By Jude Webber in Buenos Aires
Published: October 5 2010 20:01
The life of Argentina’s legendary gauchos herding cattle on the pampas is tough. But this year the outlook is particularly gloomy as production and exports of the succulent steaks for which the country is famed slump to their lowest levels in a decade.
Though Argentina remains one of the world’s top beef producers and exporters, rivals such as Uruguay have increasingly been biting into its global market share. Government restrictions on exports designed to protect the domestic price, a catastrophic drought in 2008-09 and the surge of soyabeans offering a more profitable return per acre are all to blame.
Argentines cannot conceive of life without beef – indeed they traditionally export only about 15 per cent of production and eat the rest – so there is no question of the industry slipping away. But producers warn that Argentina risks being left behind as population growth and an expanding middle class in China and elsewhere boost the global appetite for beef.
“Argentina is missing opportunities. The market is growing and Argentina should be joining it. Instead, the government’s policies for the sector are incomprehensible,” Dardo Chiesa, president of the Argentine Beef Promotion Institute, told the FT.
Argentine beef exports hit a record in 2005 of 771,427 tonnes, but are expected to be less than half that this year, at about 320,000 tonnes.
Between 2002 and 2005, cattle stocks grew 12 per cent, production rose 24 per cent and exports doubled. This year, exports and production will languish slightly below 2000 levels and cattle numbers, at 48.9m, are back to where they were in 2001.
To add insult to injury, neighbouring Uruguay is expected this year to export more beef than Argentina. And Uruguay has recently overtaken Argentina as the world’s top meat-eating nation.
As a result, the domestic price of beef is hugely important in Argentina, a country where most people consider a meat-free meal is equivalent to not eating.
In a bid to shield consumers from rising prices, Argentina banned beef exports in March 2006 for and 180 days has since enforced restrictions which producers say generated considerable uncertainty.
The devastating drought led to a 10 per cent surge in slaughters in 2009 compared with 2008. As a result of squeezed supplies, domestic beef prices have risen 70 per cent in the past year.
Meanwhile, an estimated 8,000 Argentine cattle farmers have switched into crops or abandoned farming entirely in the past year. The agriculture ministry reckons almost 14m hectares of top pasture land has been ploughed up. New Zealand ranchers and feedlots in Chile are among those cashing in from Argentina’s export decline.
Argentina is not only undersupplying its existing markets, including the top-grade beef sold to the European Union at premium prices under the so-called Hilton Quota, which it failed to meet for the first time last year. It also risks missing emerging market opportunities.
“Global demand is increasing and this will continue. Any beef producing country that isn’t out there staking out their territory and being part of this market is falling behind,” said Barry Carpenter, chief executive of the US National Meat Association.
Argentina expects China this month to give the green light to exports of beef to the world’s most populous nation, where meat consumption is taking off as affluence grows.
Mr Chiesa said he hoped to exploit a niche among top-notch hotels and sell China 50,000 tonnes a year of premium beef at some $20,000 per tonne. Argentina sold tenderloin to the Shanghai Expo at $28,000 per tonne, he noted. But he added: “We’ll have to see if the government lets us export.”
Alejandro Lotti, a government minister, is upbeat. If Argentina balances domestic consumption, export and growth, he says, “in five years we could be recovering our position in the international red meat market”.
Copyright The Financial Times Limited 2010
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