Argentina, the country with more cattle than inhabitants where eating beef is a luxury

RIO DE JANEIRO, BRAZIL – In Argentina, with a cattle herd of 54 million head, far more than its inhabitants, eating a steak or an asado has become a luxury, due to the unstoppable beef price rises that the Government, which has just closed exports for a month, blames on the strong international demand.

The South American country is the world’s fifth-largest producer and fourth-largest exporter of beef and also one of the largest consumers, with 44.7 kilos per capita per year.

But the sector, one of the main ones within Argentina’s powerful agro-industrial chain, is on alert after the decision taken on Tuesday by Alberto Fernández’s government to suspend beef exports for 30 days.

In justifying the measure, the Executive alleged the high and increasing cost of meat in the domestic market, which, according to the official analysis, are being fixed on the basis of international prices that are driven by strong demand, mainly from China, and not by the purchasing power of Argentines who, in addition, are increasingly restricting their demand, with a drop of 13% in the last year.

Of the total amount of meat produced in Argentina, 70% is consumed locally. Although domestic consumption has been falling for a while, the Argentines, for cultural reasons, “resists stopping their meat consumption and validate the prices,” said Diego Ponti, analyst of livestock markets of the consulting firm AZ Group.

Read also: Argentina’s suspension of meat exports favors Brazil, but sustains high beef price

According to the expert, the other factor affecting prices is the pressure generated by foreign demand, mainly from China, the destination of 75% of Argentine beef exports.

The problem is that for some time now Argentina’s production has not been growing at the pace of demand, both internal and external. “Production is stagnating due to lack of incentives, generating a structural problem of shortage,” he observed.

MEAT PRICES SKYROCKETING

Meat, due to its strong participation in the consumption basket of Argentines, has a high incidence (between 7% and 13%, depending on the regions) in the consumer price index of Argentina, whose high inflation is one of the country’s major macroeconomic problems.

According to data from the Argentine Center for Political Economy (CEPA), last April the price of meat registered a year-on-year increase of 66.1%, well above the general price variation of 46.3%.

The jump is much higher in popular cuts such as roast: 81.5% in year-on-year terms.

Asado (meat for the grill) is available at an average price of 650 pesos (US$6.50) per kilo, which means that a minimum wage is enough to buy 36 kilos, less than what an Argentinean consumes on average in a year.

For Hernán Letcher, director of CEPA, the increases are explained not only by external demand, but also by multiple factors, such as increases in production costs and speculative maneuvers.

“There is a remarking of prices for the improvement of the profitability rate taking advantage of the opacity of the meat production and commercialization chain, where very few players define the price in the market” of live cattle, said Letcher.

LIVESTOCK DEJA VU

The temporary closure of exports has generated a lot of discomfort in the agricultural sector who, as a protest measure, called for a cessation of live cattle sales for eight days starting next Thursday.

However, the measure did not surprise them since the Government had been adopting some interventions in the sector and, in addition, they have in their history the bad memory of the tense relations with the Kirchnerist governments (2003-2015), in which Christina Fernández served as Chief of Staff.

Those conflicts included, among others, a closure of meat exports in 2006 for six months, also then aimed at curbing prices in the domestic market.

Not only was this objective not achieved but, according to the Argentine Chamber of Industry and Commerce of Meat and Meat Products, it resulted in the loss of 19,000 jobs and the reduction of the beef herd by 12.5 million head, effects that the agricultural sector fears will be repeated with the new export closure.