2024-01-13 17:19:05
What has been happening with the price of beef, especially since last month, is an example of how Argentina punishes its own economy in an incomprehensible way.
He consumer price index (CPI) December – reported last week by Indec – registered in the Pampas area, where Córdoba is located, an average increase in meats and derivatives of 37% monthly and 287.8% year-on-year, but a cut like roast beef became more expensive 379% in the year, according to the basket that is surveyed every month The voice in local supermarkets.
Practically half of the meat produced in the country is bovine and, between 2012 and 2022, stock livestock ranged between 52 million and 55 million heads.
What happened in December? As an effect of the drought in 2022 and 2023, many livestock producers, as feed for their animals became reduced or more expensive, liquidated part of the stock.
According to the latest livestock monitor from the Agricultural Foundation for the Development of Argentina (Fada), between November 2022 and October 2023, 1.2 million more heads were slaughtered than in the previous 12 months. This kept prices held back until November 2023, and in December the calm ended.
The worrying fact is that they are animals that will not recover in the short term, because, of the 1.2 million heads, 940 thousand (80%) were females, the meat “factories.”
If we take into account that the cycle for a steer to reach slaughter is at least a year and a half, it is clear that this year there will be less supply of meat and, therefore, prices will remain high, despite that consumers do not endorse current values.
They are going to have a worse time feedlots, which due to less supply and more expensive food, with prices limited by the lack of demand, will have serious difficulties in sustaining profitability. According to the Treasury Chamber of Fatteners (with data as of January 1), the “feedlotero” lost $55 thousand per animal fattened this month.
One can blame temporary factors, such as the drought, which reduced the stock; to the seasonality of the business itself, because the price of meat traditionally rises before the New Year’s Eve and summer holidays, and even to inflation and the rise in the official price of the dollar by the former Minister of Economy, Sergio Massa (more 27% in August, according to data from the Central Bank), and his current peer, Luis Caputo (124% in December).
This may explain the rise in prices in this or that month. But the low supply of beef that the country will have this year is a problem that is repeated in other local markets: there is a lack of everything from vehicles to computers, from supplies and components to spare parts and equipment.
Punish the investment
What happens in meat and in other markets with scarce supply is the result of how Argentina punishes an essential activity of the economy: investment.
An example is export, which lately channeled between 20% and 25% of production. During the presidencies of Cristina Fernández and Alberto Fernández, 12 of the last 16 years, the livestock producer saw what he could and could not export change from one year to the next. For example, with the previous government, during the last two years it was prevented from selling “popular” cuts abroad: rib, beef, skirt, matambre, roast tapa, buttock and shoulder. For a business with cycles of one and a half to two years, this lack of legal certainty is fatal.
Add in export taxes, price controls in the domestic market and multiple exchange rates, and the result is a collection of difficulties for anyone looking to invest in cows.
With the arrival of Javier Milei to the national government, part of this changed. He freed export and domestic prices; He also declared his interest in ending such a variety of exchange rates with the dollar, something in which he cannot advance yet, until he has no more US currency. However, with the “omnibus law” project, he raised withholdings on exports from 9% to 15%.
“To recover investment in livestock, four factors are necessary: a single exchange rate with the dollar, clear rules of the game, no restrictions and no export withholdings,” warns Natalia Ariño, an economist at Fada.
The livestock business suffers from the same problems that other markets in the country have. Low investment is one of the fatalities that explain inflation, the stagnation of registered private employment and the lack of growth in the economy for more than a decade.
The worst thing is that it is a self-inflicted punishment.
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