September 2, 2010

 

Mercosur trade deal overtakes Argentine beef exports

 

 

While beef production and exports are growing from the South America's Mercosur trade bloc in Brazil, Paraguay and Uruguay, it is the opposite in Argentina, the home of the legendary "asado" barbecue.

 

A report by the Argentine Ministry of Agriculture, Livestock and Fisheries, based on data from the USDA, indicates that rising beef consumption in Asia finds Mercosur (Southern Common Market), with the exception of Argentina, well-placed to increase sales.

 

Economic recovery in Asia has been stronger than expected, and will encourage key buyers like South Korea, Hong Kong and Japan, the report says, adding that Russian imports have also grown due to increased demand.

 

In this context, Brazil, Paraguay and Uruguay will benefit from increased Russian imports and the continuing fall in Argentine exports, it says. According to the study, the four Mercosur countries will supply 2.9 billion tonnes of beef this year, equivalent to 40% of the global market.

 

Brazil is currently the world's second largest beef producer, after the US, and occupies first place for exports, supplying 25% of the global volume. Uruguay will reach seventh place for exports this year, for the first time ever overtaking Argentina, which will take eighth place, according to forecasts. Paraguay is not far behind. This year it will export an estimated 280,000 tonnes of beef, ranking it ninth in the world.

 

However, Argentina, which exported 770,000 tonnes of beef in 2004, now exports less than 380,000 tonnes. Producers and local analysts attribute this mainly to the shrinking profit margin and to government restrictions on exports, introduced in 2006 in an oft-unsuccessful attempt to maintain price stability in the domestic market.

 

The severe drought that affected the country in 2008 and 2009 and the enormous expansion of soy cultivation, now Argentina's main export, are other factors.

 

Agronomist Fernando Vilella, head of the food and agribusiness programme at the state University of Buenos Aires, told IPS that in recent years, government policy has benefited beef manufacturers more than ranchers, whose profit margin shrank.

 

Vilella noted that the hardest-hit sector was that of small and medium calf producers. As well as losing animals to the drought, the fall in profits led the ranchers to slaughter cows and heifers, reducing supply to the local beef industry, which led to a steep price rise for consumers and, in turn, a big fall in per capita consumption.

 

Under the circumstances, soy is the only crop which is sure to make a profit, in spite of bearing the heaviest export taxes. Therefore, many livestock producers are turning extensive areas of land over to soy production, at the expense of former crops like wheat or corn.

 

The decline is partly confirmed by the National Service for Animal Health and Agrifood Quality, which reports that cattle numbers fell by 15% between March 2008 and March 2010, from 57.5 million heads to 48.9 million. In 1977 the national herd was 61 million heads.

 

This year, Argentina was unable to fill its portion of the Hilton quota of high-quality beef accepted on preferential terms by the EU since 1979.

 

Meanwhile, Uruguay will take the global lead in local consumption at 58.2 kilogrammes of beef per person per year, while Argentina will come second at 56.7 kilogrammes, according to the Uruguayan National Meat Institute (INAC).

 

Uruguay exports 80% of what it produces, but always reserves some cuts at lower prices for internal consumption.

 

In parallel with higher internal demand, Uruguay has increased its beef exports as well as its international customers in 110 countries, including China, Russia and the EU.