Big does’t mean beautiful in Argentina – but things are changing

IMG_0118

In the UK, the market doesn’t want finished beef animals that are too large, but in Argentina, it’s almost the complete opposite.

The Argentine consumer typically has an appetite for smaller heifers of under 350kg liveweight. The reason is their belief these animals are more tender. However, with the country developing its export market – which demands larger animals, generally over 450kg- the industry is trying to close the gap between the two market streams and encourage consumers to select meat from bigger carcasses in order to boost production efficiencies.

Changing Argentine culture is a difficult one. You only need to look along the cattle pens at Linears cattle market (below) on the edge of Buenos Aires to see the typical small framed cattle that form the basis of the country’s diet.

IMG_0092

With an annual consumption of 60kg of fresh beef a head (the highest consumption per capita in the world – although I believe there’s some debate on that with Uraguay), the Argentine carnivore likes their meat and they know what they want.

Victor Sisinni (below), auctioneer for Da-ness srl – one of 55 auction houses operating in Linears market, adds: “Argentine consumers are spoilt to eat smaller, younger animals. But there is a concerted effort among farmers and industry institutions to get consumers to eat bigger animals and maybe not produce as many cattle but more kilos of beef.”

IMG_0076

The market handles around 10,000 head a day – although the day I went was after the Easter break so numbers were down to around 4,000. The market is purely for finished beef animals, with stock going direct to slaughter after being purchased. 85% would be for domestic consumption, with the rest for non-EU exports. Argentine beef isn’t hung, so beef from today’s market at Linears, could be on the plates of Buenos Aires consumers tomorrow.

Victor says steers generally average 400kg live weight and heifers 330-340kg. Cattle are split into different classes at sale: 300-350kg – male or female ‘calves’; 350-430kg – small steers or small heifers; and 430kg+ steers and bulls. These are then classified as “good” or “bad”.

On the day (3rd April – see video below), Victor sold 390 cattle, with heifers averaging 37 peso/kg (£1.30) live weight and steers, 35-36 pesos/kg LW (£1.23-£1.27). 6-7 year old Angus cull cows averaged 23 peso/kg (81p/kg).

I met with Adrian Eduardo Bifaretti and Eugenia Ana Brusca from the“Instituto de Promotion de la Carne Vacuna” (The institute for the promotion of Argentine beef consumption). They told me that 70% of fresh beef here is sold through butchers, with very little available pre-packaged.

The Argentinian shopper goes to their local butcher and usually specifically asks for “ternra”, which means a young animal of under 350kg (this could be a heifer or steer).

In order to change shopping habits, the instituto is actively promoting “special steers” (light steers of 380kg live weight) to the Argentinian shopper. This is financed through the industry as part of a levy paid at slaughter. Farmers pay 11 pesos (39p) per head, with abattoirs paying a further 6 peso per head (21p), which goes to the institute.

The adverts for the campaign have predominantly been placed on social media, with various slogans such as; “At your home or outside, always ask for the special steer”. TV chefs have also been encouraged to promote this type of meat, with radio also being used to communicate the message. “La Rural” Show – which sees 1 million visitors come through its gates in Buenos Aires in July – is also a key route of communication to the public.

This year, the aim is to try and develop the campaign to promote the fact that a “heavy’ steer is also as tasty as a heifer.

No doubt it will be a challenge to change engrained shopping habits. However, the fact the Argentine consumer is so open to eating different cuts of beef already (whether its assado (ribs), knuckle or schnitzel for example), must work in the industry’s favour – once the taste test has been passed.

 

 

 

 

 

 

POLITICAL HISTORY HINDERS ARGENTINIAN DAIRY INVESTMENT

pexels-photo-236010.jpeg

Milk price fluctuations are a continual headache for British farmers, but imagine if you had to battle inflation and huge interest rates on finance at the same time. Historically, for Argentinian farmers, this has been a day-to-day reality.

When global milk prices dropped through the floor in 2016, Argentina was experiencing inflation rates of 40%. The country has struggled to control inflation for many years due to a variety of complex reasons linked to a turbulent political environment.

In the eighties, inflation hit an eye-watering 5,000%. Last year they were at 21.6% (median), whilst in February this year, they were 25.4%. At the same time, wages haven’t always kept up.

Agricultural strategy consultant from Quarterra, Monica Ganley tells me that Argentinian consumers are used to prices going up and down on supermarket shelves. However high costs have impacted on dairy product sales, and particularly fresh products like yoghurts.

Input costs

At the same time, the inflation story has affected farm input costs. Maize and soya prices have been fairly protected due to their link to the US dollar, but other inputs, such as medicines have escalated.

Over a coffee in her home of Pilar, to the north of Buenos Aires, Monica said things were picking up, but a couple of years ago, farmers were in “really rough shape.”

“Argentina has some incredible (cattle) genetics and a really great climate for making dairy, but nobody has had the capital to invest in their milking facilities for example,” she explained. “If you go to Santa Fe, which is the crib of milk production here, people are milking with such little technology just because they haven’t had the money available to them to invest.”

Monica Ganley

Monica Ganley (above) explains how inflation and a lack of access to credit has hindered dairy development in Argentina.

A lack of access to credit adds to the challenge. Monica tells me that historically, to buy a house in Argentina, cash has been the only option – so it has almost been a case of turning up to the sale with several suitcases of pesos! Today, things have improved slightly, with the government introducing mortgage options.

Looking back to 2012, Monica cites her own experience of trying to buy a car, where she was quoted a finance interest rate of 25%. You can imagine the huge prohibitive cost of investing in a new milking parlour!

Labour

Monica tells me that the low level of investment in Argentinian dairying is in stark contrast to other, more stable South American countries such as Chile and Uruguay.

She says: “I went to a dairy conference in Chile – not last year, but the year before – and there was a guy there with a 200 cow Jersey farm with robotic milkers. You would never in a thousand years see a robotic milker here (Argentina) and that’s crazy because labour is such a problem.”

Apparently the issue with labour in Argentina isn’t due to supply, but is instead linked to employee “rights.” This stems from the country’s populist political history and large number of worker unions.

For example, employers have to pay thirteen month’s worth of salary a year! Firing an employee is also extremely difficult, whilst workers also have to receive very generous medical and maternity support.

Uplift

However, it’s not all doom and gloom. In recent months, things have started to improve for Argentinian dairy producers. This is largely linked to the global uplift in milk price, but also the overall improvement in Argentina’s economic situation since the election of a new government in 2015 (more to come on this).

Monica says economic improvements have been slow and not as dramatic as everyone would like. However, consumer confidence has improved – something which has not yet translated into a substantial uplift in purchasing of dairy products. “I think things are getting better and that’s affecting dairy farmers as well,” she adds.

Argentinian Beef – why does it matter to the UK?

pexels-photo-735973.jpeg

So, of all the countries in the world, why I have I chosen to visit Argentina for my Guild of Agricultural Journalists Perkins Innovation Scholarship?

You may think I’ve obviously gone in order to stock up on Malbec and eat steak (and you’d be right to some degree), but my trip is also a timely one in terms of the relevance of Argentinian beef farming to the UK.

The EU has been negotiating with the Mercosur trade block (Argentina, Brazil, Paraguay and Uruguay) for many years, in an attempt to forge a deal that would give the EU more open access to the block’s car and dairy markets. In return, the Mercosur block would get greater access to the EU’s beef markets.

Current discussions appear to centre around increasing the amount of reduced tariff beef that can be imported into the EU from the Mercosur countries from 70,000t to 99,000t.

Negotiations have been slow. However, things appeared to gain speed in February this year when officials met in Brussels.

Discussions have understandably worried European farmers, who have raised concerns over market competition from cheap South American beef and food safety standards.

UK farmers should understandably be a bit twitchy considering the huge uncertainty around Brexit. For example, if the UK has to pay tariffs to export beef after leaving Europe, they will be in direct competition with cheap South American imports. The UK government will also likely forge its own agreement with Mercosur, which could see more South American beef on the domestic market.

I spoke to AHDB’s head of exports, Peter Hardwick before I left the UK to get a better understanding of the overall market picture. He explained that the type or cuts of beef included in any reduced tariff deal would likely be more significant than the volume itself. High quality cuts, such as strip-loins, fore-ribs and rump and loin sets would compete more directly with European/British beef farmers.

Argentina is obviously just one of the countries in the Mercosur block, but a significant one. There are two main EU export quotas currently available to the Mercosur countries – the Hilton Beef Quota being the main, high quality beef quota. Argentina currently has around half of the total quota of 62,250t available to the four countries. Beef through the Hilton Quota is imported at 20% duty, which means it is competitive against EU beef.

Peter also told me about an extra 48,200t of quota at zero tariff, which is available for the Mercosur countries to pitch for – Argentina included.

For some time, the challenging political environment in Argentina has meant the country has “significantly underperformed” in terms of hitting its quota allowance.

For many years, the country has struggled with huge fluctuations in inflation. Between 2003-2015 the country was governed by the left wing, populist part of Nestor Kirchner, and then wife Cristina Fernandez de Kirchner. They introduced a number of policies that impacted on Argentina’s position on the global stage.

Consultant, Monica Ganley from Quarterra– who originates from the US, but has lived in Argentina for five years – explained the situation to me:

“Argentina, when it comes to agriculture, could be a bread basket for the world. It should be an exporter. There’s tonnes of resources here. There’s more food here than people. It should be a world supplier. But one of the things the Kirchners did in their “protectionist agenda” is they put in lots of rules that limited exports in an effort to keep prices low,” she says.

Beef in particularly was massively affected. In the short term, the strategy did what it was meant to – creating more supply for the domestic market and keeping prices low. But as Monica says, “ultimately it ends up decimating your market”.

Farmers stopped investing in beef and many went out of beef altogether in favour of soya production.

However, a new “centre-right” government elected in 2015, appears to be turning things around. Relatively quickly, current president Mauricio Macri put an end to the export tariffs for beef, wheat and maize. The export tariff for soya was also reduced from 35% to 18%.

That means farmers have started to invest and the industry is embracing technology to boost production, and no doubt efficiencies. In 2017, the country exported 15% more beef and live animals to the EU compared to the year before.

All of these factors combine to mean that Argentinian beef is increasingly significant to UK and EU farmers and is why I’ve chosen to focus my attention on the country.

Over the next nine days, I’ll be speaking to farmers and ministry officials to find out how the industry is developing and how they hope to exploit the EU market. Stay tuned.

Beef in Buenos Aires and beyond

How is Argentina developing its beef export market? Is it a threat to British producers and does Argentinian beef really taste as good as John Torode says it does? These are just some of the questions I want to answer when I jet off to Argentina as part of the Guild of Agricultural Journalists and Perkins Innovation Scholarship.

After a few weeks travel, the first stop on my work part of the trip will be Linears market – apparently one of the largest, if not the largest livestock markets in the World. My plan is to attach a GoPro to one of the gauchos – could be an interesting start to the trip! Next, I will be speaking to the Ministry of Agriculture to find out more about the industry and its beef export plans. Then it will be an action packed few days travelling out of Buenos Aires visiting abattoirs, breeders, finishers and the like – hopefully with a few steaks and a few glasses of Malbec along the way.

To wet the appetite before I go, here’s John Torode’s experience of sampling beef in South America – it’s enough to get my mouth watering!

 

Aly Balsom

In just a few weeks time, i’ll be jetting off to Argentina to undertake a two week tour of beef production systems. The once in a lifetime trip is all thanks to the Guild of Agricultural Journalists and Perkins Innovation Scholarship which I was lucky enough to be awarded in 2017.
The action packed trip will take in the sights and sounds of Argentinian agriculture including Linears cattle market in Buenos Aires, beef lots and cattle on the pampas. I’ll be looking at how Argentina are developing their beef export market and asking what potential impact this could have on UK farmers.
I’ll be documenting my trip here, so stay tuned for more updates! Gracias