August 18, 2009
By Matthew Craze
Bloomberg
Argentina, the biggest beef- consuming nation, may resort to imports for the first time within two years as a drought kills cattle and export controls prompt ranchers to quit the business.
Pastures have dried up and forage prices gained so much that farmers are allowing livestock to die in the fields, said Arturo Llavallol, a director of Buenos Aires-based farm group The Rural Society. Ranchers are killing higher than usual numbers of breeding stock, compromising future output, he said.
The nation’s herd has dwindled 7 percent since 2006, when the government restricted beef exports to boost supplies in the local market, Llavallol said in a telephone interview from his farm in Saavedra, southwest Buenos Aires province. The country may need imports within a couple of years, he said.
“If we want to keep exporting, we have to lower consumption,” said Llavallol, also the vice president of the Paris-based International Meat Secretariat, an association that represents ranchers worldwide. “If you don’t have enough raw materials, you shut down the factory or you import.”
Argentines will consume about 70 kilograms (154 pounds) of beef per person this year, according to Miguel Schiariti, an analyst who compiles a monthly report for the Argentine Beef Industry and Commerce Chamber. Consumption has risen from less than 60 kilograms a person in 2006 when the export restrictions began, according to Ciccra, as the chamber is known.
Prices in the Latin American nation are the cheapest in the world at about $1.65 a kilogram, compared with $2.82 in neighboring Brazil and $2.86 in the U.S., Miguel Gorelik, a spokesman for Argentine meatpacker Quickfood SA, said in a telephone interview from Buenos Aires.
Exports
Argentina, which was the world’s largest beef exporter in the 1970s, slipped to seventh place last year, according to the U.S. Department of Agriculture. Brazil, now the world’s largest exporter, will ship four times as much beef as Argentina this year, according to the USDA.
Lifting the export restrictions set in place by former Argentine President Nestor Kirchner would allow ranchers to get better prices and stop them from selling breeding cattle for slaughter, according to Llavallol.
A drop in Argentine beef production and exports could hurt earnings at companies such as Brazil’s JBS SA, the world’s biggest meatpacker, and Marfrig Alimentos SA, which both own slaughterhouses in Argentina.
JBS, which became Argentina’s largest beef producer after its 2007 acquisition of U.S. meatpacker Swift & Co., has ceased investment in the Latin American nation because government controls are hurting economic growth, Marcus Vinicius Pratini de Moraes, a member of the company’s board and a former agriculture minister of Brazil, said from Sao Paulo.
‘Problems’
“We stopped growing in Argentina because of those problems,” Pratini de Moraes said in an Aug. 14 interview. “The world is currently divided into three types of countries: the developed ones, the emerging nations and Argentina.”
A call to Argentina’s Agricultural Secretariat in Buenos Aires by Bloomberg News wasn’t immediately returned. Calls to President Cristina Kirchner’s press office, including a listed cell phone number, also weren’t immediately returned. Alfredo Scoccimarro, a spokesman at the Presidential Palace, didn’t respond to a call to his mobile telephone.
Parts of central and western Buenos Aires province are suffering a “severe drought,” the Buenos Aires Cereals Exchange said in an Aug. 12 crop report. The exchange said its report this week may show rains failed to alleviate the drought in the area, prompting ranchers to sell off their herds.
Affect the Herd
“Undoubtedly, it’s going to affect the herd,” said Quickfood’s Gorelik. “There have been deaths, but it’s difficult to quantify.”
The Argentine diet consisting of large amounts of beef dates back three centuries ago, when cowboys, known as gauchos, in the Spanish colony would feed from wild cattle on the grassy Pampas and sell the hides.
Ranchers are hoping downpours will arrive later this year as the El Nino weather pattern forms, which warms ocean temperatures and creates excess precipitation on the Pampas. So far, the effects of El Nino have only alleviated the drought nearer the eastern coastal areas of the Pampas agricultural zone, according to the Buenos Aires Cereals Exchange.
Opposition parties are seeking to eliminate government restrictions on beef and other farm exports in December, when they assume seats won during mid-term elections.
Still, ranchers who have given up on raising cattle to grow crops instead “aren’t going to come back,” said Luciano Miguens, a farm advisor to Union Pro, a coalition of opposition parties, in an interview from Buenos Aires. “We need to stimulate the ranching and dairy industries, which are going through critical moments.”
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