April 9, 2010

Argentina to cease feedlot subsidies

The Argentinean government will stop granting subsidies to lotfeeders for the fattening of cattle for the domestic market.

The subsidy, in which the government reimbursed the difference paid by lotfeeders for feed grains over a set price, will no longer be issued because the recent hike in finished steer prices has gained much profitability.

Although this measure will restore a free market, leaving restockers at a disadvantage against lotfeeders, it is expected to further tighten beef supplies in the mid-term, according to Infocampo.

The subsidy has contributed to the beef production surge in 2009, and the increasing slaughter of young steers, leading to the liquidation process seen in recent years. Other factors that fuelled slaughter and production last year include the government-imposed industry controls since 2006 and the severe drought that affected the region since 2008.

The government currently aims to boost production by supporting the fattening of heavy steers and progressively increasing minimum slaughter weights - a measure which has already reduced cattle supply in local markets.