Argentina decided to stop the export of beef in order to halt the price increase in the country. As a reaction, the farming industry organizations, grouped in the Commission of Agricultural Entities, will completely stop the commercialization of beef for 9 days.
President Alberto Fernandez announced the measure of banning exports for 30 days to the Consortium of Meat Exporters on May 17, 2021. His action aims at tackling the inflation of meat prices. The President had already warned the industry of such an move if he didn’t receive a better alternative to the continuous price increase of beef. The agreement with the government to offer 8,000 tonnes of meat at reduced price, 0.3% of the 3 million metric tons from the 4th largest national production worldwide, was not enough.
The Argentine Association of Brangus, a beef cattle breed, called for "the entire production and industry to react against something that reminds us of results we sadly remember", referring to the limitations imposed 15 years ago. In 2006, the President Néstor Kirchner decided to stop beef exports in order to halt the inflation of price for meat in Argentina.
The price of meat out of hand in Argentina
Such export limitations continued for 10 years until Mauricio Macri became president and removed the restrictions in 2015. Since then, the volume of export multiplied by 4. In 2005, Argentina couldn’t sell more than 700,000 tonnes a year outside the country. In 2015, the quantity was less than 200,000 tonnes. However, it reached 933,000 tonnes for the last 12 months, generating $2.7 billion USD of revenue, fuelled by the demand from China. The country accounts for 74% of Argentine exports and the quantity it bought grew by 37% in a year.
But President Alberto Fernández blames the previous presidency for opening the market, and targets the large industrial farmers who speculate on the boom of the Chinese demand. On Radio 10 he explained that "price is the only thing that changed: from 150 pesos to 800 pesos a kilogram. The liberalization doesn’t benefit the market but the most powerful", who are described as "el rulo de la carne", the meat roll. For the President, who is in favor of quotas and regulation to assure supply in the domestic market, the issue about meat is "out of control".
Actually, the country has been suffering from a staggering inflation of 45% a year for the last 3 years. And according to the IPCVA, the Institute for the Promotion of Beef, meat is 65% more expensive than last year for the Argentine population. It accounts for a higher increase than the inflation rate when, at the same time, the domestic consumption shrank by 12%. And in parallel, beef exports grew by 24% in volume and 8% in revenue ($226 million in March 2021). When 18% of Argentina’s cattle was dedicated to external markets in 2018, the proportion jumped to more than 25% of the production sold outside the country in 2019 and 2020.
10,000 jobs may have been lost because of the export restrictions in 2006
But for Daniel Pelegrina, the President of the SRA, the Argentina Rural Society, "closing meat exports for 30 days is a mistake and a step backwards in every way. It will cause irreparable damage to a productive sector that proved it created jobs and activity throughout the national territory. […] And, the worst part is, as the recent history of Kirchnerism has shown, it will not contribute to lowering prices, especially in the long term".
Argentina could lose $240 million by closing the borders for meat export for 30 days. Moreover, farmers would likely prefer reducing their activity than having to cut prices. In the context of a rampant inflation that affect gas or machinery prices, production costs would quickly become higher than the sales price, encouraging farmers to slow down their work. As a consequence, the offer to the Argentine population will be smaller, which eventually limits the price reduction. In 2006, a year after the restrictions, the production had decreased by 20% and 10,000 jobs were lost, while the price paid by the final consumer was 5% lower.
In the beginning of the year, the government had already closed exports for corn but reopened them after a 72-hour strike.
Media sources and useful links:
- Informe de exportaciones de marzo de 2021, Instituto de Promoción de la Carne Vacuna Argentina, Free access