November 21, 2008

Argentina feedlot use up sharply on subsidies


Argentina's fame as the land of grass-fed beef is being challenged as an increasing number of the country's cattle are being rounded up from the Pampas and crowded into feedlots before making it to the table.


The use of feedlots for finishing cattle in Argentina has skyrocketed in recent years, with 4.5 million to 5 million animals passing through the pens this year compared to just 1.5 million in 2001, according to a report from the Argentine Feedlot Chamber.


An estimated 15 million head of cattle were slaughtered in 2007, according to the Agriculture Secretariat. If the number is similar this year, that would mean that about a third of Argentina's cattle are fattened in feed lots now.


The trend is being fuelled by government subsidies on corn for use as feed and the higher relative profits made by growing grain compared to using pastures for cattle grazing.


This year, 3.6 million tonnes of corn went into the bellies of cattle, or 18 percent of the country's total corn production, according to the Chamber.


The government implemented the subsidy program last year to compensate beef, poultry, pork and dairy producers as well as wheat millers in the face of skyrocketing corn prices and domestic price controls aimed at keeping down food costs.


As grain prices peaked earlier this year, the government payouts surged.


In the 12 months ending March 31, ARS1.6 billion (US$480 million) were paid out, while more than ARS2.1 billion have been paid out from April to the present, according to the agricultural trade office ONCCA. Beef feedlots received ARS354 million of the payments since April.


However the recent pullback in international corn prices is likely to lead to some major savings for the government.


Corn prices closed at ARS270 a tonne at the Rosario Grain Exchange Thursday, almost 10 percent under the cut off price set by the government for making subsidy payouts.


The price drop could save the government ARS100 million a month, local daily El Cronista Commercial said.
ARS1.00 = US$0.300305 (Nov 21, 2008)

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