Argentina's beef industry struggles to find its place amid economic and political instability

If Argentina isn't the carnivore capital of the world, it's certainly the closest thing to being heaven on Earth for beef eaters. Per capita beef consumption in Argentina is among the highest in the world - and nearly double that of the U.S. Almost every meal includes at least two, if not three or four, servings of beef.

This passion for beef defines the persona of the country. There's no question the cattle industry is a mainstay of Argentina's culture and economy.

Still, Argentina's beef industry continues to struggle in an economic and political landscape that's far from secure. Argentine cattle producers are typically forced to deal with a poor infrastructure, extremely tight credit and competition from within.

"The unpredictable nature of the Argentine economy has been a constant concern among Argentine cattle producers," says Lewis Hagen, Bozeman, MT, president of Montana Genetics International Inc.

Hagen represents a cadre of U.S. purebred producers who market cattle genetics - mostly embryos - to Argentinean cattlemen. He's made numerous trips to Central Argentina's renowned Pampas region, where fertile soils, long growing seasons and plentiful rainfall combine to form some of the greatest grasslands in the world.

"The vast natural resources are only half of the beef production equation, though," adds Hagen.

"The volatility frequently forces producers to make business decisions based on short-term considerations and provides little margin for the risks associated with expansion," he says.

Argentina's cattle herd reached a 30-year low at 50.3 million head in 1997. Coming in to 2000, there was hope for a modest herd re-building, but it hasn't happened.

"During the past couple of years there's been a huge increase in demand by domestic consumers for young beef (500-600 lbs. live weight) in Argentina," explains Hagen. "I've heard various reasons for this, ranging from consumer preference to economic necessity."

To meet the demand, large numbers of heifers that would normally be held back for replacements have gone to slaughter.

"This is bound to have a profound effect on cattle prices in the near future," says Hagen, "considering that Argentina is trying to expand export markets and the fact that the industry cattle numbers are already relatively low."

Most Argentine beef exports are to Chile, Germany and the U.S.

But, to expand and meet the demand of export market, cattle producers must compete for land against the crop sector - mainly wheat, soybeans, oilseeds and cotton, says Argentinean Federico Boglione of Rosario. Boglione owns Los Lazos S.A., one of the country's leading Angus seedstock operations.

"In some areas of the Pampas, there has been a decrease in beef production and an increase in grain production," says Boglione. To pick up this slack, beef production has increased in some of the more arid regions of the country, specifically Patagonia, where crop production is very marginal.

Argentine beef producers must also compete against tradition, says Juan Protto of Buenos Aires. He owns cattle along with several restaurants - including Estilo Campo, one of the city's premier dining spots.

"We have a tradition of grass-fed beef that is known around the world," says Protto, a Harvard University-educated businessman. "There are changes coming along that certainly threaten that image and may change the way we produce much of our beef." He refers to the increasing number of commercial feedlots using grain-based rations.

"Some of these changes contradict the age-old image of only producing grass-fattened cattle," says Hagen. "But, given their ability to adapt, I have no doubt that Argentine cattlemen will have the ability to implement these changes while maintaining the integrity of their market identity."

While there are varying opinions about the future identity and integrity of the beef industry, without question the present Argentine economy has a lot to say about the health of the beef business.

In November, Argentina's President Fernando De la Rua and several provincial governors agreed on a government spending freeze as part of an austerity plan demanded by international lenders. The freeze was announced as part of a package to pull South America's second-largest economy out of a long economic downturn.

The deal places a five-year cap on spending by Argentina's 23 provinces, the federal government and the city of Buenos Aires (population 13 million).

"This move is crucial to Argentina's hopes of receiving billions of dollars in new funds from the International Monetary Fund and other international lenders," Protto says. "They are forcing the country to deal with a ballooning national debt, soaring interest rates and one of the highest unemployment rates ever."

In response to the news of the freeze, labor unions across Argentina waged a 36-hour general strike crippling rail, shipping and public transportation across the country.

How this austerity plan will affect agriculture and the beef industry is yet to be seen. Either way, most observers feel more investment is needed to maintain a consistent and dependable domestic business structure - and to compete in international markets.

Argentine producers are mired in a network of decaying highways and railroads and silt-clogged ports. Improvement of those systems is vital to feeding domestic consumer demand - but they become even more important if Argentina is to be a major player in world commerce.

"We need a modern, reliable infrastructure in order to do business, especially international business," says Protto. "I have faith that we can work our way through these hard times, but I'm not holding my breath."

A foot-and-mouth disease (FMD) situation appeared in Argentina late last summer, according to USDA's Animal and Plant Health Inspection Service (APHIS).

USDA then banned U.S. imports of fresh, chilled and frozen beef from Argentina until the disease incident was more widely understood.

According to APHIS veterinarian Joseph Annelli, a small number of cattle were smuggled into Argentina from Paraguay. The cattle were vaccinated in Paraguay, but the Argentinean government considers the cattle exposed to FMD because Paraguay is not FMD-free.

The illegal cattle, along with all cattle that came into contact with them (3,000 head in all), were destroyed. APHIS found no clinical signs of FMD in any of the depopulated cattle. Argentina has since closed cattle trade with Paraguay.

Argentina has been eligible to ship fresh, chilled and frozen beef to the U.S. from regions declared FMD-free since 1997.

Argentina's U.S. import quota is 20,000 metric tons. In 2000, it appears the country will have filled half the quota. Before the FMD incident, the country was expected to fill the quota.

Alfonso Torres, administrator of APHIS Veterinary, says certification to any country to import into the U.S. takes from 18 to 24 months after the time of the last outbreak. Since Argentinean cattle only showed the antibodies for FMD, the recertification process could take less time.