(Bloomberg) -- China’s beef imports are dwindling amid slowing consumption and ample domestic supply, dealing a blow to its biggest supplier Brazil.

Official data show the value of China beef imports fell last year for the first time since at least 2016, with prices plunging to the lowest level in almost three years. Import volumes are seen dropping 4% this year, ending 12 straight years of meteoric rise, according to the US Department of Agriculture. 

The predicament highlights the risks in relying heavily on a single customer: China was the destination for more than 52% of the South American country’s beef sales last year even after halting imports for roughly two months over a case of mad cow disease. While the nation’s meatpackers have sought to diversify their exports, alternatives remain limited. 

“Brazil depends a lot on China — if there’s a hiccup in China, it will affect Brazil very badly,” said XP Investimentos analyst Leonardo Alencar.

The outsized exposure to China has taken a toll on meatpackers’ earnings. Minerva SA, the largest supplier of South American beef, saw export revenue shrink by almost 18% in 2023. Marfrig Global Foods SA’s South American beef operation saw a decline of nearly 26%. 

The exporters’ shares have been mixed this year. Minerva’s stock has dropped 19% while Marfrig is up about 10%. JBS SA, the world’s largest supplier, is down 6.8% year to date.

China’s share in the global meat trade has plunged from a 2020 peak following an increase in domestic meat supplies. The nation is seen producing 7.7 million metric tons this year, up 1 million tons from 2020, according to the USDA. What’s more, an economic slowdown has prompted consumers to seek cheaper proteins. 

“Local farmers are giving up cattle breeding and doing a massive slaughtering of heifers,” Fernando Galletti de Queiroz, Minerva’s chief executive officer, said last month in a conference call with analysts.

Increased competition from Australia has also pressured the price Chinese importers are willing to pay, JBS CEO Gilberto Tomazoni said during the company’s earnings call. 

Yet most analysts predict China’s pullback will be temporary, and that the Asian nation will continue to be a big growth engine for Brazil’s beef exporters as per capital consumption levels still trail the global average.

China may even become more relevant in the years to come, after the country last month cleared an additional 24 Brazilian beef plants for export. JBS said Friday it will soon double capacity at one of its biggest Brazilian facilities after it was green-lit. 

The increased number of approved facilities means “a gigantic step forward for Brazilian agribusiness,” Tomazoni said Friday during a ceremony to celebrate the first shipment of beef to China from the company’s facility in Campo Grande. 

With the new approvals, Brazil can see its share in China’s beef imports rise to as much as 60% in a few years,” according to Joao Otavio Figueiredo, head of the livestock division at consultancy group Datagro.

To be sure, Brazil is seeking new customers in an effort to diversify. The government has opened new markets for beef in Mexico and Singapore. But the potential for expansion still pales in comparison to China’s massive market. 

“China is a great commercial partner for Brazil and will continue to be for a long time,” said Alcides Torres, founder at consulting firm Scot Consultoria. “We increased our exports to other destinations but not enough to replace the Chinese.”

--With assistance from Hallie Gu.

(Adds share activity in sixth paragraph. Earlier version corrected year in fifth paragraph.)

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