Argentine Beef Industry Primed for Revival

21 February 2018

After almost two decades of protectionist trade policies under the Kirchner regime, Argentine agriculture is rebounding and returning as an important global player. Inflation and debt impaired the agricultural economy and hurt farmers, with the beef industry taking a huge blow. Agricultural markets have demonstrated positive growth following President Mauricio Macri’s election in late 2015. Not only has he lifted many export tariffs, but also increased shipping permits, guaranteed seed company royalties, and implemented better financing options through loan opportunities and tax breaks. His agricultural reforms offer hope that Argentina will soon have a much bigger presence in key global markets like beef, corn, and soybeans. 

Argentina’s beef industry historically had a commanding presence both domestically and globally. Global consumption continues to grow as an increasing numbers worldwide are able to afford meat products. Domestic consumption of beef trumps that of other meat products like chicken and pork, and margins continue to expand. Argentine beef is synonymous with high quality, making it appealing to many export markets that demand a certain grade of product. With new policies in place and changing global tastes, Argentina’s beef production and exports could soon rise to new levels. 

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Promises of Agricultural Reform
Rise of Argentine Beef
Argentine Agricultural Growth
Looking Forward

Ethusiastic Argentine Consumption of Beef

Promises of Agricultural Reform

Back-to-back Kirchner political terms damaged Argentina’s agricultural economy with individual commodity tariffs reaching up to 35 percent. These protectionist policies may have produced revenue for the government, but Argentine farmers who relied upon exports to international markets saw adverse effects. Most of the country’s export income is derived from the agricultural sector, so it seems likely that these policies hindered the national economy as well as farmers themselves. 

Argentines are famously enthusiastic beef consumers, eating approximately 2.5 million tonnes annually. Annual meat consumption is ranked second globally at 38.6 kilograms per capita. Along with export markets, the domestic beef market was also hurt by the implementation of export tariffs. In response to high domestic prices, late President Néstor Kirchner imposed high export taxes and, at one point, a 180 day ban on exports. Although the policy had the goal of stabilizing domestic beef prices, it hurt farmers instead, as exports fell more than 50 percent between 2007 and 2011 and herd sizes decreased by nearly 20 percent. Farmers have since recovered from the effect of former policies and are now investing in domestic beef markets and global trade by growing their herds. In 2016, head of cattle grew 1.2 million from 51.4 million the year prior.

The free market approach promised by current President Macri has led to increased agricultural investments. Stakeholders and farmers are jumping at opportunities, with exports up 25 percent just one year after Macri’s election in late 2015. Furthermore, the value of Argentina’s agricultural sector is projected to increase by 30 percent throughout the next decade, according to the Buenos Aires Grain Exchange. The beef industry was especially hit by former policies but now shows signs of growth following the dismantling of the 15 percent beef export tariff. Policy reforms coupled with increasing demand for key agricultural commodities is sure to help Argentina become more competitive in global markets.  

Agriculture's Importance to the Argentine Economy

Rise of Argentine Beef

Much like wheat, the cattle industry is recovering after years of high tariffs restricted growth. Serial bouts of foot-and-mouth disease (FMD) throughout the early 2000’s worsened the situation. While this disease poses no threat to humans, infected livestock legally cannot be sold and must be slaughtered to avoid spreading the highly contagious virus. This slaughter requirement reduced herd size and therefore exports. Drought conditions around 2010 in high production areas affected the beef industry as well. Stock quantity of cattle dropped below 48.9 million head, the lowest the industry had seen in over a decade. Although herd size has since started to recover, inclement conditions have hindered growth. Recent extreme rains and flooding in regions with high production acreage have deteriorated pasture conditions, hurting operations. Despite unfortunate weather, herd size is rebounding and ranchers are optimistic about the future of the beef industry.

Argentine Cattle Herd Size Rebounds

As herd size continues to grow, Argentine beef exports are steadily increasing, with the United States Department of Agriculture’s Foreign Agricultural Service expecting them to build each year. This is due in part to the opening of new global markets as economic statuses change and global consumption of meat increases. China’s middle class increasingly purchases more meat and consumers are interested in high quality products. Restaurants and supermarkets catering to these customers commonly carry chilled beef from Argentina. Beef exports to the US are gaining ground as well with the reopening of beef trade between the two countries, which had been closed since 2001 due to foot-and-mouth disease concerns. Argentina can boost their beef exports even more by capitalizing on a potential trade deal in the works with the EU. The EU is among the Mercosur bloc’s top trading partners, with agricultural products comprising a majority of trade.

Beef Exports Growing

While beef exports are expected to increase in the coming years, growth may be slowed as ranchers try to expand their herd sizes. Increasing cattle herd size will slow meat production and raise beef prices as many ranchers grow their inventory and send fewer cattle to slaughter. However as global demand continues to increase, exports should not drop. Export markets should stay optimistic about the status of future beef trade.

Argentine Agricultural Growth

Argentine agriculture appears to be in good shape, as exemplified by rising beef exports  and agricultural investments. Farmers in Argentina are investing more in their operations in a time of political reform. Exports of farming equipment like tractors, seeders, and planters to Argentina are on the rise, pointing to further increased production. Acreage planted to corn and soybeans, two of the country’s top crops, has also been on the rise. These crops were not as heavily damaged as the beef industry by Kirchner policies. Global demand for soybean meal and oil in particular kept export markets competitive. These trends could be a sign of improved agricultural sector growth in the near future.

Agricultural Equipment Exports to Argentina-A Sign of What's to Come

Looking Forward

Things are looking up for Argentine agriculture in an era of free market reforms. Former protectionist policies and high export tariffs plagued the agricultural economy for almost two decades, hurting both domestic farmers and global trade relations alike. The beef industry suffered not only from steep export tariffs, but also foot-and-mouth disease outbreaks and extreme weather that affected pasture conditions and ultimately herd size. New reforms are helping ranchers to invest more in their operations, and rising domestic and global demand for meat will surely aid the growth of the Argentine beef industry production and exports. Gro Intelligence can guide subscribers through the intricacies of the Argentine beef and cattle industry through up-to-date data and analytics. 

 

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