The current 2021 Argentine beef export forecast is 770,000 tonnes carcass weight equivalent, 50,000 fewer than in 2020, said the USDA’s Foreign Agricultural Service, in an attaché report.
The lower exports stem from lower slaughter forecasts resulting from negative margins, the report said. Overall exports there depend heavily on China’s demand and market recovery from COVID lockdowns.
Argentine cow/calf operators are benefitting from high calf prices, the FAS said, but domestic beef consumption is at a record low to the benefit poultry and pork.
BEEF PRODUCTION DOWN
Beef production for 2021 was forecast at 3.1 million tonnes, in line with the USDA’s official estimate, but 4% below 2020, the attaché said. Beef producers are enduring rising production costs, including high corn prices.
Together with lower FOB prices, high corn prices hurt margins and contribute to a slow but steady fall in cattle inventory for slaughter, the report said. Slaughter inventory was expected to drop to 13.54 million head in 2021.
In addition to higher feed costs, high calf prices and low fed cattle prices are affecting cattle production, the FAS said.
FEEDLOT MARGINS DISAPPOINT
Overall feedlot margins remained disappointing in 2020, the FAS said. The Argentine Chamber of Feedlots reported that gross margins were positive in the first quarter of 2020 but since the second-quarter COVID-19 trade blocks, producers continue to experience negative returns, currently losing between $30 and $80 a head.
Since August 2020, feedlot inventory has held below normal levels, the report said. In January 2021 commercial feedlots showed an occupancy level of 51%, 7% fewer than a year ago.
Some ranchers are managing costs by expanding backgrounding and finishing at heavier weights, leading to overall lower slaughter cattle projections, the FAS said. As a result, beef production in 2021 is forecast to be down to 3.1 million tonnes, 130,000 less than a year ago.
COW/CALF OPERATIONS POSITIVE
Alternatively, cow-calf operations continue to produce positive margins, the FAS said. The calf crop for 2021 was projected at 14.55 million head, in line with USDA estimates, but 250,000 head fewer than a year ago as cow sales spiked over the past several years in response to favorable prices.
Furthermore, dry pasture conditions in 2020 have improved after rains in January and February, which will improve calf production conditions. Investment in herd genetics also are ongoing to improve production efficiency and beef quality.
EXPORTS
Beef exports in 2021 were forecast at 770,000 tonnes carcass weight equivalent, in line with the USDA, and 6% lower than 2020, the report said.
Generally, Argentina has seen its price competitiveness fall compared to export prices from Uruguay and Paraguay, the FAS said. Exporters expected weaker first-half exports but hope for a COVID recovery by the second half.
CATTLE, BEEF RECAP
Fed cattle trading this week was at $113 to $114 per cwt on a live basis, steady with last week. Dressed-basis trading was at $180, also steady.
The USDA choice cutout Thursday was down $0.62 per cwt at $226.67, while select was up $0.25 at $220.07. The choice/select spread narrowed to $6.60 from $7.47 with 97 loads of fabricated product and 37 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were up $0.10 to $0.13 a bushel to $1.15 to $1.20 a bushel over the May CBOT futures contract, which settled at $5.38 1/2 a bushel, up $0.04 1/2.
The CME Feeder Cattle Index for the seven days ended Wednesday was $133.85 per cwt, down $0.14. This compares with Thursday’s Mar contract settlement of $135.25 per cwt, down $0.95.