Argentina Livestock and Products Semi-Annual 2009

Argentine beef exports for 2009 are revised downwards at 420,000 tonnes primarily due to a weaker demand from its main buyers.
calendar icon 9 February 2009
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Low returns coupled with the worst drought in the last 50 years will reduce slaughter and beef production. The cattle herd is also expected to fall.

Argentine beef exports for 2009 are revised downward at 420,000 tonnes (carcass weight equivalent). The main reason for this drop is the significant reduction of imports of the country’s main clients since the last part of 2008 due to the global economic downturn. Recession, strong devaluations of many currencies, large stocks of beef in some cases, are all factors that will have a negative impact on beef exports throughout 2009. Based on recently published official trade data, Argentine beef exports for 2008 totaled 421,000 tonnes.

Most traders are confident that the majority of the main markets will be reestablished during the year as prices stabilize well below last year’s record levels. Although the price for the Hilton Quota is high compared to historic levels, some exporters doubt Argentina will be able to fulfill the entire 28,000-ton quota. Export packing plants are working at a slower pace, and many are finding difficulties to source heavy steers, which are normally the type of animals used under the quota, due to the severe drought suffered during most of 2008 and January 2009. The Russian Federation, the most important market (in volume) in the past five years, is starting to show signs of activity which is expected to speed up after March.

Chile and Israel, two very important markets, are also expected to recover somewhat. Exports of themoprocessed beef are forecast to remain relatively high as the government excluded these products from controls and restrictions, and furthermore, there is an abundant supply of cows and heifers for slaughter due to the effects of the drought and herd liquidation.

Exporters indicate that the government’s regulations to control exports are now not a significant factor at this time. With a slow down of the local economy, the government is encouraging exports to collect revenues and stimulate economic activity.

Most traders indicate that beef export prices fell approximately 40 per cent from last year’s peak level; however, they foresee an improvement throughout 2009.

By the end of 2008 and early 2009, the worst drought in at least 50 years affected a vast area of the most productive crop and cattle land in Argentina. Beef production for 2009 is revised downwards due to a smaller slaughter and a drop in average carcass yields. A reduced calf crop and greater animal losses in 2008 will negatively affect the supply of fed cattle in 2009. Moreover, the shortage of feed reserves, the destruction of thousands of hectares of pastures, and a smaller corn crop are also expected to affect production.

Continued government support for feedlots to reduce feed costs (at about $50 per animal) will be an important factor in the market. The availability of productive pastures has been reduced as more pasture land has been turned into cropland in the past several years, and the remaining pastures were severely affected by the drought.

The calf crop in 2009 is also revised downward at 14.2 million calves. The drought primarily and low returns have reduced the number of cows in production. Furthermore, their poor condition will significantly affect pregnancy rates. This situation will affect beef supplies for the next couple of years.

Most contacts indicate that the cattle herd will fall nearly one million head in 2009, similar to what happened in 2008.

There are practically no new investments at the ranch level or the processing industry. Low returns have discouraged players from expanding their businesses.

The Argentine government is slowly letting the value of the dollar increase, now at pesos 3.60 per dollar.

The government and the local farm sector continue to have a very tense relation. The two sides reopened dialogue on February 24, with the government offering support for wheat, dairy, cattle and regional products. In the case of cattle, the government has offered some tax cuts to producers feeding cattle over 400 kilos, will support cow calf operations affected by the drought, and will pass to Congress a new Federal Meat Law.

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March 2009

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