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Argentina Beef Exports to Increase in 2009

Despite government interference, Argentina's beef export market is projected to grow.

Beef exports from Argentina should be in the region of 500,000 tons for 2009. However, the volume will depend on the government policies in regard to exports.

The government has prepared a draft quota for the year 2009 and much depends on inflation and government restraints for the year. The government increased controls of beef exports in the first half of 2008 in order to guarantee domestic supplies during the four month farmer strike.

While in 2008 the government did increase the beef export quota to 500,000 tons, it was followed by restrictions on the beef plants that had to guarantee 75% of production in the plant for the domestic market.

The National Organization of Control of Agriculture Commercialization(ONCCA), administers a control of exports systems known as the ROE. This is a system where the export plants have to register their proposed meat for export, with the destination, name of client, type of cut and agreed prices.

This is then considered by ONCCA, and the answer is given yes or no if the meat can be exported. As ONCCA has the daily purchases and values of all livestock and the amount of meat and name of client on domestic market, the system cannot be circumnavigated or foiled in any way.

For the new year of 2009, frozen beef is expected to lead the beef exports, and the Russian Federation is the main market. This consists of block packed forequarters and hindquarters of manufacturing cows, round cuts and chuck and blade from better quality cows.

Israel and Venezuela are the second largest buyers of frozen beef, with forequarters for Israel and compensated sides cut to retail specification for Venezuela. The beef to Venezuela is a government oil for beef barter system of payment, the plants are then paid by the government of Argentina.

Germany remains the leading buyer of chilled Hilton quota beef in the European Union, followed by Italy, the Netherlands and the United Kingdom. Chile is also a very important market for fresh beef, albeit a seasonal trade from the month of September to March of each year. Meanwhile, processed beef corned beef and cooked meats, are still mainly exported to the United Kingdom and the United States.

The Hilton price for the prime cuts in the first half of 2008 was topside, silverside, round, rump and loin to the port of Buenos Aires. While this is a good price in Argentina, it’s quite low in real terms on the world stage, even despite a 40% increase of 2007.

There has been a large slaughtering of cows, both from the beef and the dairy sectors in the last year. The drop in commodity prices since the economic slowdown makes beef farming look attractive again.

Additionally, the government has introduced a scheme for feedlots to encourage the fattening of dairy steers in particular for the domestic market, this works out at $41 per year.

Under normal conditions, Argentina consumes 80% of beef produced on the domestic market; however, in 2008, it was in fact 87.5%. This is maintained because of government policy, in keeping beef prices artificially low for Argentine consumers. If this was not the case, then exports could quite easily exceed 900,000 tons a year.

This gives an indication to the extent the government of Argentina works to keep the cattle prices artificially low for good sound political reasons, an ever important 40 million voters.

Every year since 2005 has seen an increase in the number of cattle finished in feedlots. This is, in no small part, is due to the fact that Brazilian beef companies own most of the beef plants today. The Russians and Americans own the rest of the export beef plants.