Global IssuesSOUTH AMERICA: Argentine Beef Overtaken by Mercosur Partners
South America's Mercosur trade bloc is becoming established as the top world producer of beef, with 40 percent of the international market. But while in Brazil, Paraguay and Uruguay production and exports are growing, Argentina, the home of the legendary 'asado' barbecue, is falling behind.
A report by the Argentine Ministry of Agriculture, Livestock and Fisheries, based on data from the United States Department of Agriculture, indicates that rising beef consumption in Asia finds Mercosur (Southern Common Market), with the exception of Argentina, well-placed to increase sales.
Economic recovery in Asia has been stronger than expected, and will encourage key buyers like South Korea, Hong Kong and Japan, the report says, adding that Russian imports have also grown due to increased demand.
In this context, Brazil, Paraguay and Uruguay will benefit from increased Russian imports and the continuing fall in Argentine exports, it says.
According to the study, the four Mercosur countries will supply 2.9 billion tonnes of beef this year, equivalent to 40 percent of the global market.
Brazil is currently the world's second largest beef producer, after the United States, and occupies first place for exports, supplying 25 percent of the global volume. Uruguay will reach seventh place for exports this year, for the first time ever overtaking Argentina, which will take eighth place, according to forecasts.
Paraguay is not far behind. This year it will export an estimated 280,000 tonnes of beef, ranking it ninth in the world.
What happened to Argentina, which exported 770,000 tonnes of beef in 2004 and now exports less than 380,000 tonnes? Producers and local analysts attribute this mainly to the shrinking profit margin and to government restrictions on exports, introduced in 2006 in an oft-unsuccessful attempt to maintain price stability in the domestic market.
The severe drought that affected the country in 2008 and 2009 and the enormous expansion of soybean cultivation, now Argentina's main export, are other factors.
Agronomist Fernando Vilella, head of the food and agribusiness programme at the state University of Buenos Aires, told IPS that in recent years government policy has benefited beef manufacturers more than ranchers, whose profit margin shrank.
'The hardest-hit sector was that of small and medium calf producers,' he said. As well as losing animals to the drought, the fall in profits led the ranchers to slaughter cows and heifers, reducing supply to the local beef industry, which led to a steep price rise for consumers and, in turn, a big fall in per capita consumption.
Under the circumstances, soy is the only crop which is sure to make a profit, in spite of bearing the heaviest export taxes. Therefore, many livestock producers are turning extensive areas of land over to soybean production, at the expense of former crops like wheat or maize.
'The drought is responsible for a 10 percent fall in production, but the rest is due to the government's beef policy,' according to Arturo Llavallol, the local representative for the International Meat Secretariat (IMS) and a member of the Argentine Rural Society (SRA), the powerful large landowners' association.
The decline is partly confirmed by the National Service for Animal Health and Agrifood Quality, which reports that cattle numbers fell by 15 percent between March 2008 and March 2010, from 57.5 million head to 48.9 million. In 1977 the national herd was 61 million head.
'Costs are increasing, and as cattle-raising becomes uneconomical, producers slaughter the females that reproduce the beef herd,' Llavallol told IPS.
He regretted that this should be happening at a time when consumption in Asia is predicted to take off. For this country, at least, it will be difficult to respond to higher demand.
This year, Argentina was unable to fill its portion of the 'Hilton quota' of high-quality beef accepted on preferential terms by the European Union since 1979.
Its allocation is 28,000 tonnes, the largest slice of the total quota of 60,000 tonnes, but this year it only delivered 18,000 tonnes because the necessary export permits to Europe were delayed, Llavallol complained.
'In addition to temporary bans on exports, the government delays export certificates, and so the meat processing plants cannot fill their orders,' Vilella said.
He added that to maintain cattle numbers, no more than 45 percent of the cows should be slaughtered, but at present 60 percent of them are sent to the slaughterhouse. In the medium term, beef production will fall still further, he said.
The fall in beef output in Argentina has led to Uruguay, with an area 15 times smaller, overtaking its neighbour in export volume as well as in domestic per capita consumption.
Uruguay will take the global lead in local consumption at 58.2 kilograms of beef per person per year, while Argentina will come second at 56.7 kilograms, according to the Uruguayan National Meat Institute (INAC).
INAC president Alfredo Fratti described to IPS the factors driving his country's production and exports, by telephone from Shanghai, China, where he is promoting Uruguayan beef at the country's stand at World Expo 2010.
'Formerly, producers faced the risk of price swings, but now, perhaps because we have managed to diversify our markets, there is very large potential demand and the international price in dollars has risen steadily since 2004,' he said.
Uruguay exports 80 percent of what it produces, but always reserves some cuts at lower prices for internal consumption.
'The local market absorbs 20 percent of output, and we regard it as the most important sales market,' Fratti said. Even when prices and external demand are high, a balance is sought so as not to neglect local consumers.
Among the measures adopted are tax cuts and a pricing agreement between the government and retailers' associations for two or three cuts of lower quality.
In parallel with higher internal demand, Uruguay has increased its beef exports as well as its international customers in 110 countries, including China, Russia and the European Union.
© Inter Press Service (2010) — All Rights Reserved. Original source: Inter Press Service