Argentina is ramping up its beef exports as structural changes in the industry sees more Argentinian beef being directed into the global market, Rabobank says in a newly-released report. And this could represent increased competition for Australia.
In its Q2 Global Beef Quarterly, the specialist agribusiness bank says a combination of increased Chinese demand, the devaluation of Argentina’s currency (leading to greater competitiveness) and a reduction in its own domestic consumption is behind the growth in the country’s beef exports.
Rabobank says from 2010 to 2019, exports represented on average around 10 per cent of the total of Argentina’s beef production. From 2020 to 2022, this share has more than doubled to 26 per cent.
The bank says China remains the dominant market for Argentina with 77.6 per cent of its beef shipments sent to China in 2022. “And we expect this to continue,” the report said.
Rabobank’s senior animal proteins analyst Angus Gidley-Baird said “With Argentina’s position as China’s second-largest beef supplier and given the type of product Argentina exports, any increase in Argentina’s exports is likely to mean increased competition for Australia into this key market”.
Economics and elections
Argentina remains one of the largest producers, consumers and exporters of beef in the world, the report says.
But, in addition to the issues faced by many other countries, Argentina has two particular challenges that distinguish it from other regions and will shape the Argentinian beef industry over the coming years – the economic crisis that has intensified in recent years and the presidential elections in October 2023, Rabobank said.
“The most recent polling (April) indicates the top three candidates are from opposition parties – with these parties supporting a more free market and the removal of protectionist measures, such as the current export restrictions,” the report said.
The bank said any future Argentinian government will have the challenge of balancing the impacts of La Niña – with Argentina experiencing its third consecutive year of dry seasons, causing feed costs to rise and pasture quality and availability to decline. While also balancing the availability and cost of food, investments in infrastructure and technology.
Existing export restrictions have not reduced Argentina’s overall beef export volumes, and removing these measures may actually lead to exports increasing further. Rabobank expects without an improvement in the purchasing power of the local population, Argentina’s domestic beef consumption will likely fall further – unless economic reforms lead to an appreciation of the Argentinian peso – reducing the attractiveness of Argentinian beef on the export market.
“Argentina’s beef consumption has been slowly declining over the last 30 years and reached its lowest level – 47.5kg person/year – in 2022,” the report said.
Rabobank says while several factors have contributed to this, the rising cost of beef is a leading cause. Retail beef prices in Argentina have increased by more than 35 per cent (in USD) since January 2019 – short ribs were selling for USD 8.30/kg in January 2023 compared to USD 6.11/kg in January 2019.
“Beef consumption in Argentina has a powerful cultural connection and rising prices and declining consumption have become a focus for government policy,” the report said.
In an effort to curb rising inflation and limit rising beef prices, export restrictions were put in place in June 2021.
But, the Rabobank report said, with the temporary closure of food service and further deterioration in economic conditions throughout the pandemic, inflation remains high and restrictions on beef exports have been extended until the end of 2023.
Australia
For Australia, the report said, increased cattle numbers are leading to higher slaughter volumes and lower cattle prices for the local beef sector.
“Consecutive years of herd rebuilding is now starting to become evident through consistently higher weekly slaughter numbers,” Mr Gidley-Baird said.
Rabobank estimates the national slaughter will be up 16 per cent in 2023 and, while these projected numbers lie within the current processing capacity, there remains pressure in the system.
“Most processors have been able to accommodate the increased volumes through better utilisation of existing staff levels. However, increasing beyond the current volumes is believed to require additional staff and, given the tightness of the labour market and low availability of skilled workers, this would inhibit further slaughter increases,” he said.
Herd rebuilding has also led to a drop in producer-restocking activity, Mr Gidley-Baird said. “With many areas across Australia now believed to be close to normal breeding numbers – except some areas in Queensland and northern Australia – the urgency of cattle producers to buy more stock is now lower and prices for young and replacement stock have declined accordingly.”
Mr Gidley-Baird said the Eastern Young Cattle Indicator was 43 per cent lower in mid May than it was the same time last year.
