Argentina’s meat market will be strengthened by government action – Minerva Foods
RIO DE JANEIRO, BRAZIL – The recent restrictions imposed by the Argentine government on meat companies operating in the country tend to narrow the number of formal companies in the market and strengthen the sector, said on Wednesday the CFO of Minerva Foods (BEEF3), Edison Ticle, while referring to the reinstatement of meat export registrations, announced in April.
Minerva Foods’ CFO recalled that Argentina’s official exchange rate is significantly lower than the market average and this has become a “perverse incentive” for intermediaries to enter the meat trade with the sole purpose of arbitraging currency.
According to the executive of South America’s largest beef protein exporter, with an Argentine operation through subsidiary Athena Foods, some players external to the food sector have come in buying and selling meats to profit on the exchange rate.
“Some (of these) companies can’t meet the country’s legal requirements, which obviously is not the case for Minerva and other big players,” Ticle said. “The government has introduced measures in an attempt to curb this kind of practice,” he added.
In addition to the restrictions, last week Argentina announced a 30-day suspension of meat exports as an emergency strategy to contain inflation in the local price of beef protein.
According to the CFO, after this period, there should be fewer companies with licenses to export and those which remain will have more bargaining power to achieve attractive prices and margins. “In this respect, we welcome the government’s measures… We think the market will be strengthened, more formalized, and companies that come out of this will be strengthened.”
Currently, the operation in Argentina represents about 10% of the consolidated revenue of Minerva Foods. Soon after shipments were suspended, the company said in a statement that it would use its geographic diversification to serve international clients through its units in Uruguay, Paraguay, Brazil and Colombia.
The company further stressed in the statement that it also has a solid presence in the Argentine domestic market through Swift, one of the best known brands in the country.
Diversification
With respect to competitor Marfrig Global Foods’ indication to diversify proteins, with the acquisition of 24% of BRF, Minerva’s executive said he does not see any sense in the company investing in beef, poultry and pork, unless the companies merge. “One should not expect this from Minerva in the medium and long term,” he said.
Ticle also denied that any formal proposal from Marfrig (MRFG3) has reached Minerva, prior to the purchase of BRF (BRFS3) shares, as rumored in the market.
According to him, the only strategy that would make sense for Minerva would be the expansion of geographical diversification, with operations in Australia and the United States, which are also major global suppliers of beef.
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