by By Juan Alemann
Tuesday, June 17, 1997
The projection made by the Department of Agriculture, Fishing and Food estimates that beef exports will grow from 467,0000 tons in 1996 to 550,000 tons in 1997 (a 18 per cent), 650,000 tons in 1998, 740,000 tons in 1999 and 800,000 tons in 2000.
Furthermore, the average price per imported ton is expected to rise, on the one hand, because we will have access to markets paying higher prices, like the US, and, on the other hand and to a lesser extent, because we will be exporting sliced meat and meat products prepared for sale in supermarkets. That is to say, if an increase of 71.3 per cent is expected in 4 years as measured in tons, it will surely be much more than 100 per cent in terms of value.
Argentina has just been officially declared "aphtous fever-free country" by the international agency in charge of controlling animal endemic diseases. The qualification given to Argentina bears the additional words "with obligation to vaccinate", which implies that vaccines will have to keep on being used. Only after a longer period will Argentina be rated as an "aphtous fever-free country without obligation to vaccinate". For the purposes of foreign trade, both are equal, since the Marrakech agreement which ended the long GATT Uruguay Round determined that no import ban can be placed for sanitary reasons on countries bearing the "aphtous fever-free with obligation to vaccinate" status.
Argentine beef exports had been forbidden in the US for more than 60 years due to aphtous fever (foot-and-mouth disease). Many countries, the Asian especially, also applied the same ban as the US. In 1962, a minimum opening up of the US market was achieved, allowing the import of cooked meat. Even though the cooking point was more than enough to ensure the absence of the aphtous fever, the North American authorities took a long time to allow those imports. In fact, they only did when Argentina sent ships to the Caribbean on account of the Cuba missile crisis. It was a retribution for the gesture of political sympathy. In practice, it was just a gesture.
Europe, in turn, implemented strongly protectionist measures on its bovine livestock during the post-war period, with a devilish mobile tariff system depending on the price (the lower the import price, the higher the tariff), created by Dutch-born Sicco Mansholt.
This system blocked the imports, which were reduced to small quantities and to a special quota of high-quality meat, known as "Hilton quota", because it was intended for the international hotels. The French would surely have liked it to be "Mediterrané quota", or something of the kind. At the same time, domestic European prices were set at such a high level that this favored an expansion of meat output, which was accumulated in frozen stocks and also exported with irrationally high subsidies. In every case, subsidies were simply at the level needed to crowd out Argentina from other markets.
In these conditions, meat export became a difficult business for Argentina, with very much depressed prices. This will have changed precisely after the Marrakech agreement and will be felt in the next years. Countries subsidizing meat exports have undertaken to reduce those subsidies in a substantial though gradual way. At the same time, the meat price has been set at a less attractive level in the European Union, the main agricultural subsidizer of the world, so that production dropped. In Europe there is also another factor of no lesser importance: the aging of population, the high unemployment rate and the priority given to social needs make it necessary to assign more public funds to these purposes. As the tax-paying capacity has already been exceeded, the reduction of agricultural subsidies is inevitable.
As per the Marrakech agreement, the US have undertaken to import an annual 20,000 ton-quota of fresh Argentine meat (either frozen or chilled). The bureaucratic arrangements preceding the decision are apparently completed. Apparently, Clinton wants to make this announcement before visiting Argentina, but also to prevent the red-tape formalities from blocking the import afterwards. Just as Australia which, having a quota that is higher than 20,000 tons per year, does not comply with it, Argentina can request (and obtain) a significant rise of the quota in the next years.
Some Asian countries have already lifted the prohibition of importing fresh Argentine meat. Others, with Japan in the first place, still have not. They prefer to import meat from the US to counteract eventual restrictions on their car exports. But this is a business argument which is not valid according to the standards regulating international trade. Argentina is entitled to report Japan to the World Trade Organization (WTO, substituting the GATT), and it surely will have to. The other solution consists in taking retorsion steps, that is to say, stalling the import of Japanese products.
Undoubtedly, export prospects are excellent. Some days ago Secretary Felipe Solá revealed that a project for the creation of a mixed body for encouraging the export of Argentine meat abroad will be submitted to the Congress. This body would be funded with the contribution of one peso per slaughtered cattle head. Surely, Argentine meat will sell in larger quantities and at a better price if European, American and Asian consumers become aware that it is a lean meat, produced without either hormones or methods deteriorating its quality and making it dangerous for human health. Our beef is simply the best in the world. But many people ignore it.
But this growth of meat exports raises an issue. Today, the output hardly covers the present export needs plus a domestic consumption much lower than it used to be. Between mid-1995 and 1996, the bovine cattle stocks were reduced by 2.3 million heads, from 52.6 to 50.3 millions, and by mid-1997, a new fall is estimated to take place, as a consequence of the formidable expansion of the cereal grain and oilseed crops. Under these circumstances, if demand increases as a consequence of larger exports, it will initially have a perverse effect over the supply: female animals will be withheld and the demand will drop. This reinforces the price rise, which depends on the elasticity of the demand, that is, of the consumers¹ disposition to replace beef either with other food products such as pork, poultry, pizza, fish, or with pasta and stews which require smaller quantities of beef.
In the past, sudden beef price rises brought headaches for the government, due to its effect on the price index. Beef has both a direct and an indirect bearing on other foods. Argentine food habits have changed during the last years, less beef is eaten (even though the prices are comparatively low in relation to the past) due to health reasons, to a larger supply of other food products and to a change in the eating habits. But, just in case, a strategy should be thought of for the moment when exports grow as expected and the domestic price rises. On the one hand, substitution must be ensured and encouraged; on the other, the technology for the increase of production must be promoted: there are enough chances to reduce mortality and increase the parturition rate and the fattening speed.