May 31, 2006

 

Industry evaluates impact of the lifting of Argentina's beef ban

 

 

Argentina's beef producers heaved a collective sigh of relief as the country partially lifted its ban on beef exports last Friday (May 23).

 

The ban, which has been in effect since March, is expected to be completely lifted by September this year.

 

Argentina's government had imposed the ban due to the high cost of the product on the domestic market fuelling inflation.

 

Argentina's lifting of the ban has relieved built-up tension among producers, who are on the verge of organising protests and threatening nationwide strikes to cripple beef sales.

 

Meanwhile, producers in Argentina whose profits have plunged during the 10-week-old ban, welcomed the lifting of the ban. 

 

Javier Ordoqui, president of Carbap, the country's biggest cattle ranchers organization, said the development alleviates the situation for ranchers due to the huge decline in prices seen since the ban was announced.

 

Besides allowing exporters to ship up to 40 percent of what they exported between Jun 1 and Nov 30 last year, the new policy also lifted all export restrictions on cooked and preserved meat.

 

Traditionally, cooked and canned meat were destined for export because of low demand in Argentina. Thus, the ban on exports of these products did nothing to lower beef prices in the country, Ordoqui said. However, it did hurt the profits of producers, he added.

 

Up to a third of the cattle population in Argentina is used for soups and other cooked foods in the US and other countries. Thus producers lost the ability to sell almost a third of their stock when the ban was imposed, Ordoqui said. 

 

Even if Argentina exports less beef this year, it may still manage to match last year's beef earnings as international beef prices have gone up, said Marcelo Fielder, a beef analyst at the Argentine Rural Society.

 

Despite the promise of greater supplies, analysts expect beef prices in Russia to rise due a general worldwide shortage of the meat.

 

Russia is one of the largest buyers of Argentine beef. The lifting of the ban would have little effect on the Russian market as current policy favours the European Union.

 

Country-by-country quotas on meat imports have been in place in Russia since 2003. The European Union has the quota for supplying 78 percent of beef exports to Russia.

 

However, Europe itself has also become a large-scale meat importer in the last five years, thus Russia is negotiating to have half of Russia's beef imports coming from Latin America.

 

If the European Union refuses to budge, the price of meat in Russia would rise 20 percent in the next few months, according to National Meat Association head Sergey Yushin.