Argentina has extended restrictions on beef exports until the end of October in an attempt to tame rising prices, leaving some international buyers looking elsewhere for supplies. Brazil is also grappling with high food prices and suspended overseas sales after an outbreak of mad cow disease in a move that experts expect to be short-lived.
In May, Argentina’s government imposed a short-term ban on the export of some beef cuts, stoking tensions with national producers who have enjoyed a boom in sales in recent years. However, it introduced a new cap of 50% on shipments compared to last year’s that will now be in place until the end of next month.
"This measure adopted by the Argentine government increases the conflict in the sector, and the long-term effect can already be predicted if it continues," said Inés del Valle Asis, an economics professor at the National University of Cordoba who predicted that any short-term price stabilisation would be unlikely to last.
The beef price increase for Argentina’s consumers in hit 65% in April compared to the same month last year, according to Argentinian government data. In Brazil, which suspended sales to its main buyer China in early September due to “atypical” cases of mad cow disease, the increase in July was 43% compared to July 2020.
Inflation has long been a problem for Argentina and 2021 is projected to close with the annual rate at around 50%, according to the national institute of statistics (INDEC). The value of Argentina’s currency, the peso, has also declined in value against the dollar amid a prolonged economic crisis, making the South American countries’ products cheaper for international consumers. Argentina’s beef exports to Asia have grown rapidly in recently years, even overcoming the slowdown global in trade during the pandemic.
Brazil, Argentina, and Uruguay, South America’s three main suppliers of beef, increased their aggregate exports to China threefold between 2016 and 2020, from 564,000 tonnes to 1.72 million tonnes.China’s purchases of South American beef grew by a third during the first year of the pandemic as it sought solutions to the animal protein shortfall caused by the outbreak of African Swine Fever that decimated pig populations, according to Rebecca Ray, senior research fellow at Boston University's Global Development Policy Center.
An ongoing diplomatic spat with Australia – another of China’s major beef suppliers –contributed to larger purchases from South America and currency devaluations in Brazil and Argentina only increased the appeal, according to André Braz, coordinator of the Consumer Price Index (CPI) at the Getulio Vargas Foundation’s Brazilian Economy Institute.
Uruguay capitalises on Argentina’s beef conflict
In protest at the government’s export ban, Argentine beef producers halted domestic sales for nine days in May. As international buyers looked to secure supplies, Uruguay, whose beef exports are expected to grow 13% this year, according to the United States Department of Agriculture (USDA), ramped up its efforts.
Uruguay has an international reputation as low-risk supplier of high-quality beef. According to Valle Asis, the growth of the sector in Uruguay is due its responsible foreign trade policy with regards to beef, which involves improving breeds and herds, and the specialisation of its industry for the domestic and international markets, which demand standard and higher quality cuts, respectively.
It is essential that traceability is implemented throughout the entire production chain
Uruguay's quality beef has attracted special attention from China. The two countries plan to conduct joint research into cattle breeding and pasture varieties, as well as set up an industrial park to improve trade integration with a partner considered a reliable and responsible supplier.
China has begun to signal to international markets that wants beef that meets certain sustainability criteria, according to Daniela Teston, who coordinates WWF's Collaboration for Forests and Agriculture. In 2017, China’s national meat association released a set of guidelines for the industry based on the Accountability Framework, an international standard to promote ethical supply chains.
"It is essential that traceability is implemented throughout the entire production chain and that meat packing plants, retailers, and international companies make public commitments,” Teston said.
China market outlook
In the long term, the growth in China’s demand for beef is expected to stabilise. According to the China Food Association, the average annual growth rate of meat imports should remain at 4.1%. Demand projections, however, depend on the sustained recovery of China’s pork industry.
Any expectations of a quick return to normality for China’s pork sector suffered a setback in the first months of this year as ten new outbreaks of African swine fever (ASF) were identified.
Despite this, better control of the disease and the prospect of vaccines for China’s herd, the market is beginning improve the situation. According to China's Ministry of Agriculture and Rural Affairs, the value of pork fell 46.23% in the second week of June, compared to the end of 2020, an indication that national production is regaining strength.