Beef Study Tour Visits Cactus Argentina

The day began with an early morning flight from Buenos Aires west to the city of Mendoza, a city of 1 million inhabitants located in the foothills of the Andes Mountains near Chile. Mendoza was founded in 1561 and is a budding gambling destination. It contains three casinos with four more on the way.

It's our jump-off point for our four-hour bus ride back toward the east to Villa Mercedes in San Luis Province, home of the nine-year-old Cactus Argentina feedlot, a Texas-style cattle feeding venture between Tyson Foods, Cactus Feeders and Cresud - an Argentine agricultural conglomerate.

Exiting the Mendoza airport, the travelers were treated to a view of the Andes Mountains. Mariano, our host for this stage of the trip, informed us that the province of Mendoza (population of 2 million) boasts more than 1,000 wineries and produces 85% of Argentina's wine production.

Jesuit priests introduced the grape to this area in 1598. Today, the Malvec variety of grape dominates. Featuring 300 days/year of full sun, and temps that range well past 100° F., the area boasts 35 dormant volcanoes. It's also a heavy area of olive-oil production.

Receiving just 5 in. of annual rainfall, the area's lifeblood is an extensive canal system, the basis of which was built centuries ago by the ancient Incas. The system funnels Andean snowmelt into the irrigation ditches that make this desert area bloom.

On the way to the Cactus facility, we stopped for lunch at a modest-sized, U.S.-style shopping mall bustling with kids and young families and replete with a large modern supermarket, fast-food shops, retail shops and a cinema. "Just like a Wal-Mart," is how one tour participant described it.

As the group continued east toward Villa Mercedes and the Cactus feedlot, puddles of water and mud were very evident. The area, which lies on the northwestern edge of Argentina's Pampas region, had been hit with a 1-in. rain the day before (annual precipitation in this area is about 25 in. -- October through March is the rainy season). While pen conditions were muddy, the U.S.-style pen design of sloped and mounded pens had the cattle looking comfortable.

Miguel de Achaval, general manager of Cactus Argentina, spoke impeccable English. A Texas A&M University graduate, he worked for Cactus-U.S. in Amarillo, TX, before returning home and oversaw building of the 25,000-head Villa Mercedes facility.

He says building a U.S.-style, grain-fed, cattle-finishing facility in Argentina was his dream. "I went to Mike Engler (Cactus CEO) and said: 'I have an adventure for you,' " he says. The resulting three-way partnership was hatched, with construction of the facility commencing in 1998, and opening in 1999.

de Achaval says the site was selected for its proximity to a steady source of corn gluten feed, an ample corn supply located far enough away from shipping ports to somewhat guarantee its affordability, a strong cattle supply, dry winter and good climate. Interestingly, the Cactus Argentina feedlot is located exactly the same distance south of the Equator as the Amarillo Cactus operation is located north of the Equator.

The cattle-feeding venture was topped off when the trio immediately added an existing slaughter and processing plant to its portfolio. The aim was to create the first fully vertically integrated beef operation in Argentina with capital stock as 24% Cactus Feeders, 24% Cresud and 52% Tyson.

The venture's aim was to produce beef products for the domestic Argentine consumer -- and give Tyson access to high-value European beef markets and Hong Kong. The plant is located 275 miles south at Santa Rosa, La Pampa. It is Tyson's first participation in a beef operation outside of North America.

But production has been stymied recently, he says, by a series of events that include a foot-and-mouth-disease outbreak, followed six months later by a devaluation of the domestic currency by the Argentine government. A more recent challenge has been government-enacted price controls on domestic beef in Argentina, as well as export restrictions. The result was that only 16,000 head were in the facility during the tour's visit.

"Our situation in Argentina today is like what the U.S. experienced in 1973 -- fixed prices, high corn and high energy prices. The U.S. (beef industry) thought it was the end of the world, but it wasn't," de Achaval says.

Typically, about a third of the cattle are company-owned with the rest being custom cattle. Most cattle are from herds of 200-300 cows in size. "We don't buy from auction markets." At the time of our visit, more than 50% were packer-owned. Packers, de Achaval says, make good cattle-feeding clients. "They are solid customers and you know they will pay their bills. Volume makes a lot of sense in this business," he says.

He grimaces, however, at the lack of packer concentration in Argentina. There are 400 packers in Argentina, de Achaval says, which presents a problem for a larger-scale feeding operation such as Cactus. "They are very small plants and there is no commercial loyalty. They cherry pick," he says.

The feeding ration consists of cracked corn ($120/mt), wet corn gluten feed from a local sugar-production facility ($50/mt), alfalfa hay ($60-$70/mt) and supplements (including Rumensin; no MGA is used). Corn purchases are graded by weight, moisture level, quality and absence of aflatoxin and foreign material. For consistency's sake, de Achaval says there is no deviation from that four-ingredient recipe, even though there are other byproducts available.

Feeding is three times daily. All the feeding equipment and feed trucks are from the U.S. (the facility just bought its first squeeze chute of Argentine manufacture). Communication between mill and feed crew is by radio. The feedyard has 22 fulltime employees. Two gauchos ride the pens daily to check for sick cattle. Death loss averages .27%.

Healthwise, he says no live-virus products are allowed in Argentina. "So our vaccines are not as effective as in the U.S.," he adds. But at the same time, he believes cattle health in Argentina is superior to the U.S. because there is less pampering done of cattle in Argentina. "Our calves are tougher," he says.

Draxxin and Micotil, as well as other U.S. animal-health products are staples of the operation. Bloat and liver abscesses are rare in Argentine fed cattle. "Our rations aren't as hot as in Texas. We only crack corn; we don't steam it."

"But I would like a little bloat because it means I'm pushing the system."
Purchase price of stockers is 40-45¢/lb., the same as for fed cattle. "We look for quality, conformity and black in what we buy." Cattle are weighed upon arrival and at finish. There is no fixed out weight on cattle. Cattle generally are shipped after a 300-lb. gain and sold on the rail. "There is a demand for each product. Export and retail like big cuts; restaurants and home consumers want small cuts."

Fed cattle are quality graded on a days-on-feed basis rather than fat, as is the case in the U.S. The average carcass weight is 500 lbs. Feed conversions run higher than in the U.S., de Achaval says -- 6.2 vs. 5.6, which he attributes to the use of less processed feed in Argentine feeding. "Our cattle are raised on grass and finished on grain but we can't afford 200 days on feed because of the price of corn." Parasitic wasps are used to control flies.

de Ascheval isn't a proponent of mandatory animal ID. While he acknowledges the advantages of individual-animal management that individual animal ID makes possible, and is impressed by the national ID systems of England and Canada, he says, "they don't make any money off of it. If you can get ranch traceability, that's all you need."

He expects cattle feeding to expand greatly in Argentina, the result of greater competition from crop production for the best land. "Good land in Argentina is worth as much as good land in Iowa. It doesn't pay to have a grazing animal gaining just 1 lb./day on it," he says.

-- Joe Roybal