A USDA global agriculture information network (GAIN) report forecasts local producers will continue investing in the cattle business in Argentina.
Cattle production in 2017 is expected to be about 2.7m metric tons, which is above production from 2016 and similar to 2015, said the USDA. The country also is predicted to continue rebuilding its herd and see additional investment in cattle.
“In December 2015, the new government implemented significant policy changes to encourage the sector to revive after several years of government intervention and low profitability,” noted the report. “The main measures implemented were the liberation of the currency exchange market (with an initial devaluation of 45%), the elimination of export quotas and taxes on beef and the removal of other measures which distorted the domestic beef/cattle market which negatively affected the sector.”
Although the rebuilding process is expected to take time, the changes are considered to help Argentina regain lost space in the world beef market, found the review.
However, there also are some negative factors working to slow growth for the sector, said the USDA. Local industry is less competitive as the currency is strong, cattle prices are higher than other countries in the region and some international beef markets remain shut.
“Most local beef export plants had to reconvert their businesses and focus more on the domestic market than what they did before,” found the report. “However, they continue to claim that they face unfair competition from smaller plants which supply exclusively to the local market. They state that they have stricter sanitary and tax controls that result in higher costs and loss of competitiveness.”
Feed grain specifics
About 28% of cattle production in Argentina comes from registered feedlots, said the USDA.
“The price hike on corn was a result of the combination of deregulating the currency exchange rate (with an initial devaluation of 45%), the elimination of the 20% export tax and the removal of export restrictions,” according to the GAIN report. “The price of corn in the domestic market in early September was Pesos 2,360 per ton (USD$ 154 per ton), while a year ago it was Pesos 920 (USD $99 per ton).”
The change is a cost increase of about 156%, according to the USDA. But there have been positive returns for producers fattening cattle, on pasture with or without grain, it continued. Feedlots have also been profitable despite increased feed costs and cattle slaughter weights are growing.
“In feedlots, the higher cost of production due to more expensive corn was compensated by a higher increase in fed cattle prices (50% in the same period) vis-à-vis feeder cattle prices which increased only 30-35%," noted the GAIN report.
Additionally, costs for feed grains are expected to drop in 2017 as corn production is predicted to increase by 30%, reported the USDA.