Argentina’s beef ban: a double-edged sword for competitors

Argentina’s decision to suspend beef exports for 30 days presents its competitors in Latin America with an opportunity – but it will also push up domestic prices on markets suffering heavy inflationary pressures in the estimation of analysts and members of the farming sector.

"An important player has retired from the international market should this measure materialise ... It’s a pretty negative signal for the entire productive sector and the beef chain," summed up Fernando Mattos, the president of Uruguay’s Instituto Nacional de Carnes (INAC), in statements to Radio Nacional last Wednesday.

Argentina, the world’s fourth biggest beef exporter with 819,000 tons last year, announced the 30-day suspension "as a consequence of the sustained rise in beef prices on the domestic market." In response, cattle-breeders decided to halt all marketing of livestock for nine days as from last Thursday.

The country, which according to the OECD (Organisation for Economic Co-operation and Development) is the world’s leading beef consumer, is undergoing rapidly accelerating inflation with consumer prices going up 46.3 percent last month as against the previous April, according to official data, but beef rising 65.3 percent in the same period, ahead of inflation, according to the Instituto de Promoción de Carne Vacuna Argentina (IPCVA).

"The beef issue is out of control with prices rising month after month without justification because while the price rises, consumption goes down. We have to restore order," argued President Alberto Fernández during a radio interview this week.

A double-edged sword

Although Argentina’s absence from international markets might suppose an opportunity for competing countries like Brazil, Uruguay, Paraguay and even the United States, in the medium term the impact might be felt within their own economies on the prices of a product which is central to any basic food shopping-basket.

"The meat-packing plants authorised to export will opt to do so ... because dollars will thus come in compensating for the reduced profit margins from the price increases for animal feed," André Braz, the coordinator for inflation issues in the Instituto Brasileiro de Economia da Fundação Getulio Vargas (FGV/Ibre), explained to AFP.

But "the market will feel that lack. Beef is a product of the basic shopping-basket (...) and beef prices have already risen over 30 percent in the last 12 months," he warned.

In Brazil, food prices in general have risen over 12 percent in the 12 months up to April and inflation is 6.76 percent, above the official target ceiling of 5.25 percent.

Uruguay’s Mattos has no doubts as to the negative impact of the Argentine move.

"This year we’re going to have pressures from rising beef prices which will not benefit the consumer. When balancing the pros and cons, such distortions of the international market have their benefits in the short term but in the long run it’s not a healthy and authentic market. It’s much better to have the formation of prices obeying a gradual economic logic and not a direct administrative intervention of the market by the Argentine government," he underlined.

US: the main beneficiary

"The appetite for commodities is increasing all over the world, above all in Asia, parallel to the advance of vaccination [against Covid-19]," explained the Fundação Getulio Vargas specialist Braz.

The main beneficiary of Argentina’s restrictions must surely be the US, the world’s third leading exporter, thanks to the rise in Chinese demand, estimated Fernando Iglesias, analyst of the beef sector for Brazil’s Safras & Mercados.

"China is a very proactive country when it comes to food security and when it realised that Argentina was going to slam the doors on its beef exports (there were some norms in that direction last month) they simply opted to clear the exports of 32 US meat-packing plants as from May Day," he explained to AFP.

For Uruguay’s Mattos, a temporary exit of Argentina from the market will provoke "the effect of retiring 7-8 percent of global supply" at a time when it was "shooting for exporting around a million tons this year." Annual beef marketing worldwide is in the range of 11-12 million tons, he concluded.