Cactus Argentina has all the look and feel of a Texas Panhandle feedyard. After all, Cactus Feeders of Amarillo, TX, has worked since 1999 to introduce Texas-style grain finishing to South America.
The feedlot located near Villa Mercedes on the northwestern edge of Argentina's Pampas region was the vision of Miguel De Achaval, vice president and general manager of Cactus Argentina. The former Cactus Texas employee has built the feedyard to a one-time capacity of 25,000 head.
Earlier this year, he oversaw the Cactus operation — with the help of Argentine agricultural conglomerate Cresud — take on a new look with the announcement of a joint venture with Tyson Foods of Springdale, AR.
The cattle-feeding venture was topped off when the trio immediately added an existing slaughter and processing plant to its portfolio. The aim is to create the first fully vertically integrated beef operation in Argentina with capital stock as 24% Cactus Feeders, 24% Cresud and 52% Tyson.
The new company expects to produce beef products for the domestic Argentine consumer — and give Tyson access to high-value European beef markets. The plant is located 275 miles south at Santa Rosa, La Pampa. It will be Tyson's first participation in a beef operation outside of North America.
Developing a vertically integrated partnership has been one of Cactus' ultimate objectives in Argentina.
“We believe a vertically integrated system for finishing cattle and processing beef in Argentina is the perfect way to capitalize on the strengths of the country's beef industry,” De Achaval says. “The commitment of this venture is to work with Argentine beef producers to offer a superior product at an affordable price.”
The export-certified Santa Rosa facility presently has the capacity to slaughter and process about 9,500 head/month. Tyson spokesman Gary Mickelson says the newly formed company expects to expand the plant's capacity to 15,000 head/month in the future.
“As part of the joint venture, much of the plant's production gradually will be converted from grass-fed to grain-fed beef, with cattle coming from the Villa Mercedes feedlot,” Mickelson says. “This grain-fed product will provide increased access to important export markets in Asia, as well as the European Union (EU).”
Back at the feedyard
Today, the pens at Cactus Argentina are filled with a mix of company-owned and customer cattle showing a predominance of British breeding, led by black and red Angus and Hereford. Managers buy a significant amount of locally raised feeders for both the company and feedyard customers, mostly through a network of order buyers.
The customer base of the feedlot has been changing of late, spurred by drought; and more recently, government food price control policies (see sidebar). Animal ownership is evolving away from independent cow-calf and stocker producers to ownership by meatpacking companies and other large firms.
“About 60% of the cattle in the feedyard are owned by third parties,” says Roberto Eizmendi, Cactus Argentina feedyard operations manager. “Of the beef produced from third party-owned cattle, about 70% is exported to the EU.”
Eizmendi says there's even growing interest from large supermarket chains that are seeking to own and feed cattle, and retain ownership of the beef through slaughter and processing.
Like your typical High Plains feedyard, the Cactus Argentina feed base is corn; pricing of which is a risky proposition anywhere these days, Eizmendi says.
But in a twist of government policies, last year's average corn costs were higher than today's average costs. It's all tied to the Argentine government's complicated scheme to keep domestic beef prices in check.
“Now, our cost for corn is going down,” Eizmendi says. “The government is compensating cattle feeders for the corn we feed to help keep feeding costs down so we can produce lower-cost beef for the consumer.” Under strict government oversight, the price-compensated corn can't be fed to animals producing beef for foreign markets.
Despite the price for such inputs as feed grains, Cactus plans to build another feedyard modeled after the Villa Mercedes facility, but located closer to the Santa Rosa packing plant.
“The idea is to grow in the country as Argentines continue to develop a taste for grain-fed beef,” Eizmendi concludes. “At this point, our competition is not other feedyards; our competition is the grass-finishing sector.”
In other news
Tyson isn't the only foreign meatpacker making news in Argentina. Brazilian-owned JBS SA Friboi, which slaughters about 22,600 head of cattle a day in its 21 plants across eight states in Brazil and five plants in Argentina under the Swift Armour name, added a sixth Argentine meatpacking firm to its portfolio. Friboi is the same company that recently announced the purchase of the Swift & Co. U.S. holdings.
Argentina has all but fully recovered from the recurring foot-and-mouth disease (FMD) outbreaks of the past several years, says Ignacio Iriarte, editor of Argentine Cattle Report. The World Organization of Animal Health (OIE) recently agreed to restore “FMD-free with vaccination” status in Argentina except for a 15-km-wide strip along the northern borders with Bolivia, Paraguay and Brazil.
The announcement paves the way for access to some of the world's strictest sanitary markets in North America, Japan and South Korea. For now, Argentine beef exports to North America are limited to thermally processed product.
Argentine ranchers remain discouraged by very thin margins due to increased government intervention in the meat sector, Iriarte adds. “They say that if the government doesn't free the market or implement effective policies to encourage production and exports, beef output will begin to drop,” he says. “There are some indications that this process has already begun.”
Two additional challenges discourage production. First, cattle continue to be pushed to the edges of the Pampas to new, less productive areas in the west and north of the country. Increased world prices favor a shift away from grazing toward grain and oilseed production.
Second, the strong price increase of corn, which doubled in the past 15 months, directly affects cost of beef production for ranchers. Most Argentine cattle are finished in “hybridized” pasture/grain finishing systems. Iriarte says the corn price compensation program isn't aimed toward ranchers.
“So far, this program isn't for use at the ranch level, and even many smaller feedlot companies won't subscribe to the program, as they must register with the government,” he says. “Our ranchers don't trust our government very much; it's not a good situation.”
Contributing Editor Clint Peck traveled to South America as part of a beef study tour sponsored by the Livestock Marketing Information Center.