I get a lot of calls and emails lately from people asking why the prices of Brazilian FBS are skyrocketing.
If we look at all factors influencing the price increase of Fetal Bovine Serum the development seems to go against any logic we have applied so far.
In the article about NATURE we saw that FBS availability may be negatively influenced by droughts, floods or other events affecting the natural pregnancy cycle of the animals or impeding animal transportation. Currently there are no such cases in Brazil. Indeed part of the country suffered a severe drought but finally FBS is being collected everywhere.
In the article about ANIMAL HEALTH STATUS we talked about the OIE country classification which may determine the value of FBS coming from a specific country. Yet Brazil's OIE health status has not changed since the country had been upgraded to "negligible BSE risk" three years ago. Since 2014 only three Brazilian states are not yet considered FMD free. Therefore no animal health status change might have influenced the FBS price increase.
In the article about AGRICULTURAL AND ECONOMIC DEVELOPMENT we looked into cases when the economic growth of a country may influence consumer's income and purchase preferences thus leading to increased veal production (which decreases pregnant cow slaughter and FBS production). However Brazil's economy is anything else but strong now. Also the Brazilian Real exchange rate has significantly deteriorated which means that the US dollar value of all domestic costs should go down. But this is not the case.
So how come that despite all above considerations and logic the Fetal Bovine prices in Brazil continue to rise?
The three rules we have applied so far relate to the current situation - they are focused on the NOW.
In certain instances the focus shifts to WHAT'S NEXT. Two extraordinary events played a big role for the price increase.
First, recently the US re-opened for imports of fresh meat from Brazil. The USDA consultation started already in 2014 and lead to an announcement in September 2016 that Brazil may import up to 64,000 metric tons of fresh beef per year. The first container of Brazilian fresh beef landed in Philadelphia last week. According to the principle that "blood follows meat" there is a big chance for Brazilian serum to become eligible for importation into the US. This hope makes Brazilian FBS producers see more value in their product and logically ask for a higher price.
Next, there are serious talks between China and Brazil about opening the borders for Brazilian FBS. Brazil started shipping meat to China in late 2014 following a 2-years ban. Since that time there have been efforts to make Fetal Bovine Serum also eligible for importation into China. Lately there have been unofficial statements that this will happen "soon". Although "soon" may mean for the Chinese officials anything between two months and two years, FBS producers in Brazil are optimistic and proudly increase their price to all customers.
The lesson we learn today is that serum prices are determined not only by the situation we have NOW but also by future hopes, development trends and by what may come NEXT.
Despite all price increase, Brazilian FBS is still the cheapest available Fetal Bovine Serum on the market, compared to the US, Australian or New Zealand production of similar quality. And that's the good news.
Happy sourcing.
