Argentine beef exports during the first nine months of 2010 fell 52 percent year-on-year, to 133,973 metric tons (carcass weight equivalent). The sharp decline in beef shipments for 2010 comes as the combined result of reduced production, soaring cattle prices and the restriction of beef export certificates by the Argentine government.

Government policies have had devastating consequences for agriculture and livestock breeding, claims Hugo Luis Biolcati, president of the Argentine Rural Society, SRA, the country’s largest agricultural lobby.

“Argentina’s cattle herd has lost 10 million head (from 55 million in 2005), which means beef exports in 2010 will be half of those last year, and all this is happening in a context of closure of abattoirs, loss of jobs and higher prices for consumers,” says Biolcati.

A myriad of government interventions into cattle and beef markets were initiated in early 2006 to, ironically, keep domestic beef prices low – and voting consumers happy – in the country that once credibly boasted the world’s highest per-capita beef consumption at about 160 pounds per year. For decades the beef supply chain in this cattle-ranching paradise was able to make beef a staple on the average Argentine dinner plate – and still have enough to beef export up to 20 percent of its production annually.

The tradition goes back more than 400 years to when the Spanish crown began needing more space to raise cattle to provide a steady supply of leather and meat to furnish and feed its growing empire. The cattle were processed in the new city of Buenos Aires, with salted hides and beef put on Europe-bound ships. The beef trade soared with the late 19th-century railroad boom, coupled with innovations in refrigerated shipping.

For at least the past 70 years, Argentina has been the global beef icon – much to the chagrin of many American ranchers. Nevertheless, not much changed until the very recent and very heavy intrusion of government into the beef cattle marketplace.

Former Argentine president Nestor Kirchner (recently deceased), and his wife, Cristina, the current Argentine president, set off a series of cataclysmic events when they imposed a series of export bans and export slowdowns in early 2006 on several classes of Argentine beef. Their aim was to control inflation in a country where 4.5 percent of the average household disposable income was spent on beef.

When those measures failed to keep enough beef home and keep prices below inflationary thresholds, federally mandated measures kicked in that set internal price controls on cattle at terminal markets. The price controls were met with corresponding price caps on the most popular cuts of retail beef.

The controls had the opposite effect as a devastating nationwide drought set in – and as disgruntled cattle farmers plowed their grass pastures and planted more lucrative cash crops such as soybeans, sunflowers and corn. The price of beef skyrocketed to the point where late last year one was hard-pressed to find the most popular cut of beef, bife lomo, on the menu of even the highest-class Argentine steak house.

“The reconstruction of these painful results will take years; but to begin the process we need to have a clear horizon – opening of exports and an end to all interventions in domestic markets,” explains SRA’s Biolcati. “But there doesn’t seem to be political will to make things function: these farmers have been through extraordinary circumstances and need extraordinary solutions.”

Don’t expect changes anytime soon. In fact, the scene across the Argentine pampas appears to be getting increasingly bleak. Biolcati says an unstable beef economy means lack of sufficient accessible credit from government banks.

“Few farmers have sufficient collateral conditions to take loans for the retention of heifers and cows, and with no financing the production situation becomes very difficult,” he says. “The hardest-hit sector has been that of small and medium calf producers.”

Fernando Vilella, head of the food and agribusiness program at the University of Buenos Aires, says that as well as losing animals to the drought, the fall in profits led ranchers to slaughter cows and heifers. “This reduces supply to the local beef industry, which led to a steep price rise for consumers and, in turn, a big fall in per-capita consumption.” He says in order to maintain cattle numbers, no more than 45 percent of the cows should be slaughtered, but at present 60 percent are sent to the slaughterhouse. Therefore, in the mid-term, beef production will fall still further.

The drought is responsible for only 10 percent of the fall in production; the rest is due to the government’s beef policy, adds Arturo Llavallol, the local representative for the International Meat Secretariat (IMS) and a member of SRA. “Costs are increasing, and as cattle-raising becomes uneconomical, producers slaughter the females that reproduce the beef herd,” Llavallol says.

It’s not only the Argentine beef consumer that’s feeling the effect. This year Argentina was unable to fill its portion of the “Hilton quota” of high-quality beef accepted on preferential terms by the European Union since 1979. Its allocation is 28,000 metric tons, the largest slice of the total quota of 60,000 tons. But this year Argentine exporters only delivered 18,000 tons because the necessary export permits to Europe were delayed.

Meanwhile, some beef is managing to leak out of Argentina. Although Russia continues to be Argentina’s main export beef market, accounting for 23 percent of total exports during 2010, its share as a percentage of total exports is down from 36 percent during the same period in 2009. Exporters are concentrating on other destinations, such as Israel (15 percent of the total in 2010), Germany (14 percent) and Chile (10 percent).

Who knows what the future holds for Argentina? The bottom line is, the Argentine beef industry – most certainly its beef export industry – is unlikely to recover for decades as government policies continue to mire the country’s beef producers. But even more painful for most rural Argentines is that the country is rapidly losing its rich and colorful gaucho tradition and a 400-year-old way of life that can never be reclaimed.

Think about it.    

Clint Peck is the owner of Global Beef Systems.

PHOTO TOP: Two calves behind fence in Buenos Aires province.