Voluntary Report - public distribution

**Date:** 7/14/2006

**GAIN Report Number:** AR6025

AR6025

**Argentina**

**Livestock and Products**

**An Additional Relaxation on Argentina\'s Beef Export Ban**

**2006**

**Approved by:**

![](media/image1.wmf)Kari Rojas

U.S. Embassy

**Prepared by:**

Ken Joseph

**Report Highlights:**

The Argentine Government permitted for the next 60-90 days the
exportation of beef cuts from steers weighing above 460 kilos and cuts
from cows which are normally used for manufacturing beef. With this
measure, Argentina recovers approximately 65-70 percent of its export
beef potential. The latest measure was designed to make cattle prices
increase after a sharp drop due to the export ban. The challenge for the
next few months will be to recover cattle prices and export volumes, and
keep retail beef prices unchanged.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Buenos Aires \[AR1\]

\[AR\]

On July 4, 2006, through Resolution 503/2006, the Argentine Government
(GOA) announced that exports of hindquarter beef cuts of steers weighing
over 460 kilos and cuts of cows, which are slaughtered for manufacturing
(thermoprocessed) beef, will not be subject to export quotas for the
next 60 days. Depending on the development of local retail beef prices,
the measure could be extended for 30 more days. This additional
relaxation of the export ban, imposed in March 2006, was a consequence
of a steep drop in cattle prices and ranchers' returns as a result of
the ban. With this measure, the GOA now looks for improved cattle
prices, but with stable retail beef prices to keep inflation under
control.

On May 26, 2006, the GOA rescinded Resolution 114/2006 by which all beef
exports were prohibited and allowed exports of thermoprocessed beef and
established an export quota for fresh and frozen beef for the period
June-November 2006, equivalent to 40 percent of the volume exported in
that same period in 2005. In sum, exports of Hilton Quota premium cuts,
bilateral agreements (Venezuela and Morocco), and thermoprocessed beef
have no export restriction. Fresh and frozen beef exports are subject to
the 40 percent quota until November 2006, with the new exception which
frees for 60 or 90 days exports of hind-quarter cuts of steers weighing
over 460 kilos and cuts of cows for manufacturing beef. Exports
currently eligible add about 65-70 percent of the country's total
potential. Most contacts forecast beef exports for 2006 at about
480,000-530,000 tons (carcass weight equivalent). The Russian
Federation, the E.U. (under the Hilton Quota and outside of it), and
Chile, which is expected to open next September, will be the primary
destinations for fresh and frozen beef over the next few months.

By early July 2006, cattle prices had fallen on average 25-30 percent
since the export ban was implemented. The categories that suffered
greater losses were old cows (generally purchased by thermoproecessed
beef processors) and heavy steers (above 450 kilos), the two categories,
which are primarily demanded for export. Local consumers, which account
for 80 percent of the total beef output, are not fond of the beef of
these two categories; they prefer beef from younger and lighter cattle.
The steep drop in prices of the two main cattle export categories
dragged down prices of other cattle. Retail beef prices during the
export ban dropped only 5 percent. Cattlemen are angry because their big
losses meant large gains for intermediaries in the chain, and not the
consumer. During the second week of July, fed cattle prices were slowly
recovering, and as export plants reopen, they are expected to continue
to increase. Most traders indicate that the big challenge from now on
will be to recover cattle prices, export volumes and keep retail beef
prices unchanged. As soon as beef prices begin to increase, the GOA will
again limit exports.

The export ban, lower fed cattle prices, and the scarce interest in
investing in a sector which has official intervention, forced calf
prices to drop 25 percent. The shortage of pastures due to the frosts
and drought has also impacted negatively in feeder cattle demand.

The first ban relaxation of late May was not effective enough to make
cattle prices recover. This was because several large exporters had a
good volume of product in storage, as many continued processing at a
slower pace, taking advantage of low cattle prices. At the same time,
there were a lot of fed cattle stocked in the ranches because of the
ban.

Farm organizations are receiving a lot of pressure from their members,
which are disappointed with the measures the GOA has and is taking,
affecting negatively their business. In fact, one lobby group announced
a 4-day strike for late July. Although producers under this group will
not market cattle during those days, its effects on the market are
expected to be quite limited.

The GOA continues working on a National Cattle Program to increase
production of beef to supply both the local and foreign demand. It is in
the process of receiving comments from different key players in the
sector. Most contacts indicate that even if the program looks
interesting and credit is widely available, it will have little impact.
Producers will not invest in a sector which is intervened by the
government to keep prices controlled.