Tuesday, February 09, 2010

Beef Prices Spur Inflation

The Argentine consumer price index has risen strongly over the last two months, driven by a 70 % rise in food price items, including beef as supply slumps.

According to local trade, butchers and supermarkets have faced a 95% increase in wholesale beef prices, and passed a 100% price increase to local consumers. Demand for beef has also reportedly decreased, and interest in chicken and other meats has improved (La Nación).

According to analysts, the sharp decline in cattle supply has driven the price increases, which comes as a result of severe drought in 2008-09, inadequate government policies, female cattle liquidation, and the ease in beef export restrictions in 2009.

As a result of the price hikes, the Secretary for Domestic Trade has announced a tightening in export certificate issuing until beef supplies increase in the local market.

Local analysts forecast a further large reduction in supply over the next few months, as feeder cattle are scarce and expensive, reducing feedlots reposition rates (which currently account for around 35% of slaughter given government subsidies to lotfeeders).

The industry forecasts that the price increases will continue over the next two to three years, as demand remains strong, supply low, and the government tightens exports (Infocampo).

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