Cry for Argentina: They’re Importing Cattle

It’s not always the case that a new president will affect beef prices and production but take a look at Argentina, a country that has been synonymous with a good cut of meat for many years.

Argentina once was the third-largest exporter, but those days are past. Beef is now so expensive in Argentina that slaughtering plants will soon begin importing cattle from neighboring countries for the first time in almost two decades, according to Bloomberg News. The last time Argentina allowed ranchers to bring in cattle from outside the country was 1998, and it rarely permits non-domestic meat.

This is an embarrassing development for a population that eats more beef per person than any other country in the world. Beef also has become as much a part of the national identity as the tango or World Cup soccer.

Rising costs have encouraged a buying shift that was almost unthinkable a decade ago: Beef demand is dropping and consumers are purchasing cheaper chicken and pork instead.

Politics and New Policies

What brought about such a drastic change? Argentina’s cattle industry was upended by the end of price controls and a devaluation of the peso under newly-elected President Mauricio Macri. The new president altered the policies of his predecessors to revive an economy hobbled by a government debt default.

At the start of the South American summer In December, the price of beef used for barbecues known as asados surged 28%. To ease the strain, Macri authorized imports of beef and cattle from neighbors like Uruguay.

Low Prices and Herd Management

Before Macri arrived, the governments of former presidents Nestor Carlos Kirchner and, later, his wife, Cristina Fernandez de Kirchner discouraged beef exports with rules intended to keep domestic supplies ample and prices low. Instead, ranchers lost the incentive to expand herds, which shrank to 52 million head last year from 60 million in 2003. Raising cattle was more costly than using the land to grow soybeans, so many switched.

Argentina’s beef exports, which surpassed all but Brazil and Australia in 2005, tumbled 69% over the next decade and ranked 11th in the world last year, according to U.S. Department of Agriculture data. Shipments were the lowest in 11 years, government data show.

To revive the incentives for ranchers, the government lifted export restrictions and devalued the peso. The Argentine currency has plunged 49% against the dollar since December 1, which makes it more profitable for farmers and ranchers to ship their products overseas to buyers who pay in U.S. currency.

No Quick Solution

But that won’t solve the cattle problem right away. It can take two years to expand the herd because more cows are being withheld from slaughter for breeding. Breeders dismantled their herds during the Kirchner administrations, said one industry group leader. He said the business will again be profitable with the new rules. “But rebuilding a herd takes time and consumers will have to pay more for a product that was subsidized before,” he said. 

Cash Cattle Trade

Cash cattle markets Thursday remained at a standstill in all major feeding regions, according to the USDA Market News Service. Live sales in the last week were $136 to $137. Dressed sales in Nebraska were $214.

The USDA reported its afternoon wholesale choice beef price was up $1.42 to $225.24. Select cuts were up 0.21 to $213.85. The choice/select spread widened to $11.39 from $10.18. There were 140 loads of fabricated product sold into the spot market. Strong wholesale beef demand, improved packer margins and tighter cattle supplies bode well for market-ready, or cash, cattle prices by Friday, analysts said. The CME Feeder Cattle Index for the seven days ended Wednesday was $159.57, down 0.11. This compares to Mar’s Thursday settlement of $161.55, up $2.50.