January 2, 2008

Argentine beef export to slide further as farmers make the switch to grains

Cattle ranchers in Argentina, the nation with the highest per capita beef consumption in the world, are switching to planting grains rather than tolerating low profits.

Argentina's government last year imposed export restrictions on beef to contain rising inflation. The loss of this immense market has resulted in a flood of cheap beef in the domestic market, precipitating a sharp drop in prices. The restriction has infuriated the nation's cattle ranchers who see beef prices rising worldwide.

The government imposed a limit of 480,000 tonnes for beef exports, down from nearly 700,000 tonnes in 2005.

The 31-percent cut meant Argentina could slide from being the fourth largest beef exporter to being the fifth this year, behind the US, Brazil, Canada and India, according to the USDA.

Analysts expect Argentina 's beef exports could have been on par with beef exporting giants Brazil and the US had it not been for the restrictions.

The drift to grain planting is likely to continue as Cristina Fernandez, the new President, has promised to maintain the prohibitively high export tax on beef and restrict beef exports to just 20 percent of production.

The lure of much higher profits from record international grain prices have also prompted farmers to abandon cattle grazing in favour of grain planting. The attractions of grain planting is also heightened by the short time period from planting to harvest as opposed to cattle, which takes years of grazing before slaughter.

As a result of the switch, ranchland in Argentina have dropped 10 percent since 2005, estimates AgriPAC Consultores, an agricultural consultancy.

Half of all farmland in Argentina is dedicated to soy today, a preference made due to the fact that other crops like wheat and corn are intensely regulated as they are also consumed locally. Soy on the other hand, is in huge demand from the global arena, particularly from Asian nations like China.