Global Market Opportunities Drive Beef Production
Decisions in Argentina and Uruguay
Improvements to certification
programs and traceability programs have helped expand
beef exports from Argentina and Uruguay.
Michael
McConnell and Ken
Mathews, Jr.
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Argentina
and Uruguay are increasingly important
suppliers of beef in global markets.
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Keys
to both countries’ success in
international markets are certification
and traceability programs, which have
been improved in response to recent
cattle disease outbreaks.
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Grass-based
production systems and bans against
feeding meat and bone meal to cattle
have helped allay importers’ concerns
about bovine spongiform encephalopathy
(BSE). |
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| This
article is drawn from . . . |
| Beef
Production, Markets, and Trade in Argentina
and Uruguay: An Overview, by Kenneth
H. Mathews, Jr., and Monte Vandeveer, LDP-M-159-01,
USDA, Economic Research Service, September
2007.
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Over the past decade, export markets
have had a growing influence on the beef industries
in Argentina and Uruguay. Together, the two countries
provide 13-20 percent of U.S. beef imports, as well
as significant amounts to the European Union (EU).
Uruguay exports roughly 80 percent of its production
while Argentina is more oriented to meeting the
demands of its beef-loving domestic market. Exports
account for around 20 percent of its production.
In 2007, Argentina’s cattle
herd was estimated at 51.2 million head, compared
with Uruguay’s 12.1 million. Both countries
have suffered recent outbreaks of foot-and-mouth
disease (FMD) and are under pressure from their
major trading partners to control disease outbreaks.
The U.S. and the EU require beef export certification
(processing plants must meet protocols and sanitary
standards acceptable to each importer), and each
has its own beef import requirements. The need to
meet the demands of these markets has motivated
Argentine and Uruguayan beef producers to adopt
production practices designed to allay international
concerns about animal disease and residual growth
hormones in beef.
To address such concerns, Argentina
and Uruguay have implemented traceability systems
that identify the farm-of-origin and indicate whether
the animals have been in areas exposed to FMD. Both
countries promote their grass-fed beef production
as a “healthier” system, which, combined
with bans against feeding meat and bone meal to
cattle, reduces BSE concerns among importers. Export
markets are important to both countries, and their
beef industries are increasingly shaped by the demands
of foreign buyers.
Both Countries Free of BSE But
Wrestle With FMD
In May 2005, the World Animal
Health Organization (originally named the Office
International des Epizooties and still known by
its abbreviation, OIE) revised its guidelines on
countries’ exposure to and potential for spreading
BSE. Argentina and Uruguay remained in the lowest
(“negligible risk”) risk category. They
achieved BSE-free status through pasture-based cattle
and beef production technologies and bans on using
meat and bone meal (MBM), a high-protein material
rendered from animals, in animal feed. Argentina
and Uruguay, along with many other countries, imposed
bans on feeding MBM to cattle and other ruminants
in 1996, after the United Kingdom announced a possible
link between BSE and variant-Cruetzfeld-Jakob Disease
(vCJD) in humans. Infected MBM is thought to be
the vector for spreading BSE. In Argentina and Uruguay,
the ban against MBM in feed extends to all ruminant
livestock feed, including feed for cattle held in
feedlots, where the animals are fed rations containing
high levels of grains and proteins.
Unlike BSE, foot-and-mouth disease
has been an issue for nearly all South American
beef producers. OIE has issued guidelines for how
a country can achieve and maintain FMD-free status.
One country’s success at maintaining that
status can be influenced by neighboring countries’
disease-control efforts. In 2001, an outbreak of
FMD along the border shared by Argentina, Uruguay,
Paraguay, and Brazil resulted in the voluntary suspension
of beef exports from all of those countries.
An outbreak in 2000 cost Uruguay
its FMD-free status (held since 1995) from the OIE.
The regional FMD outbreak in 2001 further damaged
Uruguay’s trading status. Since 2001, however,
Uruguay has not had any new cases of FMD and is
currently classified “FMD-free with vaccination”
by the OIE. Uruguay was able to resume its beef
exports to the U.S. in 2003. Although USDA does
not consider Uruguay to be “FMD-free without
vaccination,” Uruguayan beef imports to the
United States are allowed under specific guidelines
established by the U.S. Government.
Argentina had another outbreak
in 2006 and is currently able to export only thermo-processed
beef (heated to a specific temperature for a specified
amount of time) to the United States. In addition,
importing nations’ FMD-based fears have prevented
Argentina from making inroads in major Asian markets.
In January 2007, USDA proposed recognizing the Patagonia
area of southern Argentina as FMD-free without vaccination,
but has yet to make a final ruling. Such recognition
would permit exports of raw and processed beef products
from this region to the United States. Patagonia
accounts for about 2 percent of Argentina’s
cattle.
Domestic Policies Respond To
Global Markets
At the same time that Argentina
and Uruguay were coping with FMD outbreaks, external
forces affected their economies as well. The impacts
of a steep devaluation of the Brazilian currency
(Real) in 1999 spilled over the borders, first to
Argentina and then to Uruguay, making all three
countries’ goods less competitive on the global
market. This was enough to push the export-reliant
Argentine and Uruguayan economies into recession.
The simultaneous internal shock of FMD was even
more difficult to address because of the broader
economic conditions in the region. Although the
two countries faced similar challenges, they chose
different paths to recovery.
Because Uruguay’s beef industry
was more export dependent, the industry was also
sensitive to trade interruptions related to disease
outbreaks. Uruguay’s domestic beef consumption
declined after the recession, and its beef production
and exports dropped significantly in 2001. Exports
expanded in 2002, but because of FMD, the U.S. did
not accept beef imports from Uruguay again until
2003. Since then, Uruguayan agricultural exports,
especially beef, have played a large role in the
country’s economic recovery. In 2005, beef
accounted for 22 percent of Uruguay’s total
export value.
The Uruguayan Government currently
intervenes minimally in the country’s beef
market. As the disease outbreaks subsided, the government
allowed market conditions to drive the recovery
of the beef sector. Domestic beef consumption began
a gradual rebound in 2006 and is expected to continue
increasing. Although well below its peak in the
late 1990s, Uruguayan per capita consumption re-mains
among the highest in the world. Uruguay’s
beef production in 2007 was projected to be more
than double its 2001 level, and beef exports more
than triple.
With exports accounting for 80
percent of Uruguay’s production in recent
years, the country’s beef industry and government
are oriented toward the world market. The Uruguayan
Government has recently reduced several domestic
taxes that affect beef. Uruguay has become an important
beef-exporting country, with Chile, Brazil, the
United Kingdom, Germany, and the U.S. among its
biggest customers for fresh/chilled beef. Uruguay
faces tariff-rate quotas in several of those importing
countries, including a 20,000-metric-ton (MT) quota
in the United States; 11,000 MT in Canada; and 6,300
MT under the Hilton beef quota, which limits the
import of high-quality fresh and frozen beef into
the EU.
The beef industry was less significant
in Argentina’s post-2001 economic recovery.
Monetary, fiscal, and exchange-rate policies, in
addition to strong commodity exports, were credited
for Argentina’s turnaround, which has since
seen the economy grow as much as 8 percent per year.
However, the strong growth has caused inflationary
concerns and prompted price-stabilizing policies.
Beef plays a major role in Argentine household budgets,
accounting for about 4.5 percent of the Argentine
inflation index. Thus, the beef industry is an important
factor in domestic policy. Measures such as export
taxes, minimum slaughter-weight restrictions, and
price controls have been used to ensure the supply
of beef meets domestic demand without raising prices.
In 2006, the Argentine Government limited beef exports
to 70 percent of the prior year’s exports,
and, in 2007, it set a monthly export quota of about
40,000 tons carcass-weight equivalent. While helping
stabilize price levels at home, these measures have
hurt Argentine beef producers’ ability to
trade in foreign markets.
Argentine Government policies
have had several unintended effects. Producers have
shifted from grazing cattle to growing grains and
soybeans, commodities for which policies have been
less disruptive in international markets. Along
with this acreage shift, cattle production is also
shifting into the northern areas of Argentina, away
from the more fertile, crop-friendly central regions.
These areas are more susceptible to new FMD outbreaks
because of the northern border. Overall, these policies
have caused Argentine beef producers to give up
foreign market share, much of which Uruguay, Brazil,
and Paraguay have seized. However, beef output in
Argentina has remained quite stable during these
years.
Traceability Aims To Protect
Animals and Improve Productivity
Animal traceability has become
a priority in both countries as a result of the
outbreaks of FMD and foreign customers’ demands
to know the sources of their food. Animal identification
systems help locate the source of an outbreak and
mitigate against further spread of the disease through
the isolation of key at-risk herds. Argentina and
Uruguay implemented mandatory national animal identification
systems, after having less formal systems in place
for several years. The animal identification programs
in place in both countries now make it possible
to track animals from birth to slaughter.
Before 2007, traceability in Argentina
was an informal system. Primarily through word-of-mouth
and based on the reputation of suppliers, the beef
industry was able to assure the retail and export
markets of the quality of beef final products. The
system was sufficient to maintain the confidence
of the Argentine domestic market, as well as that
of many of its foreign customers. But the programs
were inadequate to meet the needs of all foreign
buyers of cattle and beef. In 2007, Argentina instituted
a compulsory identification program, requiring that
all calves born after September 2007 carry official
tags. The entire herd is expected to be tagged by
2017.
Uruguay has a comprehensive national
animal identification program aimed at animal disease
control, quality beef production, and marketing.
A pilot program of animal identification, administered
by the government-created Division de Controlar
de Semovientes (DICOSE), was established in 1973.
The pilot program was designed to improve animal
health and fight against illegal smuggling. All
cattle operations in Uruguay were required to have
documentation on each animal in their herds. The
program required hide branding and documentation
each time an animal was bought, sold, or transported.
Copies of each transaction went to the buyer, seller,
local police stations, and the Ministry of Livestock,
Agriculture, and Fisheries. The DICOSE system made
Uruguay one of the first countries able to track
an animal to its origin and ensure that ranchers
and producers were complying with sanitary requirements.
In September 2006, Uruguay moved
to a mandatory system of two ear tags, one highly
visible and the other containing electronic information.
Cattle are tagged before they reach 6 months of
age or are moved from their farm of birth. Lost
tags are required to be replaced. These tags include
information on the individual animal, the farm from
which it originated, and its ownership and movement
history. While the Uruguayan Government currently
pays for tags, plans are for producers to assume
that cost in the future. The government plans to
have all herds registered and all cattle tagged
by 2010.
Beginning in 2010, the Uruguayan
Government will require traceability not only of
beef cattle from birth to slaughter, but also of
all cuts of beef back to their farm of origin. Currently
the individual cuts of meat can be traced back to
the final pen from which the animal came from, but
it is not possible to identify the specific animal
or its origins.
The planned second phase of this
system would allow carcasses to be tracked beyond
slaughter and would allow producers to obtain information
on the post-mortem performance of their cattle.
In addition to identifying and tracing animals in
the event of a disease outbreak or food-safety event,
producers could use this information to compare
the performance of their cattle with national averages.
As designed, the system would maintain producer
confidentiality. These programs focus on using technology
to better manage the beef sector and allow Uruguay
to maintain access to the export markets upon which
its beef industry depends.
Production Systems Promote Safe,
Healthy Beef Internationally
Uruguayan and Argentine beef cattle
are primarily grass-fed in pastures with high-quality
grasses, alfalfa, lotus, and clovers. Animals that
are finished in “confinement” are generally
placed in smaller pastures, and their diets are
supplemented with grains and forage, such as corn
silage. While North American-style grain feedlots
can be found in both countries, they are not common
because of the relatively high cost of grain-based
feed. Neither Argentina nor Uruguay permits feeding
or implanting artificial growth hormones or feeding
antibiotics as growth promotants—Uruguay banned
growth hormones in 1978; Argentina banned both in
2004.
As a result of these production
practices, Argentine and Uruguayan beef have a number
of characteristics attractive to customers. Grass-fed
cattle generally produce leaner meat, and pasture-based
production is typically seen as less harmful to
the environment than some other production technologies.
The bans against feeding or implanting artificial
hormones and feeding sub-therapeutic antibiotics
allow Argentine and Uruguayan beef to be imported
into the EU, a market generally closed to U.S. beef.
Global demand for beef products with these characteristics
continues to increase.
Certification is frequently part
of export verification processes imposed by importing
countries. Standards are often higher for exported
beef than for domestic beef, and plants that export
beef usually must be certified to ensure that they
comply with the importers’ veterinary, animal
health, and sanitation standards. Argentine and
Uruguayan beef-manufacturing facilities are modern
and clean, and those that export meet the conditions
established by export verification programs in the
United States, the EU, and other importing countries.
Sanitary sampling is conducted regularly in plants
to ensure the product reaches company standards
as well as domestic and international market demands.
Uruguay is able to certify that its beef processing
plants meet regulations put in place to allow fresh
and frozen meat to be exported to the United States,
despite its current status as FMD-free with vaccination.
Argentina’s thermo-processed beef meets the
export verification requirements of USDA’s
Food Safety and Inspection Service.
In addition, in 2004, USDA announced
that Uruguay’s certification program was “Process
Verified,” according to a USDA program that
validates marketing claims made by suppliers. In
this case, USDA verifies for U.S. consumers that
the “natural” label placed on Uruguayan
beef is consistent with U.S. criteria. “Natural”
means that a credible third party has certified
that the source is verified from ranch, to harvest,
to fabrication, and packing; no added hormones or
growth promotants were administered to the animal;
no sub-therapeutic antibiotics were administered
to the animal; no animal proteins were given to
the animal as feed; the animal was raised and fattened
on a grass-fed diet; and the animal was on open
range and never confined to a yard or feedlot.
Uruguay’s grass-fed production
system is internationally recognized as an independently
certified source of natural beef. The “Certified
Natural Meat Program of Uruguay” maintains
consumer confidence and differentiates Uruguayan
meat through certified compliance with international
protocols for animal production and industrial practices.
Uruguay is also in the process of obtaining certification
for organic beef production through EUREPGAP, a
private-sector certification body in Europe that
institutes standards addressing consumers’
concerns regarding product safety, environmental
impacts, and labor conditions throughout the supply
chain.
Beef Will Remain an Important
Industry for Trade in Uruguay and Argentina
Trade has differing roles in
Argentina and Uruguay and has affected policies
and programs related to each country’s livestock
and beef industries. Argentina’s policies
have not been as export- friendly as Uruguay’s,
due to beef’s role in Argentina’s
domestic economy. Enhanced traceability programs
will help both countries manage and mitigate disease
outbreaks, as well as meet the health and sanitary
standards of international customers.
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