This South American competitor has many export weapons.
Uruguay, one of the newest players on the world beef scene, is positioning itself as a major competitor to U.S. beef in the first decade of the 21st century.
In recent years, Uruguay has taken a three-step approach to gaining worldwide acceptance for its beef products.
* Step one was to remove itself from the list of countries banned from beef exports because of foot-and-mouth disease (FMD). Like Argentina, Uruguay-an producers have made major strides in ridding its borders of this vesicular disease, which is passed to other cloven-hoofed animals through uncooked meat products. USDA recognized the country as FMD-free in 1995.
* The second was winning concessions through the Uruguay Round of GATT talks that ended in December 1993. The country gained access to the U.S. market with a quota of 20,000 tons of beef. Most of the beef has been for manufacturing, but Uruguayan cattlemen hope to begin developing U.S. high quality markets for its beef products.
That could be tough, but Uruguay will benefit anyway since acceptance of imported beef by the U.S. usually opens the doors for the exporting nation to market their products to other countries.
* The third step is a progressive effort by Uruguayan producers to improve their productivity. USDA's Foreign Agriculture Service (FAS) reports that in the medium and long term, Uruguay will expand its beef production by 50% to around 500,000 tons carcass-weight equivalent (CWE). That increased production would double the Uruguayan export potential to just under 150,000 tons CWE. That means increased competition with the U.S. for Uruguay's other targeted markets: Mexico, South America, the Caribbean and countries in Asia.
Mexico Will Be Biggest Battleground Of all the targets, Mexico arguably will become the biggest battleground between the U.S. and Uruguay. Although the U.S. has made major strides in marketing its products to Mexico, raising it to a position as the No. 2 customer of U.S. beef in 1997, Uruguay has many advantages.
For one, Uruguayans speak the same language. They also can market cuts that more closely fit the Mexican cultural profile. And, Mexico could become a member of Mercosur, the South American common market, which provides preferential trade access to its members. If Mexico joins, Uruguay could receive a boost in trade access similar to what the U.S. enjoyed in Mexico after NAFTA became reality in 1994.
That prospect worries many U.S. traders who already are facing increased competition from the recently opened Canada Beef Export Federation office in Monterrey.
But no one is as concerned as the Mexican cattleman, said Cesar S. Cantu, a cattleman in Nuevo Leon and publisher of Boletin Agropek, a monthly agricultural publication.
"It's not going to be good if Uruguay enters the picture," Cantu tells BEEF. "Those guys produce beef at a very low cost - half the price of our costs. Our producers were not ready for NAFTA. They didn't have the technological expertise or the interest rates to compete and we're losing dollars. We're definitely not ready for Uruguay and Mercosur."
Uruguay's inclusion in Mercosur also provides problems for the U.S. in South American markets. Chile, one of the U.S. targets, is a case in point. Until it joined Mercosur, Uruguay had a beef quota with Chile of 750 tons per year at a 50% tariff. Beginning Oct. 1, 1996, tariffs were reduced by 40% and will be phased out in 2004.
That gave Uruguay an opening to increase its exports to Chile to 3,000 tons per year beginning in 1996. In all likelihood these numbers will increase further.
It will be tough winning back any losses from Uruguay itself. The country has a small population and is relatively self-sufficient in beef production, so there is little need for imports. Most current U.S. beef exports go to select restaurants, and FAS has not justified spending significant market expansion funds.
The U.S. Has Its Weapons Yet the main weapons the U.S. has to play in this fight for market share are the same strengths that set it apart from all other countries. The U.S. already has marketing efforts to promote high quality, grain-fed U.S. beef in 13 key foreign markets that reach hundreds of other countries.
And the U.S. consumer has shown no desire to purchase foreign beef. That lack of demand for Uruguayan products will keep that country from developing its own grain feeding industry to compete for Prime and Choice markets around the world.
So although Uruguay is a new player in the world global market, it always will have to play catch up.