November 26, 2012

 

Argentina's 2012 beef exports to hit lowest point

 

 

Due to an overvalued peso which makes the steaks too expensive for many overseas grills, Argentina's 2012 beef exports are on track to hit the lowest point in a decade.

 

During the first nine months of the year, Argentina's beef exports totalled 135,000 tonnes, down from 194,000 tonnes during the same period a year earlier and down 75% from the record shipments seen in 2005, according to the beef chamber Ciccra.

 

Beef shipments in September were particularly weak, falling 40% on-year to just 8,698 tonnes. A peso overvalued by 25-30% against the US dollar and the 15% export tax on beef "makes it so the effective exchange rate impedes access of our meat to international markets," Ciccra said in its monthly report.

 

The government has allowed the peso to weaken about 13% against the dollar during the last 12 months. But annual inflation that most private-sector economists say has been running at or above 20% in each of the last three years has caused the currency to appreciate notably in real terms.

 

The peso traded on the local wholesale foreign-exchange market at 4.8185 to the US dollar Friday (Nov 23), while greenbacks were selling for about ARS6.46 (US$1.34) on the black market. The government has made it next to impossible for Argentines to buy dollars on the formal market in a bid to stem capital flight, leading residents to pay a steep premium for dollars on the black market.

 

Beef shipments are unlikely to reach 200,000 tonnes this year, pushing Argentina down into the No. 10 position among top global beef exporters, Ciccra said. Argentina was the world's No. eight beef exporter in 2011.

 

During the first nine months of the year, Russia took 21% of Argentina's beef exports, followed by the EU with 16%, Hong Kong with 14%, Chile with 12% and Israel with 11%.

 

The value of beef exports from January-September were just US$727 million, down 25% on-year. According to the USDA, Argentina is likely to export just 170,000 tonnes of beef this year and 180,000 tonnes next year. That is down from 621,000 in 2009.

 

Argentina has steadily lost market share in the global beef trade in recent years as government export restrictions, price controls and a severe drought in 2009 led ranchers to send their animals to slaughter en masse.

 

Starting last year, the government eased export and price caps. Ranchers have responded by slowly starting to rebuild decimated herds. Production during the first nine months of the year totalled 1.91 million tonnes, up from 1.86 million tonnes a year earlier but down from the peak of 2.53 million tonnes seen in 2009, according to Ciccra.

 

According to the USDA, Argentina's production should continue to recover, climbing to 2.8 million tonnes in 2008. "Increased slaughter will be supported by growing cattle supplies as a consequence of herd rebuilding initiated in 2010 after severe drought and liquidation," according to the USDA's monthly global-beef-supply report.

 

"Despite expected high inflation rates and continuously increasing production costs, historically high cattle prices are still likely to provide positive returns to the cattle sector, encouraging the continuation of herd rebuilding, albeit at a more-moderate pace," the USDA said.

 

Argentina's exports are expected to rise 6% next year, according to the USDA. "Argentina's growth is limited by high cattle prices and an overvalued peso, but shipments to the EU and some other niche markets are exceptions," the USDA added.