If you're talking cattle or beef, please don't use the words Argentina and Brazil in the same sentence. While it's natural to think of the two neighboring South American countries in the same light, they couldn't be more different and are certainly headed in different directions
April 1, 2010
If you're talking cattle or beef, please don't use the words Argentina and Brazil in the same sentence. While it's natural to think of the two neighboring South American countries in the same light, they couldn't be more different — and are certainly headed in different directions.
In February, a group of 20 participants in the 2010 Beef Study Tour to South America saw the differences firsthand.
“I expected ranching in the two countries to be a lot more similar to each other,” says rancher and auctioneer Rex Arb, Lyndon, KS. “It didn't take long to see that Brazil and Argentina have two totally different cattle industries.”
Begin with Argentina
Argentina's 50 million head of beef cattle are 85% English breeds — Angus and Hereford — and are raised in a temperate climate. Thus, the Cactus Feeders feedlot at Villa Mercedes in the state of San Luis reminds Arb of a typical U.S. feedlot setting.
“A very clean feedlot, very efficient and really good-looking cattle,” Arb comments. “I thought I was in western Kansas — certainly not Argentina.”
It's that loss of identity of which most Argentine ranchers are not terribly proud.
Arb was among those surprised to learn that Argentina is rapidly moving from its signature grass-fed beef system to corn finishing, and vast areas of the world-famous Pampas region transition from grass to more profitable agricultural crops.
Rodrigo Troncoso, general manager of the Argentina Feedlot Chamber, explains that 45% of the national cattle slaughter now spends some time in one of the country's 2,100 registered feedlots. It's quite a switch from a decade ago when 90% of the cattle in Argentina were strictly grass finished.
“There's no turning back,” Troncoso says. “Five years from now, 80% of Argentina's cattle are going to be finished in feedlots.”
It's all part of a national policy cluster intended to keep beef prices low in the country with the largest per-capita beef consumption.
Troncoso explains that government compensation payments are made to registered feedlots to increase production and to make up for lower prices resulting from cattle price controls and an export moratorium. He says the average payment (“not a subsidy”) is about US$73/head produced for the local market.
What's most obvious across the Pampas landscape, though, is that there are fewer and fewer cattle to be seen. The cattle that remain are moving to the fringes of the country's breadbasket.
Government-mandated limits on cattle prices were apparent during what otherwise would be a busy day at the country's largest terminal livestock market. The pens at Mercado de Liniers in the outskirts of Buenos Aires are virtually empty these days as cattlemen steer clear of government-monitored markets and opt for the privacy of “direct” sales to meat packers.
Worst crisis in history
Argentine meatpacking icon William Hayes of Buenos Aires (see sidebar) notes that government price controls and beef export policies are pushing his country's beef industry into its worst crisis in history. He says the national cattle herd has dropped by 21 million head since 2007 to a total of 50 million head today.
He says it seems inconceivable that the country that once was the world's leading beef exporter will have to import at least 1,000 tons of beef this year.
“There's going to be a lot of sorting out over the next several months,” Hayes says. “With a few exceptions, we're not going to be exporting beef after this year.”
At Cactus Argentina, the beef outlook is more optimistic. General manager Miguel de Achaval, a Texas A&M University graduate, says the 25,000-head facility fits well into the national aim of producing grain-fed beef for both domestic and export markets.
Achaval says the Argentine beef industry must pay attention to global demands.
“And, the world doesn't demand grass-fed beef, it demands consistency,” he says. “Consistency is achievable with grain finishing; we can fit any market if we manage cattle correctly.”
He adds that the Argentine beef industry is learning how to cope in the marginal production areas. “As a result, producers will need to raise more kilograms per cow and more calves per cow — instead of simply putting more cattle into production,” he says.
Ironically, this all comes at a time when Argentina is fighting U.S. policies prohibiting fresh beef imports from Argentina due to foot-and-mouth disease restrictions. Alternatively, the U.S. is now allowed to export beef to Argentina as BSE-related restrictions are lifted.
North to Brazil
It's a whole other story in Brazil where the country's 190 million head of beef cattle are 85% pure or crossbred Nelore genetics, a tropical-tough zebu breed.
But, don't expect to eat a beef steak from Brazilian cattle like you would at a Montana — or Argentine — steakhouse, says Patti Davis, a commercial and seedstock cattle rancher from Belgrade, MT.
With due respect to her Brazilian hosts, Davis says their beef is simply too tough to eat that way.
“But, when they barbeque it churrasco-style and slice it hot onto your plate, it is great beef,” she says. “I didn't see anyone from our group shying away from it.”
Neither is the world, so it seems. Brazil continues to strengthen its position as the world's top beef exporter, accounting for a whopping 25% of the world's beef trade. And, live cattle exports for slaughter will likely increase by 20% in 2010.
The potential for expansion of Brazil's cattle herd is almost limitless — with an estimated 400 million acres of potential grazing land available — “without cutting down another tree,” as you often hear.
At Fazenda Marilângia near Bela Vista in the state of Mato Grosso do Sul, expansion is in the works.
Sergio Pinheiro manages the 500-head family ranch for his mother Maria. He's in the process of clearing several tracts of land and planting exotic grass species to increase grazing capacity.
“The government provides many programs to increase production,” Pinherio says. “Everyone tells us that we have to increase.”
But, Pinherio says government assistance programs should not be thought of as “incentives.” More fittingly, he says, the programs help encourage adoption of “requirements” that the government imposes on ranchers.
“For example, we can't allow any cows to drink from a stream or river, so the government helps us build watering systems,” he says. “I'm not sure we're better off that way, but it's the law.”
Pinheiro and other Brazilian ranchers look cautiously at government environmental regulations. In his region, 20% of all private property must be kept in “environmental preserve” — meaning it must be left to nature — and can't be used for any purpose.
In areas closer to the Amazon, the preserve requirement increases to 80%. Additionally, grazing is not allowed within the “high water” areas of any watercourse.
Productivity pressures abound
What strikes Davis the most is the land redistribution doctrines hanging over the heads of Brazilian ranchers.
“If their land doesn't meet government productivity definitions it can be taken away and given to the landless people, or to the Indians,” Davis says.
The productivity pressure comes from powerful socio/political groups like the Landless Workers Movement or Movimento dos Trabalhadores Rurais Sem Terra (MST). The target of the MST is the 3% of the population they say owns 66% of all arable lands.
When asked if the government pays compensation for any expropriated property, Pinheiro shrugs his shoulders. “We don't want to know the answer to that question,” he says.
J.W. Nuckolls, Hulett, WY, says cattle productivity is the other side of the coin for Brazilian ranchers.