June 19, 2007

Government restrictions may limit sales growth on Argentina's beef this year

Figures released by the United States Department of Agriculture (USDA) show that Argentina's beef production will see a marginal increase in 2007 by 3.1 million tonnes due to government interventions on Argentina's beef exports.

A slate of government restrictions such as price agreements, minimum slaughter weights, export tax increases and temporary suspension of exports have affected Argentina's beef exports in recent years.

Fewer government restrictions are expected to help export volumes recover somewhat following a fall of 27 percent in 2006. For the year, exports are forecast to reach 600,000 tonnes.

The restrictions were to keep domestic beef prices low in order to reduce inflation levels. Beef accounts for almost five percent of the Argentine consumer price index and is the main food item within the index.

Over the last five years there has been little movement in Argentina's cattle herd with numbers hovering around 50 million head as some farmers shifted to soybean production due to profitability over biofuel boom. The conversion has reduced the amount of land available for beef production.

The Argentine government has introduced a four-year beef plan that aims to boost beef production by more than 15 percent, or 500,000 tonnes, by 2010. This is to be achieved through a combination of herd growth and increased productivity.

Little movements in domestic consumption are seen to improve overall export availability by eight percent on 2006 levels but would leave export volumes some 20 percent lower than 2005. Argentina currently exports around 20 percent of its total beef output and remains the fourth largest global beef exporter behind Brazil, Australia and India.

The USDA reports Argentina's recovery in exports is anticipated in the second half of 2007 despite a lower shipment by 21 percent at 93,000 tonnes in the first four months of the year compared to the same levels in 2006. Most of this decline was due to a drop of 63 percent in exports to Russia where ongoing high stocks levels made trade very difficult.

Exports to the European Union were seven percent higher, at 23,300 tonnes for this year's first quarter but lost 30 percent from the 2005 levels. Other key markets during the period were Chile and Israel, at 16,000 and 10,600 tonnes respectively.