High grain prices and government caps drive many to sell their herds and instead grow lucrative crops.
03:51 PM PST on Saturday, January 12, 2008
By JEANNETTE NEUMANN The Associated Press
BUENOS AIRES, ARGENTINA - Argentines are passionate about their beef -- from cattle grazed on the sprawling pampas grasslands, it's a national staple, delivered inexpensively and received with religious fervor at Sunday barbecues nationwide.
But while Argentines are some of the world's top meat-eaters, consuming nearly 154 pounds per capita each year, soaring grain prices and export caps are driving many cattle ranchers to sell their herds and farm more lucrative crops instead.
Ranchers have switched from grazing to grain on about 7.4 million acres since 2005 -- a 10 percent decline in ranchland, said Pablo Adreani, an economic analyst with AgriPAC Consultores, an agricultural consultancy in Buenos Aires.
Argentines are some of the world's top meat-eaters, consuming nearly 154 pounds per capita each year, but soaring grain prices and export caps are driving many cattle ranchers to sell their herds and farm more lucrative crops instead.
Export caps imposed by former President Nestor Kirchner as an anti-inflation measure, have flooded the local market with meat, keeping beef prices low while soybean, corn and wheat prices soar.
The trend has driven Argentina, the world's biggest beef exporter until the 1950s, to fourth in U.S. Department of Agriculture rankings, behind Brazil, Australia and India, and the USDA predicts Argentina will fall to fifth behind Canada in the coming year.
Nowhere is the trend more clear than on the open plains of Argentina's pampas, a vast grassland where thousands of "gauchos" herded cattle like in the old Wild West. The romantic vision of ranch life remains important in Argentine culture, but the economic equations involved have changed profoundly in recent years; boosted by U.S. ethanol production and a global interest in biofuels, prices for soy, wheat and corn have hit record highs.
Some agricultural analysts say Argentine soybean farming is now three times more profitable than cattle ranching. Others say reliable figures on this are lacking. Nonetheless, the trend against ranching is powerful, said commodities expert Ricardo Baccarin.
"The business of soybean farming is brilliant in Argentine today," he said.
Half of all cultivated farmland in Argentina is dedicated to soybeans today -- an explosion aided by the fact that soybeans need just eight months to reach harvest, far less than the two to three years needed to raise a beef herd, he said.
Soybeans also require less fertilizer -- a major expense -- than corn or wheat, and almost 90 percent of soybeans are exported for high prices thanks to a solid futures market and constant international demand, he said.
"Nobody who is farming soybeans is complaining," Baccarin added, noting that corn, wheat and beef are all far more intensely regulated because they are consumed in Argentina and inflation-fighting is a top concern.
Since 2005, there has been about a 10 percent decline in ranchland in Argentina as many cattle ranchers have switched from costly grazing to profitable grain.
The trend pains Alfredo Guillermo Silveira, who has ranched for 22 years on a large spread where the owners finally sold their 1,000 head of cattle and planted soybeans and sorghum. As an employee, Silveira feels lost.
"It's not like it was, waking up early, caring for the animals," he reminisced. "There are practically no cows left" in his farm state Entre Rios, he added -- "It's all soy."
The switch to mechanized grain farming has brought unemployment, even as land prices have nearly doubled since 2002 because of soaring demand for farmland, said Marcelo Fielder, head of economic policy for Sociedad Rural, the country's main agricultural lobby.
Taming inflation was Kirchner's goal when he banned most beef exports last year. This year, exports were capped at 480,000 metric tons, down from nearly 700,000 tons in 2005.
Kirchner's wife, the newly elected President Cristina Fernandez, has promised to maintain a high export tax that makes outbound beef too costly for many foreign buyers. So ranchers must keep selling 80 percent of their meat to swamped local markets where profits as well as prices are low.
The government's measures cost Argentine ranchers $1 billion in 2006, Adreani said.
"If the government would allow a free, unrestricted market, Argentina could be the second largest world exporter of beef," Adreani said. Instead, it is fourth.
Argentina's remaining ranchers are particularly frustrated to be missing out on rising global beef prices driven by the same swelling cost of grains that cattle are fed. At his slaughterhouse at the Yaguane meat processing plant, quality control supervisor Carlos Alberto Kuida blames the government.
"We've got our hands tied behind our backs with these export taxes," Kuida said. "We're in the worst situation we've been in for years."
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