beef industry participating in the discussions in Brasília told Valor that there is a tug-of-war over the inclusion of meats in the basic food basket. “Regardless of this, the domestic market has seen good demand,” the source said, referring to beef.

It is not a very high consumption, the source said, but it is balanced. Exports are also currently favored by the weakened real and stable sales to China, which helps slaughterhouses deal with the high supply.

Even with exports doing well, most beef production is consumed domestically. The consulting firm Agrifatto projects a 15.5% increase in external sales in 2024, reaching 3.28 million tonnes. In the domestic market, demand is expected to grow by 5.4%, reaching 6.48 million tonnes for the year, compared to 2023, according to Agrifatto. These calculations do not consider a potential tax exemption.

With the increased availability of beef in the market, prices are more attractive to consumers, which explains the strong domestic demand. “In times of significant cattle supply growth, external demand rarely grows at the same magnitude. Thus, a significant portion of the additional meat production stays in the domestic market and is sold at lower prices,” said Hyberville Neto, director of HN Agro consultancy.

Another factor driving demand is the improvement in the labor market. “Unemployment is more controlled, close to 8%, there is less debt pressure on the population in the second half of the year, and generally, there is an increase in temporary job creation, the payment of the 13th salary [a mandatory year-end bonus for formally employed workers], and bonuses. Demand [for meat] should be better,” observed Felipe Fabbri, an analyst at Scot Consultoria.

Fernando Iglesias, with the consulting firm Safras & Mercado, agrees that factors indicate domestic consumption will remain strong this year, but he predicts a change in 2025. “Next year, with the reversal of the cattle cycle, there is potential for a reduction in the beef supply in the domestic market. Then this dynamic tends to change.”

A possible tax exemption could maintain optimism for consumption in 2025 when prices are likely to rise. One industry source believes including beef in the basic food basket makes the sector more competitive. “I think that if we have a strong domestic market, like in the U.S., we become less dependent on exports and can demand higher prices abroad,” he said.

The working group’s report from the Lower House on tax reform regulation did not include meats in the list of basic food basket products that will be exempt from the future Value Added Tax (VAT). The non-inclusion was criticized by the poultry and pork industry, which expects lawmakers to “support the revision,” said the Brazilian Animal Protein Association (ABPA).

For Ricardo Santin, president of ABPA, “this change in understanding that has emerged, taxing meats at 60% of the average rate, will have a significant impact on consumers. In our case, you will see at least a 10% increase [in price]. In many states, the rate is zero, as it is part of the basic food basket.”

According to Lygia Pimentel, director of Agrifatto, the reform will change meat taxation. The extent of the change will depend on the VAT. “Depending on the VAT, chicken taxation changes.” In other words, prices could rise.

If only chicken is exempted and beef is not, the consumption of the latter could be affected, added Mr. Hyberville Neto. This is because chicken, naturally cheaper, would become even more competitive compared to beef on the shelf.