Argentine Meat Packers Suffer As Cattle Numbers Fall – for Sep. 13, 2010

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A sharp reduction in the number of cattle roaming Argentina’s Pampas plains is hitting the country’s meat packers, forcing some to cut workers’ hours or close their doors for good.

The South American nation still has more cattle than people, but the national herd has shrunk by 10 million head in the last three years to about 48 million.

Many ranchers have sold off their herds due to several years of harsh drought. Others have turned their fields over to more profitable soy, blaming the government for eroding ranching profit margins with export curbs and price caps.

Brazil’s JBS , the world’s biggest beef producer, is considering selling some of its Argentine plants.

A few of the country’s approximately 440 beef-processing plants have closed down since the livestock shortage started to bite late last year, raising the cost of Argentines’ favourite food and prompting fresh government export restrictions.

“As of now, 10 meat-packing plants have closed and another 10 are having serious problems,” said industry consultant Ignacio Iriarte.

Argentine beef production is set to fall 24 per cent this year to about 2.6 million tonnes, Iriarte said.

Meat-packing plants are currently operating at just 60 per cent of installed capacity due to the lack of livestock, according to private sector industry think-tank CREA.

The dwindling livestock supplies have driven up prices at the country’s Liniers cattle market, where the rambling pens and horse-riding assistants are a reminder of the country’s rich ranching heritage.

Prices of steer, used as a benchmark at Liniers, have risen 90 per cent over the last year, market data shows. Butcher shops have hiked their price tags to reflect that, forcing many consumers to abandon their beloved steak.

Disenchantment

Until recently, Argentines were the world’s No. 1 beef eaters, but per capita beef consumption fell 18 per cent in the first seven months of the year compared with the same period a year ago to 56.6 kg (124.8 pounds) per year, industry group CICCRA said in a recent report.

While some analysts say a thriving black market means real consumption is higher, CICCRA’s data would make neighbouring Uruguay the country with the highest rate of beef consumption. The average Uruguayan ate 58.2 kg in 2009, according to the state-run National Beef Institute (INAC).

In Argentina last year, “consumption levels were high as were exports, but that was due to a massive (cattle) sell-off, caused by ranchers’ disenchantment and the sharp drought,” Luis Bameule, head of the Quickfood meat packing company, told a Uruguayan radio station over the weekend.

Quickfood is part of another giant Brazilian meat packer, Marfrig.

Argentine farmers, who have been at odds with the government for years, blame agricultural policy for the crisis in the beef industry.

They say the repeated use of export curbs, sporadic price caps and deals with certain government- friendly companies and supermarkets have distorted the market and driven many ranchers to sell off their herds.

Soybeans have escaped government intervention because they are barely consumed locally, so have no impact on consumer inflation running at an annual rate of at least 20 per cent.

Argentina was the world’s fourth-biggest beef supplier in 2009, shipping 653,000 tonnes to markets including Russia and the European Union, according to the U. S. Department of Agriculture (USDA).

This year the country is expected to slip to eighth place as the supply crunch hits. Between January and July, shipments fell by 46 per cent year on year to 185,900 tonnes, data from the CICCRA industry group shows.

Some meat packers lost out on a lucrative contract with the European Union, called the Hilton quota, by which they supply tender filet steak and sirloin.

“This is going to be the worst year for exports, except when we were excluded (from global markets) due to foot-and-mouth disease in 2001-02,” said Quickfood’s Bameule.

Researchers and industry specialists gathered at a seminar at Argentina’s Catholic University (UCA) said last month it could take a decade for the country’s cattle stocks to be replenished.

“The crunch is going to last,” Iriarte said. “This is just the beginning.”

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