January 3, 2007

Argentina's beef sector investment down 33 percent in 2006

Argentina's beef producers reduced investment by US$300 million in 2006, down 33 percent from a year earlier, as the result of government intervention designed to keep down domestic beef prices, according to the Argentine Rural Society (SRA).

Production also fell to 3.13 million tonnes, down 3 percent compared with 2005, according to the SRA study cited by local daily La Nacion.

Farm groups are incensed by a series of government measures designed to prevent inflation in domestic wheat, corn and beef. They complain that the measures deprive them of the value of their goods and force the sector to subsidise domestic food supplies.

"Investment is frozen" due to intervention in the farm sector, SRA analyst Ernesto Ambrosetti said, according to La Nacion.

Beef producers have cut investment in infrastructure, pastures, genetics, fertilisers and other inputs in response to the government measures, according to the SRA.

In March, President Nestor Kirchner banned all beef exports to prevent soaring domestic and international demand from pushing beef prices up. The restrictions were progressively eased and now exports are limited to 70 percent of 2005 levels. In addition, the government has been circulating a list of reference prices for certain cuts, which vendors at the nation's principal slaughterhouse, Liniers, are "recommended" to honour.

With increasing costs and price limits imposed by the government, there is "no incentive to increase beef production," said Ruben Agueropolis, general manager of one of Argentina's leading meat processing plants, Paladini.

Domestic beef prices have been a major source of friction between the government and farmers. The average Argentine eats about 66 kilogrammes of beef a year, the highest consumption rate in the world.

Yet control of beef, corn, and wheat markets has led farmers to focus on increased soybean production, which has escaped government scrutiny due to miniscule domestic demand. Some 480,000 hectares were shifted from cattle pasture to soy cultivation in 2006, according to a report from the Buenos Aires Cereals Exchange.