April 1, 2013

Despite the devastating 2009 drought that, along with price controls, forced ranchers to slaughter millions of animals before their time, Argentina's cattle industry is recovering and its herd has grown to 51 million head.

Between 2007 and 2010, 17% of the herd was slaughtered or died of thirst and hunger. That three-year period was marked by government price controls that discouraged beef production, and hot weather that peaked in 2009, turning prime grazing land into dust.

By the end of that three-year period only 48 million head of cattle were left and soy farming was fast encroaching on grazing lands made famous by Argentina's iconic gauchos, or cowboys.

The government lifted beef price controls in 2010 as many ranchers took to feeding their cattle meal on feed lots, turning grazing pastures into more profitable soy farms.

"Starting in 2010, thanks to higher prices, ranchers started conserving more of their cows to be used for reproduction. The inertia of the three preceding years means that stocks should keep growing," said ranching consultant Victor Tonelli.

Between 2010 and 2013 the Argentine herd gained from 3-3.3 million head, and it could gain another 2.7 million to reach a total of 54 million by 2016, Tonelli said.

Cattle market analyst Ignacio Iriarte said that of the 10 million head of cattle that were lost between 2007 and 2011, 3.5-4 million have been recuperated. He said the size of the herd should stabilise soon as the retention of cows used for reproduction has been dropping in recent months, reflecting a dip in beef prices.

Argentina's Ciccra cattle industry chamber said that in the first two months of this year 42.5% of slaughters in the country were of cows versus 39.3% in the same 2012 period. For herd size to remain steady, Ciccra says, slaughter of cows as opposed to bulls must not rise above 43%. Some, however, have a more cautious view of the herd's growth prospects over the years ahead.

"Yes, there was a restructuring of the sector in recent years, but today you will find that between 25% and 30% of the national herd is two years older than it should ideally be," said Gervasio Saenz Valiente, an analyst with the Saenz Valiente, Bullrich and Co. consultancy.