February 16, 2010

Argentina sees slow buying of beef as prices shoot up

Argentine consumers noticeably cut consumption of red meat by 25% this year as falling supplies caused prices to surge, said Miguel Schiareti, vice president of the Meat Industry Chamber.

"Producers are trying to recover the stock they lost in the past three years," Schiareti said. "Rising prices prove how government policies have failed."

Since 2007, the South American country's cattle herd has shrunk by 16% as export restrictions and domestic price limits led ranchers to send breeding stock to slaughter, Schiareti pointed out.

Declining supplies and price increases of as much as 80% since Jan 1 will result in per capita consumption dropping to an average of less than 60 kg this year from about 75 kg in 2009, Schiareti said.

Consumer prices rose 2.2% in January from December and 16.3% from a year earlier, in part because of increases in beef and dairy goods, said Javier Paz, an economist at Buenos Aires-Base research company Ecolatina. Beef has a 5.8 percent weighting in the index.

The National Statistics Institute is scheduled to release January consumer prices, and it is expected that the agency will report 1.1 percent increase in January from December.

However, economists and politicians including Vice President Julio Cobos have questioned the accuracy of the agency's reports, saying it has underreported price increases since former President Nestor Kirchner changed some personnel at the institute in 2007.

While Argentina reported a 7.7% inflation in 2009, Paz said prices rose 15.3% in that period.

For this year "inflation expectations are very high, at 25%," Paz said in a telephone interview.

Meanwhile, the government has slowed the issuance of beef export permits since December in a bid to stem price increases, newspaper La Nacion.

President Cristina Fernandez de Kirchner blamed the increase in beef prices on cattle ranchers who she said were taking advantage of recent rains, which improved pastures, to keep their animals from markets. This was causing prices to rise while their livestock gained weight.

Argentina, which was the world's largest beef exporter in the 1970s, slipped to fifth in 2009, according to the Buenos Aires-based Rural Society.