Argentina ranchers kill the fatted cow amid cash crunch,
turn to China
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[July 16, 2019] By
Maximilian Heath
BUENOS AIRES (Reuters) - Argentina's
world-famous ranchers are culling their breeding cows at the highest
rate in 30 years and tapping Chinese demand for meat in order to help
pay their bills as access to credit has dried up for farmers in South
American's No. 2 economy.
The trend underscores how Argentina's tight monetary policy and sky-high
interest rates hovering around 60% are squeezing the sector, which
relies on up-front investment to maintain valuable cow herds and rearing
calves over several years to maturity.
"The farmers, with no real source of financing, are now looking for
liquidity through these cow sales," Carlos Achetoni, president of the
industry association Argentine Agrarian Federation (FAA), told Reuters.
Argentina's meat industry chamber CICCRA said in the first half of 2019
females represented 50.1% of slaughtered animals, the highest level in
the last three decades and well above the maximum sustainable rate
considered to be around 43%.
This trend could cut the herd by up to 400,000 head of cattle by 2020
from a total of around 53 million in March.
"It's a survival decision," said Miguel Schiaritti, president of CICCRA,
who said ranchers were having to think short-term and get rid of their
assets because they could not borrow at current rates.
"For ranchers the cow is the machine to produce calves. It's as if
someone who manufactures bolts sold the machine which makes the bolts to
finance themselves and pay their expenses."
Farmers said that Chinese demand was a silver lining, ensuring that
these sales were at least proving lucrative.
Exports of beef from Argentina to the world's second-largest economy
have multiplied, with shipments in the first five months of the year to
Chinese ports representing 72% of Argentina's total 180,000 tonnes of
beef exports, according to CICCRA.
China mainly demands cheaper cuts of beef from female cows - which
better suit local cuisine more focused on shared dishes than prime cuts
of steak - which has boosted the price of the category by 88% versus a
year ago to an average of 43 pesos ($1.01) per live kilo in Argentina's
main livestock markets.
Farmers sell the cows to local slaughterhouses, which then in turn ship
the meat to global buyers including in China.
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Cows graze on a farm
near Sunchales, Argentina, April 6, 2018. Picture taken April 6,
2018. REUTERS/Marcos Brindicci/File Photo
Carlos Iannizzotto, president of Argentina's association of rural producers
CONINAGRO, said unusual "sky-high" prices from China helped, though the core
issue was still farmers' finances.
"China exports mean at least producers don't have to give the cows away, they
can get a good price. That's a blessing," added Schiaritti.
EU DEAL JUST 'PAIN RELIEF'
Officials at industry bodies added a recent, landmark deal between the South
American Mercosur trade bloc and the European Union - that included a larger
quota for meat exports - would do little for now to resolve the crisis facing
Argentine ranchers.
The bloc made up of Argentina, Brazil, Uruguay and Paraguay struck a free trade
agreement in June after two decades of talks, providing for the entry into the
EU of an annual quota of 99,000 tonnes of beef at a 7.5% tariff.
"The agreement is just pain relief really," said Schiaritti, whose CICCRA
chamber has said that because of the limited volume - shared between the four
countries - the export boost from the deal would not be that major.
FAA President Achetoni added that in order to benefit from the deal, ranchers
first needed authorities at home to solve the issue of access to credit,
otherwise farmers would continue to be squeezed and the cattle herd would
decline.
Argentina's high benchmark interest rate, set by daily central bank auctions,
has helped bolster the local peso currency after it tumbled last year, but
choked off access to credit, especially for small businesses and farmers.
"Before we can even really talk about getting into international markets, we
need to resolve the issues of taxation and access to finance (at home),"
Achetoni said.
(For a graphic on 'Holy cow! Rising prices of Argentina's female cows' click
https://tmsnrt.rs/2jWBy6V)
(Reporting by Maximilian Heath in Buenos Aires; Writing by Nicolas Misculin and
Adam Jourdan; Editing by Matthew Lewis)
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