November 6, 2009

Argentina live cattle prices to increase strongly for next two years

Argentina's live cattle prices are projected to increase sharply for 2010 and 2011 due to tightening supplies, strong domestic consumption and a rise in world demand, according to analysts.

Local agents estimate that the low cattle prices have bottomed out, and that supplies will become very tight into the final quarter of 2009. Some producers have already started holding onto cattle despite the urgent need for cash flows, given the strong expectation for prices to improve.

The drop in cattle and beef supplies comes as a result of an estimated five-percent decrease in the local cattle herd in 2009, with around 60-70 percent of the breeding herd reportedly in poor condition due to drought in the region.

Since 2006, the Argentine cattle herd has contracted 15 percent, with the high slaughter of females, and poor calving rates adding to the decline.

Cattle turnoff and beef supplies for the first eight months of 2008 were at a record high, up 12 percent year-on-year, which helped to maintain low prices and a surplus for exports. However, the USDA has forecasted a 30-percent decrease in exports for 2010, and although there is no consensus on the local industry on the quantity, it is expected that exports will drop as domestic beef prices rise and the government tightens export controls.