Status of Beef Cattle Production in Argentina Over the Last Decade and Its Prospects

© 2012 Guevara and Grünwaldt, licensee InTech. This is an open access chapter distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Status of Beef Cattle Production in Argentina Over the Last Decade and Its Prospects


Cattle stock and its composition
The number of beef cattle in Argentina experienced a sustained rise over the period [2001][2002][2003][2004][2005][2006][2007].Since 2007, a sharp decline is recorded in cattle stock, which by the year 2010 had decreased by nearly 10 million head (Table 1 The fluctuation of the cattle population in Argentina observed in Table 1 is not something new, because, to just mention an example, in 1977 there occurred the greatest liquidation of beef-cow herds in the country's cattle history, since cattle stock between that year and 1988 fell from 61.1 to 47.1 million head, which represented a 22.9% stock contraction [11].
From November 2005 on, misleading public policies intensified a process of strong intervention to ensure lower prices of beef in the domestic market, affecting exports as well as domestic trade.Some of the measures adopted by the National Government in terms of foreign trade were [11]: The public policies imposed were effective in the short term in keeping beef prices low in the domestic market, although in the medium term they favoured the process of beef cow liquidation.However, these policies had no influence on the high agricultural profitability, and did not reverse the existing difference between the last one and that from cattle production.As consequence of the government's intervention policy, the live weight price dropped, which reduced the profitability of cattle rearing, causing a strong sell-off of breeding cows, factors that explain the cattle stock decrease.
On the other hand, during the period 2007-2010, the national cattle herd drop was exacerbated by the worst drought in 70 years over 2008-2009 that affected about one third of the farm belt forcing some ranchers to sell off cattle [12].

Relationship between cattle stock and human population
The human population in the country was 36.3 million and 40.1 million in 2001 and 2010, respectively, which means an increase close to 11%.In turn, the cattle stock increased by only approximately 3% over the same period.
The beef cattle/inhabitant relationship was respectively 1.34, 1.53 and 1.25 for the years 2001, 2007 and 2010 [13,14,15].The number of cattle head per inhabitant over the whole period analyzed here (2001-2010) was notoriously lower than the one the country had in 1952, which was 2.56 [3].
During 2010, Argentina's per capita cattle stock was higher than those in Brazil, Australia, United States of America (USA) and India, and lower than those in Uruguay and Paraguay, some of them competitors of Argentina in the world beef market (

Cattle extraction rate
The number of animals slaughtered and the extraction rate in the country over the study period are shown in Table 3.The extraction rate (slaughter/beef cattle stock) was obtained from the stock cited in Table 1.In the year 2010 the extraction rate in the USA (37.6%) and Australia (31.1%) was higher than that in Argentina, whereas that Uruguay (18.6%),Brazil (14.0%),Paraguay (12.2%) and India (5.0%) had lower extraction rate [17,19].

Beef domestic consumption
For many years, Argentina was the country with the highest per capita meat consumption worldwide.During the period considered, the year 2007 recorded the highest meat  Resurgence of the demand for beef since 2002 led to a rise in price that allowed a quick recovery of the cattle production profitability, influencing on the price of land in the Pampas cattle-rearing region, which quintupled in value between 2002 and 2008, with US$ values of 377 and 1,950 per hectare, respectively [22].
For a long time, an undisputed paradigm of the beef market in Argentina was the inelasticity of the demand.Because beef is deeply rooted in the diet of the Argentines, a rise in price did not affect the amount of meat demanded, which continued to be strong.The decreasing per capita meat consumption has resulted in Argentina losing the first place in the ranking of countries that most consume meat.This structural change could be explained by an alteration of the factors determining the price-elasticity of beef demand, mainly thanks to availability of substitutes at competitive prices and to a new appraisal regarding the participation of the different products composing the typical diet of the consumers [21].
In relation to availability of substitutes, the great competitor for beef over the last years has been poultry meat.Consumption of poultry meat increased by 34% between 2001 and 2010, with consumption values being respectively 25.7 and 34.5 kg per capita [23,24].One kilogram of beef was equivalent to 2.1 and 2.5 kg of chicken in 2001 [25] and 2010 [24], respectively.
Despite meat consumption in Argentina decreased by some 11% in the cited period (Table 4), in 2010 the country continued to be, along with Uruguay with 55.5 kg per capita, the leading beef consumers in the world, compared for instance to the USA with 38.  6. Cattle production systems

Classification
Feedlots are excluded in the methodology used in [27] to classify production systems but it takes into account: a. Cow-calf: ranchers with cows and without steers+yearling steers (17% of total national beef cattle stock) b.Ranchers with cows, steers and yearling steers.The variable selected to subdivide this stratum was the steer+yearling steer/total cows ratio b1.Predominantly cow-calf: ratio lower than 0.2; cow-calf and finishing of part of own production (28 % of total national beef cattle stock) b2.Complete cycle: ratio between 0.2 and 0.4; cow-calf and finishing of total or great part of own production (15 % of total national beef cattle stock) b3.Finishing+cow-calf: ratio between 0.4 and 0.8; cow-calf and finishing of own and purchased production (17 % of total national beef cattle stock) b4.Predominantly finishing: ratio higher than 0.8; cow-calf and finishing of own production and purchased production higher than b.3.(19 % of total national beef cattle stock) b5.Finishing: ranchers with steer+yearling steer and without cows (4 % of total national beef cattle stock) Although the classification in [27] does not include feedlots, it must be highlighted that for some time now they have been making an important contribution to cattle production, bringing a change to the traditional cattle system in Argentina, which had been eminently pastoral for years.The feedlot activity was not immune to government intervention, which resulted in fluctuations in use of the available infrastructure.At the beginning of the contribution of state subsidies in 2007, feedlots contributed 14% to total slaughter [1].From that time on, the number of animals from feedlot destined for slaughter increased (Table 5).
During 2010, cattle feedlot occupancy amounted to 56%, a lower figure than the average for 2006-2010, which was 67% [28].Although feedlots ceased to be subsidized in 2010, they continue to make a relevant contribution to the number of annually slaughtered animals in the country.Table 5. Participation of feedlots in Argentina beef cattle slaughter

Pastoral finishing
The technical scheme contemplates 80% of perennial pastures based on alfalfa, 20% of annual winter pastures and alfalfa hay, a stocking rate of 2 heads ha -1 , live weight at entry and exit of 180 and 440 kg, respectively, and a fattening cycle of 17.3 months.Costs in the period 2001-2010 were (mean and SD) US$ 451.5 ± 130.4 ha -1 equivalent to 521.3 ± 26.8 kg steer -1 .Despite in January 2011 the cost increased to 1,046 US$ ha -1 , the cost in terms of kg steer -1 showed no substantial variation as consequence of the fact that the price of steers rose as well [31].

Pastoral finishing with supplementation
This system is based on 70% of perennial pastures based on alfalfa, 30% of annual winter pastures and a supplementation (alfalfa hay, maize grain and protein nucleus) and a stocking rate of 3.5 heads ha -1 , live weight at entry and exit of 180 and 410 kg, respectively, and a fattening cycle of 13.1 months.The costs in the period 2001-2010 were (mean and SD) US$ 1,050.0 ± 34.7 ha -1 equivalent to 1,190.3 ± 39.9 kg steer -1 .Despite in January 2011 the cost increased to US$ 2,493 ha -1 , the cost in terms of kg steer -1 increased only to US$ 1,234 as consequence of the fact steer prices were also raised [31].
Both systems are located in the Pampas region (West of Buenos Aires Province and South of Córdoba Province) [31].

Cow-calf production
This system is carried out in rangeland areas of the Pampas region (Southeast of Buenos Aires Province).Cows are fed some alfalfa hay as supplementary food.Calf crop is 80% and stocking rate is 0.5 cow ha -1 .Costs in the period 2001-2010 were (mean and SD) US$ 52.8 ± 13.4 ha -1 equivalent to 58.1 ± 11.5 kg calf -1 [31].
In the three production systems there was a significant linear increase in the price per hectare in the studied period: R 2 Adj.= 0.51, p=0.01 for pastoral finishing, R 2 Adj.= 0.57, p=0.007 for pastoral finishing with supplementation, and R 2 Adj.= 0.35, p=0.04 for cow-calf production.

Gross margin and meat production for some of the production systems
Based on the information in [27] was estimated the gross margin per kg of sold meat for all alternatives of cattle finishing and feedlot shown in

Calf/steer price ratio 2001-2010
Regarding cattle production systems, the purchase-to-sale ratio is a factor that should not be excluded for the analysis because of its effect on their viability.Historic prices  indicate that the calf price has been 10% higher than that of the steer [32].The average price ratio of Aberdeen Angus calves and steers ( Source: [33] Table 7. Cattle prices (US$ kg -1 ) and calf/steer ratio over the period 2001-2010

Territorial distribution of cattle population
To analyze the territorial distribution of the beef cattle population, the provinces accounting for approximately 95% of the cattle stock were grouped into two zones.The Central-Eastern (CE) zone comprises the provinces historically producing beef cattle (Buenos Aires, Santa Fe, Córdoba, La Pampa and Entre Ríos) which keep the greatest number of cows.The other area, which was called North Eastern (NE) -North Western (NW) zone, to which cattle production displaced over the study period (Table 8) as result of agriculture intensification in the Central Eastern area.
During the period 2003-2010, the CE zone reduced its cattle inventories from 76.6 to 69.5 %, whilst the NE-NW zone increased its cattle herd from 18.4 to 25.3%.In the CE zone, the Provinces with higher stock losses were La Pampa, Córdoba and Buenos Aires with 38.4,28.1 and 20.5%, respectively.Moreover, in the NE-NW zone, Misiones and Salta provinces increased their cattle stock by 69.8 and 86.8 %, respectively.
In spite of the fact that the NE-NW zone has increased its cattle herd, this increase does not compensate for the loss suffered by the CE zone and cannot be explained by territorial space because their land areas are comparable in size, 828.1 and 849.6 thousand km 2 respectively for the CE and NE-NW zones.The reason is that the conditions of production are not equal in different aspects that influence on production efficiency such as infrastructure, health, food, among others.Evidence to this is the calf-cow ratio during 2010, 65.8 and 51.8%, respectively, for CE and NE-NW zones (Table 9).This implies 14 less calves every 100 cows that have been displaced from the CE to the NE-NW zone if it is assumed that the calf-cow ratio is a variable that approximates the weaning index.
Fluctuation in the stock also involves the slaughter of female cattle, which varied among 42, 46, 42, 49 and a little more than 43% for the years 2001,2004,2006,2009 and 2010, respectively considering that the limit value for maintaining the stock is about 43% [1].
Between 2009 and 2010 the number of cows and heifers continued to fall, which makes future restocking difficult.The export value, as percentage of cattle meat annual production, during 2010 was lower than those of Australia, Canada, India and Brazil that allocated 65.5, 41.1, 32.3 and 17.1%, respectively, but higher than those of USA, Mexico and European Union (EU), with 8.7, 5.9 and 4.2%, respectively [35].
Cattle meat exports by product category and their value over the period 2001-2010 and Argentina beef exports, and their value and destination countries during 2010 are presented in Table 12 and Table 13, respectively.Except for 2001, the greatest export volumes correspond to chilled and frozen meat (Table 12).The decline in sales during 2010 is indicative of the loss of presence of Argentina cattle meat in the international beef market.In 2010, the primary destination of non-Hilton chilled cuts and frozen meat was Russia, whereas the major purchaser of Hilton cuts was Germany (Table 13).
The Hilton Quota is an export quota of high-quality high-value boneless beef cuts that the EU grants to beef producing and exporting countries.Argentina is the country having the highest percentage of this quota, with 28,000 tons year    Source: Own preparation based on [27] Table 13.Destination countries of Argentina's cattle meat exports and their value in the year 2010

Cattle health state
Foot and Mouth Disease, the last outbreak of which occurred in February 2006, is the disease of greatest economic importance because it hampers exports to FMD-free circuits.The Agri-food Health and Quality National Service (SENASA) has implemented health control programs against different pathologies and has taken actions towards preventing the entry of exotic diseases.Most important among them to the international market for animals and their byproducts are Bovine Spongiform Encephalopathy (BSE) and Scrapie.According to World Organization for Animal Health (OIE), Argentina is a member recognized as having a negligible BSE risk and as being an FMD-free zone where vaccination is not practiced to the south of Parallel 42° and an FMD-free zone with vaccination in the rest of the country [36].Also SENASA has implemented health control programs against other diseases which are not restrictive on beef exports but do limit herd productivity, such as Brucellosis and Tuberculosis.

A non-traditional cattle production case
Mendoza lies in the West Central of the country with 148,827 km 2 .An important portion of Mendoza falls within the Central Eastern part of the Monte Phytogeographic Province, the most arid rangeland of the country.Of the total surface of Mendoza, around 9 million hectares could be devoted to cow-calf production systems and about 450,000 ha are under irrigation, of which 75,000 ha are uncultivated at present.Cow-calf operations under rangeland conditions are the dominant production system [37].The steer+yearling steer/cows ratio ranged from 0.08 to 0.16 in 2002 and 2010, respectively.
Mendoza has beef cattle but not in enough numbers to be considered a high cattleproducing province.Proof of this is the beef cattle stock/human population ratio, 0.25 and 0.31 for 2002 and 2010 respectively, values far below the 1.21 ratio for the country during 2010.The 2002-2010 evolution of bovine stock and human population was 404,710 to 533,488 heads [38] and 1,595,448 to 1,738,929 people, respectively [39].
The displacement of beef cattle production as consequence of the advance of agriculture is a process of no return.This situation led to the Argentinean Institute for Arid Land Research (IADIZA) to analyze the possibility of developing a non-traditional cattle activity in Mendoza, a province where competition with agricultural activities is high.At present, 10% of the animals consumed in Mendoza are finished locally, and hence the aim arises to enhance the production of steers for increasing the local supply.This framework promoted several investigations for analyzing the profitability of different production systems on cultivated pastures such as [40] beef cattle post-weaning, feedlot [41] and early weaning of calves combined with post-weaning production [37].

Prospects
Based on the analysis of the information developed here and on the opinion of leading specialists [1,4,5,42] in the topic addressed, the need is highlighted for the growth of Argentina's beef cattle production to fulfill the needs of both domestic consumption and exports.Evolution of the stock through retention of females is slow, somewhat faster by keeping cow culling rates low, although a better result is obtained by improving weaning.For this reason it is indispensable to improve this index as soon as possible.
Different hypothetical projections can be made in relation to cattle stock and beef production.One scenario that would allow achieving a production of 3.31 million tons of beef by 2020, with higher export surpluses and possibilities of expanding domestic consumption, should consider national weaning indices of 65%, a 25% of regional production rate, a 25% of cattle extraction rate, a 77% of retention of females, and a carcass weight of 225 kg.This would provide an export surplus of 800,000 tons, similar to that exported by Argentina in 2005.
Increased beef demand from developing countries has significantly impacted on the rise of international prices.Upon the basis of a scenario of low supply, a domestic demand that has validated current price levels and an international demand that has approve prices that were unimaginable a few years back (US$ 2,680 and 6,192 per ton carcass weight equivalent in 2005 and 2010 respectively) it is possible to project sustained cattle prices for the next 3 to 4 years and, therefore, cattle production systems would continue to be profitable.
The input/output ratio is going through a propitious time, with values well above those of previous years.Thus, for instance, in December 2001, purchasing a tractor of 100 HP required 50,393 kg of steer and 44,724 kg of calf, whereas in July 2010 these numbers had dropped to 23,937 and 19,552 respectively.On the other hand, the amounts needed to buy a pickup truck on the mentioned dates were 25,352 and 14,545 kg of steer and 22,500 and 11,881 kg of calf [43].Therefore, with a scenario of good cattle prices ahead for the coming years, it is advantageous to now make investments and adopt technology so that, from the production standpoint, cattle farms are provided with a more solid platform for their growth.
A high-impact factor for economic results in production models is the relationship between steer sale price and calf purchase price.With a buying/selling ratio exceeding 25-30%, as has occurred in 2010 (29.5%), it is convenient to add more kilograms to the animals at finishing stages, which would diminish the impact of the above ratio.However, the limitation to this higher weight per head is given by a lower sale price for heavier animals, which is directly related to the purchasing power of exporters.
Because pastoral finishing is more profitable that feedlot, in terms of gross margin per kg of meat sold, is expected that the number of pasture-finished cattle destined for slaughter increase in the future.
International prices are excellent and there is an unfulfilled demand.Notwithstanding, export meat processing plants have a limited purchasing power due to the export-restricting policies.These policies have been wrong because the countries with high purchasing power consume the highest-value cuts.If it were possible to export these cuts at high prices, the lower value cuts could be destined for domestic consumption.
Argentina has gradually lost its place in the world markets.However, the country still has possibilities of recovery its position because the world will run short of meat due to deceleration of the production processes in Europe and a growing demand from countries like China and India.Russia needs increasing amounts of imported beef.The only reservoirs for production of red meat are in Latin America.This turned Brazil, despite not having high quality meat, into the major exporter worldwide, whilst Uruguay earned a place by exporting 63% of its production.The strategy is focused on the EU potential demand, on the important volumes imported into Russia and on the possibility of entering NAFTA, but it must be considered that the strategy for the next decade is toward Japan and Korea.
At the XVIII Meat World Congress held in Buenos Aires in September 2010, it was stated that food production will increase strongly over the next years and that the Argentina beefproducing sector has the necessary technology to improve efficiency and increase cattle stock.Nonetheless, some of the challenges facing the Argentina meat chain are the expansion of agriculture at the expense of grazing land devoted to cattle farming and the need to set up a sustainable system including all facets: economic, social, health and animal welfare.The future of the meat market of Mercosur has the challenge to coordinate the combat of FMD disease and remove the barriers for enhancing production [27], highlighting the possibility and strength it represents for Argentina to be close to being an FMD-free country without vaccination.
At global scale, raising awareness, compromise, joint action, cooperation, a long term vision, predictability and equity are some of the concepts that will determine the magnitude of the change and its success.Argentina will have to take the challenge, to not miss opportunities, to be part of the change and become established as a major player in supplying high quality meat to the world [27].
While all links in the chain should be adjusted to increase meat production, it is evident that production, and rearing within it, is the limitation to be solved.Increased calf production will have to come from improved production efficiency of the already existing herd.It is likely that the cattle area continues to decrease, but this should not be viewed as an obstacle to the sector's growth.
In brief, the displacement of cattle population to marginal lands and reduction of stock numbers are some of the changes in beef cattle production occurred over the last decade.Specific policies are needed to increase the cattle production in view of this new frame of situation.
November 2005, a rise from 5 to 15% in export duties on beef cuts • February 2006, creation of the Export Operations Register (ROE) • March 2006, banning of beef exports for 180 days, except Hilton cuts • May 2006, restriction of exports in the period June-November 2006 to 40% of the volume exported in the same period in 2005 • November 2006, restriction of monthly exports in the period December 2006-May 2007 to 50% of the average monthly volume exported in the period January-December 2005 • May 2008, restriction of exports to 540,000 tons per year

Table 2 .
Cattle population per capita in some of the main beef exporting countries in 2010 [21]umption, 68.3 kg per capita, and 2010 the lowest, 56.3 kg per capita (Table4).These figures contrast with the historical maximum recorded in 1956, with 100.8 kg per capita[21].

Table 3 .
Argentina's cattle extraction rate over the period 2001-2010

Table 4 .
Per capita beef meat apparent consumption in Argentina over the period 2001-2010

Table 6 .
The mean values were US$ 0.71 and 0.54 for pastoral finishing and feedlot, respectively.
[27]ce: Own preparation based on[27]1 Cow-calf typical area (Cuenca del Salado, Buenos Aires Province)2Western area of Buenos Aires Province 3 Area 1: Central Southern Córdoba Province; Area 2: Semiarid La Pampa and San Luis Provinces 4 Hotel: Rent structure and "know-how" offering cattle fattening services; Own: freelance entrepreneur; March and July: calf supply is higher in March than in July suppl.= supplementation

Table 6 .
Gross margin (US$) and meat production for some cattle production systems in June 2010

Table 7
) over the period 2001-2009 concurs with the cited historic value, even though in the years 2001, 2005 and 2006 there were values above that average, but always favoring the calf over the steer.The increased calf-steer ratio in 2010 begins to be a hint of the price ratio that followed later, until exceeding 40%.As of 2010, the highest rise in price for the calf compared to the steer can be explained by a lower supply of the former.

Table 8 .
Table 10illustrates the evolution of cows stock over the study period and its territorial distribution by zone.Thus, the aforementioned is reinforced by the cow loss in the country that occurred between 2007 and 2010, which amounted to 3,883,266 cows, with the provinces losing the highest number of cows being Buenos Aires and La Pampa, both making up 63.4% of the total loss (2,460,086 cows).Cattle displacement by zones over the period2002-2010 (million head) [10]rable conditions as result of increased international prices and lower worldwide supply because of animal health problems in some of the major beef exporting countries.Source: Own preparation based on[10]

Table 9 .
Calf-cow ratio by zones and Provinces in 2003 and 2010 -1 in 2010.Other supplying countries are Brazil, Uruguay, Paraguay, USA, Canada, Australia and New Zealand.Beef cuts included in the quota are rump and loin, strip loin, rump, tender loin, silver side, top side and knuckle.The 25,639 tons of Hilton cuts exported in 2010 did not fulfill the quota allotted for that year.

Table 10 .
Beef cow stock by zones over the period 2002-2010 (million head)

Table 12 .
Cattle meat exports by product category and their value over the period 2001-2010