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Argentina’s problems also serve as a warning for just how quickly bad government policies can cripple an industry.
September 26, 2013
We complain a lot about our government and how it complicates our farm and ranch businesses. It could be a lot worse. Take Argentina, for example. That country was one of our fiercest competitors just seven years ago.
In 2005, Argentina’s ranchers and farmers produced more than 3.1 million tons of beef, exporting some 745,000 metric tons (mt) to the world market. Argentina was the third-largest beef-exporting country (behind Brazil and Australia) in the world in 2005. And, by the way, it exported all this beef while also supplying the needs of its people – who had the second-highest annual beef consumption rate in the world at more than 136 lbs./person.
As a point of reference, U.S. beef exports in 2005 were 472,668 mt, and U.S. per-capita beef consumption that year was 94 lbs./person.
That was seven years ago. USDA reports that Argentina exported only 164,000 mt of beef in 2012, slipping to 11th place as a global beef exporter. Per-capita beef consumption has declined to 121 lbs./year. And during those same seven years, U.S. beef exports have increased from 472,668 mt to more than 1.13 million mt.
Argentina’s beef export decline is a welcome development to American cattlemen. After all, the less beef the Argentinians offer for the world market, the less competition for our U.S. beef exports. But Argentina’s problems also serve as a warning for just how quickly bad government policies can cripple an industry.
In March 2006, Argentina’s government – in an effort to lower the rising price of beef to its people – banned beef exports for 180 days. It followed that up by imposing a 15% export tax on fresh beef – a tax that’s still in force. The export tax choked off exports and domestic beef prices dropped.
The government assumed ranchers and farmers would continue to raise cheap beef. But instead, they cut their herds and converted their pastures to soybean production – which was more profitable than raising cattle for the artificially depressed beef market.
Soybean acres increased in Argentina from 37.6 million acres in 2005 to more than 48 million acres in 2012 – mostly gaining those new acres from pasture and other crops, such as corn.
The national beef herd dropped from 54.26 million head in 2009 to 49.59 million head in 2012. In addition to raising fewer cattle, farmers and ranchers also freed up land for crops by finishing cattle in feedlots instead of producing the grass-fed beef for which the country had been famous.
“I feel real bad about what has happened to the cattle business in Argentina the past six years,” says Leonardo Airaldi, a cattleman in Argentina’s Entre Rios Province. He and his family run two large cowherds that produce some 2,000 head/year for market.
They grow their calves out more than a year on pasture, and then finish them on a corn silage-based ration. The Airaldi family also sells some of their production as Hereford and Red Angus breeding stock.
Like his neighbors, Airaldi has converted much of his better land into soybean production. “Land that has been converted to soybean production is not going to go back to pasture,” says Carlos Becco, head of Soybean LAS for Syngenta Agro S.A. in Argentina. “That land is worth too much now to be put back into permanent pasture.”
Paul Queck is a freelance ag writer based in Indianapolis, IN.
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