Argentina government interference in the livestock sector continues

Labour tensions were evident, as the government introduced new export restrictions in a move to try to curb the rocketing price of beef on the domestic market

by S. C.

The uneasy relationship between the Argentinian government and the agricultural sector once again came to the fore in Q210. Exports of soybean and grains were halted for more than a week in March 2010 after dockworkers went on strike at Argentina's key grains ports, in a dispute over salaries. Labour tensions were also evident in the livestock sector, as the government introduced new export restrictions in a move to try to curb the rocketing price of beef on the domestic market. The measures are the latest in a long history of government interference in the livestock sector that have disrupted exports and strained relationships with producers. In April 2010, ranchers announced a two-day halt of cattle sales in support of meatpacking workers who are protesting against job losses resulting from government policy in the livestock sector.

Corn production will show strong growth in 2009/10, increasing by 31.9% year-on-year (y-o-y) to 19.79mn as warm, wet weather conditions have led to exceptionally high yields. Although wheat production will remain flat in 2009/10, due to the low acreage sown, we see wheat production picking up by 21.9% in 2010/11, fuelled by higher prices and lower production costs.

Beef production will fall again in 2009/10, with output set to drop by 14.4% y-o-y. Devastating droughts in 2008-2009 forced farmers to liquidate herds, thus decimating the calf stock. Domestic consumption will fall by 14.4% in response to supply restrictions and high prices.

Poultry and pork production remain robust, with production up by 8.1% and 2.1% respectively in 2009/10. Production has been strengthened by strong domestic demand in the face of the reduced supply and high prices of beef.

Despite strong sugar prices on the global market, Argentinian sugar exports are forecast to fall steeply in 2010/11, to just 340,000 tonnes, a y-o-y decrease of 55.3%. Ending stocks for the depleted 2009/10 season are set to be negative, leading producers to harvest crops early in 2010/11 to cover the shortfall in supply.

2009/10 is set to produce a bumper soybean crop. Production is forecast to increase by 65.3% on the drought-hit 2008/09 harvest. We see global demand for soybean to continue to fuel production growth over our forecast period and forecast soybean production to rise to 72.09mn tonnes in 2014, up 125.3% on the disastrous 2008/09 harvest.

The soybean sector was, however, hit in April 2010 when China began blocking imports of Argentinian soybean oil, in the latest round of an ongoing trade dispute between the two countries. In recent years, China has emerged as a major importer of Argentinian soybeans, with Argentina Agribusiness Report Q3 2010 a devastating impact on Argentina's economy. The value of soybean exports to China amounted to US$1.4bn in 2009.

The government's interference in the livestock sector continued in Q210. In March, the Argentinian government announced measures to maintain quotas on exports in order to rein in inflation, which has been fuelled by soaring domestic food prices. This was followed in April with an increase to the minimum weight for cattle to be slaughtered. This was the second time in two months that the government had raised the minimum slaughter weight, as part of efforts to halt the ballooning price of beef on the domestic market.