August 18, 2006


Argentina selling higher grade beef due to export quotas



Argentine beef exporters are selling higher grade beef cuts to offset decreased exports due to shrinking Argentine beef production and government limits, industry analysts say.


To compensate for the lower volumes allowed by the government, exporters are increasing shipments of high-grade rump cuts, the Rural Society said.


Last year, the average export price per tonne of boned beef was US$1,600, while in May of this year values more than doubled to US$3,800 a tonne, an analyst said.


Beef production in July was down 15 percent from last year, spokesman Pablo Kiryluk from the Argentine Beef Consortium said. The consortium's members  account for around 80 percent of Argentina's beef exports.


Currently, farmers are hesitant about investing in a market where there is great uncertainty. This hesitation thus limits efforts to expand output, Kiryluk said.


As population growth overtakes cattle herd expansion, there are worries that one of the nation's most important sources of food is now under threat. The average Argentine eats about 66 kilogrammes of beef annually, the highest consumption rate in the world.


Production levels are now 15-18 percent down from last year, even though 2005 production levels were above average, said Miguel Schiaritti, president of local beef industry and trade chamber. If the government continues to limit exports, production would likely continue to fall next year as farmers switch to other farm products.


The Argentine government, in an effort to curb inflation, had banned most beef exports in March. The ban was relaxed in May, however production has also continued falling. Argentina was the world's No. 3 beef exporter last year.


The USDA estimates that Argentine producers are allowed to export 65-70 percent of their export potential under current restrictions while Argentine beef vendors are exporting the full amount allowed under the government's export quota.


While the value of beef exports went down 23 percent to US$480.1 million for the first half of 2006, volumes fell an even sharper 37 percent to 175,587 tonnes.


CICCRA forecasts that only 420,000 tonnes of beef would be exported for the whole year, down 44.5 percent from 2005.


The uncertainty over the future of the beef industry has also affected the feedlot industry as investors have shied away since the ban. 


The feedlot industry, which accounts for 10-20 percent of the total slaughter, is expected to decrease its output this year due to higher slaughter weight restrictions, higher corn prices, and market uncertainty, according to the USDA.


However, the government is now making efforts to reverse the decline.


A national plan announced in July involved ARS214 million (US$69.6 million) a year in direct aid for the next four years to improve sanitary conditions, bovine genetics and tracking systems.


Through these efforts, the plan aims to boost the cattle herd to 62 million by 2010.


Annual beef production could also be expected to rise to 3.6 million tonnes by then, compared with 3.06 million tonnes now.