April 6, 2010

Argentina lifts feedlot subsidies on beef price hike

Argentina has suspended broad subsidies for corn and other cattle feed for an indefinite period starting April 1 due to soaring local beef prices, announced Oncca, the agricultural trade office.

The subsidies over the past few years had helped farmers increase beef production amid drought and low beef prices. The result was a rapid and widespread expansion of feedlot use in Argentina, which accounts for 40% of beef consumed, according to Oncca.

However, the cost of beef has shot up about 40% since the beginning of the year, and this has prompted the government to block beef exports in February, a measure regularly adopted during price spike to increase domestic supply.

However in March, the government has allowed shipments of about 350,000 tonnes of beef under bilateral treaties. Later the amount was increased to 400,000 tonnes, but the government had added a new process of getting approval for exports, requiring a petition to be approved by Domestic Commerce Secretary Guillermo Moreno. After that, companies can begin the normal process of asking Oncca for an export permit followed by submitting the paperwork to customs. Many exporters see these unofficial barriers are a way for the government to stop exports without admitting they are doing it.

It is not immediately clear if feedlots will loose their competitive advantage against grass fed cattle without the subsidies.

Between 2007, when the subsidy programme was established, and 2010, the government paid out ARS1.6 billion (US$414 million) in subsidies to feedlots, according to Oncca.