July 30, 2008

Exports Row Resolved but Beef Supplies Still Face Restrictions

By Dan Buglass

THE impasse over exports of a wide range of agricultural products between farmers in Argentina and the government in Buenos Aries was resolved last week after four months of wrangling, but it seems certain that supplies of beef on the export market will be curtailed for the foreseeable future.

It is the usual story of falling margins for livestock and higher profits from growing arable crops, principally soya beans. The Scotsman has been reliably informed that during the first four months of 2008 beef production in Argentina slipped by over 3 per cent.

But the more worrying underlying trend is that the kill of female cattle - both mature cows and heifers - increased by almost 7 per cent. This suggests that the big operators with vast ranches have more faith in growing cereals at a time when world grain stocks are dangerously low.

The UK is a relatively minor importer of Argentine beef, but the latest figures from HM Revenue and Customs show that in the January to end of May period this year trade moved up from 1,338 tonnes in the equivalent months of 2007 to 1,757 tonnes. Virtually all of this beef comes under the so-called Hilton arrangement and is not subject to any tariffs.

Meanwhile, in the US the futures market for beef is clearly bearish.

According to Jim Wyckoff, a leading market analyst, trade is strongly influenced by a report from the US Department of Agriculture pointing to higher feed prices. Forward prices for store cattle destined to enter feed lots in September have hit a six-week low.

However, it is difficult to discern if the futures reflect accurately what is happening in the real world. In theory US prices should be on the rise, given the weakness of the dollar.

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