Mar 19, 2010
Argentine Government Imposes Restrictions On Beef Exports
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Argentine government took measures this week to restrict the amount of beef exported from the country. With the exception of a few of the more expensive cuts of beef, exports from the country were suspended indefinitely. The government did not officially explain their actions, but analysts believe it is in response to a sharp rise in domestic beef prices, which have increased 35% to 40% in the city of Buenos Aires during the months of January and February. The principal importers of Argentine beef include Russia, Chile, and the European Union.
Domestic beef consumption in Argentina and beef exports from the country increased in 2009 thanks to farmers and ranchers liquidating a greater than normal amount of the heifers and breeding cows from their herds. During the last three years, the cattle heard in Argentina has declined from 60 million head to 51 million. Beef prices rose as a response to increased demand and a more limited supply.
The current liquidation process started several years ago when the government closed beef exports for the first time. As a result, cattle prices fell and farmers started liquidating their herds. They plowed up their fields of hay and pasture and converted them to additional soybean production. The liquidation process accelerated in 2009 when a sever drought and lack of livestock feed killed off hundreds of thousands of cattle. The recent action taken by the government is another disincentive for cattle producers who are expected to continue the liquidation process.
A smaller cattle herd in Argentina could impact the corn and soybean acreage in the country. With fewer cattle, there will be less demand for corn, which could weigh on the corn market. Corn exports from Argentina are already restricted by the government, and if demand for corn declines, corn prices could decline as well. This would then force Argentine farmers to cut back even more on their corn acreage in 2010-11 and increase their soybean acreage. Argentine farmers already plant 9 to 10 times more acres of soybeans than they do of corn and the recent action of the government could widen that gap even further.