Tuesday, December 06, 2011
The Year in Argentine Beef - 2011
It´s the Argentine National Day of the Gaucho! What better time to look back on the state of the Argentine National Dish: Grass-fed, Free-range BEEF?
Was it a good year? I guess it depends on whose ox was gored in 2011.
Supplies of any kind of Argentine beef are down. Prices for beef ...from on-the-hoof to your supermercado ...are up. Grass-fed, no-grain beef is disappearing rapidly while feedlot beef takes the day over and over again.
The number of cattle in Argentina continued to drop in 2011 ...20% in just in the last 4 years. At the same time, the number of cattle that went to slaughter went up 10% from last year's incredible, historic lows. What´s that mean? Answer: fewer and fewer cattle and cattle-ranchers in Argentina.
Why are the numbers of cattle dropping? Answer: the irresistible pull and profit from soy. Raising free-range cattle is not all that complicated, as you might imagine. However, growing genetically modified soy is so simple that it is often referred to as "the farmer-less farm." You spray, you plant, you spray again, you wait, you harvest ...then sell at historically high prices. The local saying is, "most of the soya in Argentina is planted in Buenos Aires ...by telephone." You can literally "phone it in" ...and reap big profits even when soy exports are taxed at 35%.
What´s a cattleman to do? Switch to soy. It´s a no-brainer. The money is so big that you can´t say no to it. It´s the "offer you can´t refuse" especially when an outside company offers to pay you in advance, in US dollars, to plow-up your pastures. You don´t care if the crop fails ...you already got paid in hard cash ...but your pasture and your herd are gone.
For cattlemen who have resisted soy´s siren song ...there is a consolation prize: prices of live cattle continue to rise. Within the last four years, cattle prices have quadrupled for the most sought after categories.
But those live-cattle prices are the same for both feedlot producers and the remaining traditional free-range ranchers. As such, there really is no economic reason for grass-fed ranchers to continue. 2011 did not see the emergence of "boutique meat" or any sort of premium for ranchers who continue avoid feeding their cattle anything but grass.
For that reason, as much as any other, only 20% of beef in Argentina came from all-grass ranches in 2011 ...down from virtually 100% in 1993.
My contacts in the meatpacking industry, however, inform me that there actually is a premium for what little grass-fed beef remaining in Argentina. High-end steakhouses in Buenos Aires entice their suppliers to steer any obviously grass-fed beef to their restaurants. In 2011, supplies of grass-fed beef even to those well-heeled establishments fell short. For about a month this year, bife de lomo (filet mignon) of any kind was almost impossible to find anywhere.
The old saying from the commodity traders in Chicago is, "high prices cure high prices," meaning that if the price of beef is at an all-time high ...beef production will inevitably rise as investors enter that market in search of those high returns. However, beef cattle has a natural cycle that is different from soy, corn, or household appliances.
Pastureland is economically easy to convert to grain production. However, once converted to grain, it is a difficult proposition to revert to pasture. A soy farmer, for example, would have to "give up an annual payday" harvest to wait for grass to return. Even then, to populate his newly returned pasture with cattle is difficult because the price of live cattle is so very high now. No one appears willing this year to give up a year´s soy profits in order to grow grass for cattle for which they will have to pay record prices ...then wait a year to send the calves to feed lots ...or the 3 years to fatten the cattle on grass. Future free-range beef will no doubt come from those small and medium ranchers who have not given-up the method. Expansion of beef production in Argentina doesn´t seem to be in the cards in the near term.
To add insult to the injury which the beef industry has felt this year, Argentines are turning away from their national dish due to its high price. Argentines consumed a whopping 216 pounds of beef per person in 1958. This year, the average may end up being about 100 pounds. In 2011, beef consumption dropped 25% from the year before. The title of "beef-eatingest nation" fell to Uruguay last year and remains so.
World-class beef in Argentina was as much of the national patrimony as cheap gasoline is for US citizens. No one I know would have imagined either disappearing without a major expression of discontent. As it has happened in 2011, Argentines have not complained in any notable fashion. My opinion is that all the beef available outside the toniest restaurants ...just isn´t as satisfying as it used to be anyway.
Are exports sucking-up all the good stuff? Not a chance. I have not seen export figures for this year yet. However, 2010's figures were the lowest in a decade. Nothing has convinced me that the 2011 figures will not follow that trend. We´ll see.
Once the PBR of a proud people, the reknowned Argentine beef (even feedlot beef) has become akin to champagne in 2011.