August 17, 2006
Argentina exporting prime cuts as beef output declines
Faced with government limits on exports to control domestic inflation, Argentina's beef production is shrinking and beef exporters are focusing on selling higher grade cuts to compensate for decreased export volume, industry leaders and analysts say.
Beef production in July was down 15 percent from last year, Argentine Beef Consortium (ABC) spokesman Pablo Kiryluk said.
ABC represents meatpackers who account for around 80 percent of Argentina's beef exports.
"There is great uncertainty about the ability to sell production, and farmers are afraid to invest in expanding output," Kiryluk said.
There are about 54 million head of cattle in Argentina, Kiryluk said, compared with 36 million people, according to the latest census. However, population growth is outstripping the increase in cattle numbers, he said.
"This indicates that our children would not be able to enjoy the same levels of meat consumption which we have," he said.
The average Argentine eats about 66 kilograms annually, the highest consumption rate in the world.
"We're seeing production levels down about 15-18 percent down from last year, but production was unusually high in 2005," said Miguel Schiaritti, president of local beef industry and trade chamber, CICCRA.
"If the export quota remains in place, we will likely see production fall next year," said Marcelo Fielder, beef analyst at the Argentine Rural Society.
There are signs that some farmers are converting land to other production, such as wheat or soybeans, Fielder noted.
However, Schiaritti said it is too early to tell to what extent this may be happening.
Argentina's beef exports totalled US$480.1 million in the first half of 2006, down 23 percent from the same period last year, according to the national food and animal health inspection service, SENASA.
Volumes were down even sharper, with the country exporting 175,587 tonnes in the first half of 2006, down 37 percent from the same period last year.
Higher-grade cuts being shipped
To compensate for the lower volume of shipments, exporters are increasing shipments of high-grade rump cuts, the Rural Society's Fielder said.
"We're seeing beef sales at about US$4,000 per tonne compared with US$2,000 per tonne last year," Fielder noted.
An Agriculture Secretariat analyst confirmed the shift to higher-grade exports.
Last year the average export price per tonne of boned beef was US$1,600, while in May of this year (when exports were limited to the Hilton cut) values climbed to US$3,800 per tonne, the analyst said.
However, average values have fallen as the export quota has been eased. In August beef exports were averaging US$2,054 per tonne, the analyst said.
In the end, the dollar value of exports this year should be relatively close to last year, despite the decreased volume of exports, Fielder noted.
Argentina was the world's third largest beef exporter last year. Before the export ban, the USDA had forecast the country's beef exports to jump to 720,000 tonnes, the highest in 25 years.