Quality:
As I reported about a year ago in these pages, feedlot beef continues to increase its market share to the point where, this year, I have no idea where you can find a grass fed steak in Argentina.
If you like good ol' Iowa corn-fed beef, you're in luck! If, however, you travelled 10,000km to have that chewy, screamingly beefy goodness ...I´m afraid you are too late. Real grass-fed beef still exists in Argentina ...but the only way that I actually know that is because my missus and I still raise them.
We don´t get a higher price for them in the market, however ...so our lovely steers just go into the system and get sold side-by-side all along the chain with mushy, greasy, antibiotic laden feedlot beef.
I would like to report this year a percentage figure for feedlot beef ...but I can´t. I simply can´t find anyone who is doing it anymore ...and I´m a rancher in the famous pampas with lots of rancher friends!
Quantity:
The number of beef cattle has shrunk by about 21% over the last 3 years. OK, maybe it was too high to begin with ...but now, it´s too low.
"Too low for what?", you ask... too low to keep Argentina as the biggest beef eating nation on earth, too low to keep all the meat packing plants in business, too low to maintain exports, and too low to keep prices low.
Uruguayans are suspected to now be the beef eatingest people on the planet. Argentinos who can afford it are still eating beef as usual. Argentines who cannot (the vast majority) are having beef-less days ...long gone are the days of local construction workers building a lunchtime fire to roast beef ribs.
But pork and chicken production here has always been dwarfed by that of carne de vaca and doesn´t offer much of a low-cost alternative. In fact, when the president mentioned the aphrodisiacal properties of pork, pig producers shuddered ...there simply are not enough pigs or chickens in Argentina to compensate for a major switch to other meats.
About 5% of meat packing plants here have shut their doors. Many if not most of the other packers have reduced their output and workers. Almost all of the plants are either up for sale or could be very soon.
With Argentine beef production down about 24% this year alone, there's just not enough cattle in the pipeline to keep the big plants working at an efficient level. Smaller, more efficient plants might be indicated ...but who is going to invest big money in Argentine beef at this point?
Exports of beef today from Argentina are a catastrophe. At the close of this year, Argentina will have exported half of the amount from 2009 ...maybe less. That might make 2010 the worst year in Argentine history. Who cares? Maybe everybody on the planet that eats beef ...and maybe everyone in this country.
This is even today a very agricultural country ...and with more arable land per person than almost anywhere ...agriculture becomes more important to the world. The resultant drop in euros, pounds, and dollars will affect everyone who both lives and earns here.
Something to keep in mind: there´s 2 kinds of beef exports. Canned beef is one thing. Fresh beef is another. Soups, stews, corned beef, beef extracts ...even pet food ...is cheap and has a long shelf life. Fresh cuts of beef... especially yummy steaks and roasts are another.
Much the way God created whiskey in order to keep the Irish from taking over the world, man created the Hilton Quota to keep Argentines from putting every other cattleman out of business.
20th century US cattlemen lived in dire fear of the capacity of Argentina becoming the world's low cost producer of fine quality cuts of beef. To this day, fresh cuts of Argentine beef are not allowed into the US.
The Hilton Quota is a European tariff to spread the allowed amounts of imports across the great beef exporting countries of the world (most countries don´t have excess beef for export.) When I first began ranching in Argentina, the cry here was for Europe to increase Argentina's share of that lucrative quota. Today, Argentina cannot find enough cattle to even fulfill the amount allowed to her.
Due to the lack of beef available for export, Argentina is losing international customers to other countries. Some of those customers will never come back. That makes the possibility of a rebound in beef production here even less likely to occur for some time.
Price:
Prices are already at all-time highs. My missus and I kept our cattle when everyone else was "gittin' out the cow bidness" more out of spite than good business sense. We simply refused to sell at firesale prices during the time when it seemed that everyone was getting out. We were lucky; we had the resources to refuse.
We now receive about 3 times more for cattle on the hoof than last year ...only because we have cattle and almost no one else does. That encourages us to continue to raise traditional grass-fed Argentine cattle to full market weight.
Those prices are not transmitted directly to the supermarket, though. We ranchers have been sucking it up for years. Now, the meatpackers are lowering their profit margins. Your local butcher or supermercado has been making less income from the sale of a steak for a long time because he doesn´t want to scare you off permanently from buying beef. Restauranteurs have a bigger price margin ...so their prices are not 3 times much as a year ago.
How long can this last?
I´ve said that we can expect this ...and worse ...for the next 3 years. That´s probably because I can´t see farther than three years! A recent university study here, though, says that cattle production won´t recover for 10 years.
It takes a lot of time and money to rebuild a herd of cattle.
Even worse, converting pastureland to crops is very easy compared to converting cropland to cattle pasture.
To change your pasture to crops only takes a tractor, a lot of chemicals, and widely available and affordable seeds.
To change your soybean field to cow pasture, however, means grass-seed that is just as expensive as soy-seed ...passing up a harvest season of soy ...and having to buy cows that are already terribly expensive due to the cattle shortage.
In short: not gonna happen.
What´s gonna happen, then?
Since I´m apparently in the prediction mode, I´ll try my hand at the future: cattle producers will attempt to rebuild their remaining herds as best they can with their limited resources and their uncertainty.
Some cropland in Argentina will go out of production because some of it was never very suitable for crops in the first place. That land will go back to natural pasture (full of weeds) ...or could be sown with seeds of natural pasture grasses on a risky, expensive bet that current owners of cows will come to rent it for grazing.
Some cropland will go back to both pasture and cattle ...if their owners are willing to buy expensive pasture seed, very expensive cows and bulls, and wait until calves are produced. That scenario will take lots of money, time, and balls of titanium. All in short supply nowadays.
In the meantime, cattle producers like my missus and I will enjoy prices unheard of in Argentina ...at least until people stop eating so much beef here, until Argentina's export markets dry up, until so many meatpacking plants close that we have to slaughter them ourselves for sale (against the law.)
What could happen, however, is that two market streams could develop: one for feedlot cattle (that´s not going to go away) ...and another for the famous traditional Argentine grass-fed beef. That might reward those ranchers that keep the great national patrimony enough to keep it going.
As it is, even my missus and I could still be persuaded to get out of the cow bidness.
We´ll see.
1 comment:
My local butcher just switched to feedlot, his meat now is watery, with little to no taste. Adding slat does not help much.
Maybe we can import from UR now to make up for the deficit.
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