November 17, 2008

South America struggles with beef sales slump

The global economy downturn and financial crisis have severely affected South American beef exports, with major market Russia now becoming unprofitable.


South American meatpackers are renegotiating previously agreed prices and selling off shipments at low prices amid low beef demand.


Demand is nearly zero with virtually no deals being done, said Fernando Herrera, president of Argentina's Association of Beef Producers and Exporters (APEA).


Orders from Russia, a key importer of South American beef, have slumped with Russian importers struggling to secure credit amid the financial crisis. EU consumers are also cutting down on expensive steaks, causing sales to stall and prices to fall.


The EU's slowing demand means that high quality filet mignon intended for export is being sold for less at Argentine supermarkets, Herrera said.


Paraguay's Beef Chamber (CPC), said exports in October have declined 45-50 percent due to low demand from Russia and Chile, which account for 80 percent of Paraguay's beef shipments.


People seem to have stopped eating beef, according to Maris Llorens, president of the Paraguayan meatpacker, Frigomerc.


The outlook for 2009 looks uncertain, but it is hoped that Russia and Chile will finish their beef stocks and start buying again, said Llorens, adding that meat plants were closing down for weeks at a time.


Uruguay's sales volume rose slightly in October, but prices fell 13 percent and are likely to decline further this month, said industry analysts.


For the first 10 months of 2008, Uruguay's beef exports have surged 55 percent to a record of nearly US$1.1 billion, partly due to Argentina's sluggish exports. However, Uruguay's top market, Russia, has reduced its imports to US$9.3 million last month, less than half of what it spent in August, said the National Beef Institute (INAC).


There is no sign when this situation in the international market will end, said market analyst Rafael Tardaguila.


Brazil has not been spared either, with total beef exports falling 15.4 percent. Beef shipments to Russia alone crashed down 42 percent last month, said the Agriculture Ministry. However, Brazilian exporters are less dependent on Russia therefore the impact is not as severe. 


At Argentina's largest cattle market, prices have fallen steadily in recent weeks because meat plants are stocked. The Argentine government has also incurred the ire of ranchers with export and price controls to tame rising beef prices in the domestic market. 


"The objective of lower domestic prices has been achieved -- not for a good reason but because of the collapse in world demand," Herrera said.

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