January 8, 2007

 

Argentina's leading meat processor weathers sector storm

 

 

At Argentina's leading meat processor, Frigerifico Paladini SA, using manual labour is still the most efficient way to produce the chorizo sausages essential to any Argentine barbecue.

 

"We tried to automate the process but found that the machine was slower," said Paladini's director of quality control, Mabel Vucko.

 

In many ways the chorizos provide a fitting metaphor for Argentina's famed meat sector, which is struggling in the face of rising costs and government measures to keep down consumer prices--such as export limits and informal price controls.

 

The chorizos are processed in a modern plant located on 50 hectares along the banks of the Parana River in Rosario.

 

Paladini has weathered a series of difficulties over the past years, starting with the sharp decline in sales following Argentina's economic meltdown in 2002. The company had to wait until the second half of 2003 for sales to begin to recover, Agueropolis said.

 

Now, government policies intended to keep down domestic food prices are challenging the company in the face of increased costs.

 

The policies are inhibiting farm output, according to Agueropolis. "There's no incentive to increase beef production," he said.

 

However, despite the difficulties, the company has invested in a new beef processing facility to prepare the 300-tonne Hilton quota allocation it possesses, allowing it to ship fresh meat to Europe. Brazil, Bolivia, South Africa and Egypt are also significant customers of the company.

 

The company would like to expand exports, particularly to the US, but faces commercial and sanitary barriers that prevent cold-cut exports to almost all markets, Vucko said.

 

Paladini is also investing in a new pig farm facility in San Juan province which will make it the largest pork producer in the country, Agueropolis said.

 

The company presently raises 60 percent of the pigs it processes each year at a site 25 kilometres from the processing plant.

 

Paladini also purchases a significant amount of pork from Brazil, an effort which has generated criticism from some farm groups.

 

Pork producers are planning to march on the capital, Buenos Aires, in February to demand the immediate end to pork imports and to push for other measures to aid the industry.

 

Added to that, beef costs are also rising with surging corn prices, further pinching meat processors' margins.

 

Yet despite the problems, Paladini keeps churning out its famed Chorizos and some see record farm output from the 2006/07 growing season. Output will reach a record of 85.2 million tonnes, up 10.9 percent from the previous year and up 0.5 percent from the previous record in 2004/05, according to a study by IES Consultores.

 

Despite uncertainty created by government intervention, "the basics of farm sector are still solid and profit levels will remain high," the IES said.