The Impact of Devaluation on Meat Prices and the Role of the Corn Dollar: A Look into the Recent Increases in Argentina

The increases had started before the PASO, the devaluation accelerated them Reuters

First it was the corn dollar that made the fattening of calves in feedlots more expensive. Then, the lack of steers and finally, the devaluation shock. All these factors caused the price of the farm and the cuts, in gondolas and butcher shops, to skyrocket this week. If the consumer does not validate prices, something may drop, but the floor will continue to be higher than before.

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After 7 days of the PASO elections, the week of cattle raising showed a 35% increase in prices of the cattle in the Mercado Agroganadero (MAG), in response to the 22% devaluation that the Government applied since Monday to the official price of the dollar. But in reality, the increase in meat prices completed a process of rearrangement of the value of the hacienda that had begun in early August, before the primaries, basically caused by the so-called “corn dollar” that came into force at the end of July, made the production of animal protein more expensive and affected the cattle ranch by 27 percent.

So far in August, the average kilo of beef has jumped from $1,100 to $1,400, and then to $1,900

Thus, so far in August, the average kilo of half beef jumped from $1,100 to $1,400, and then to $1,900, according to market sources consulted by Infobae. Those values ​​then moved to counters and shelves in the course of the post-PASO week, especially between Monday and Wednesday, with a slight drop on Friday.

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Leonardo Rafael, president of the Argentine Chamber of Slaughterers and Suppliers (Camya), a sector responsible for 70% of the supply of domestic beef consumption, pointed out that, despite the 45% increase registered from mid-July to the present, the market The retailer is well supplied and we will have to see how the price bounces back in the butcher shops. “The ceiling price of the ranch is formed, it will decompress a bit and it will reach a floor to find a plateau in the business,” he explained.

A true fortune in the flesh EFE/Cézaro De Luca/File

“Until Wednesday, the market was well supplied at the price prior to the devaluation. But since the purchase from butchers is day by day, between Thursday and Friday last, the sale to butcher shops fell between 20 and 30%, compared to the same days of the week prior to the PASO”, said Rafael. Bad weather -he clarified- means that the consuming public, regardless of prices, goes less to butcher shops.

Beyond the impact of the devaluation and the fact that the economic actors in Argentina, not only those of the bovine meat chain, already have the gymnastics of adjusting their prices when the dollar moves, the evolution of the values ​​of the farm and of beef to the public had been rising below the consumer price index (CPI) measured by INDEC. Annualized to last July, inflation was 115%, while consumer meat had grown 70% and farms 60% in 12 months.

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“In August, issues outside the market began to play a role,” says Daniel Urcía, vice president of the Argentine Beef Promotion Institute (Ipcva) and the Federation of Argentine Regional Refrigeration Industries (Fifra), an entity that groups refrigerators from Córdoba , Santa Fe, Entre Rios and Santiago del Estero. “First it was the ‘corn dollar’, a situation that led the feedlots to resign profits, and then the devaluation, which added another external seasoning to the sector and generated a general recomposition of prices in the market”, he explained.

Annualized to last July, inflation was 115%, while consumer meat had grown 70% and farms 60% in 12 months.

“When there is a product that has a significant backlog and you recompose prices, it is most probable that the recomposition will recover the backlog, overcome that backlog and then – if the public does not validate the new prices – that went up more than expected, make those prices go back a bit”, as happened on Friday at the MAG.

Likewise, Urcía pointed out that there would not be another price adjustment until next year. “That depends on market fluctuations, available finances, the country’s economic conditions and how much certainty the administration generates in the production cycle. The previous updates were long in time, ”he recalled.

The lack of some categories puts pressure on the price of the ranch REUTERS/Agustin Marcarian

Asked about the factors that generated the recomposition, Urcía contextualized the situation. “We come from an extraordinary drought, there was practically no rearing, which increased the availability of light animals. We can see this in the slaughter with increases of 12 and 16%, in heifers and young steers (300 kg), and a strong increase of more than 20% in the adult cow”, he stated.

There is a good amount of closed-up property that will be coming out finished, for domestic consumption, until late October. But there is a shortage of steers of 5 to 6% compared to the previous year

As for the immediate future, “there is a good amount of property locked up that will be coming out finished, for domestic consumption, until late October.” But there is a shortage of steers of 5 to 6% compared to the previous year, in the first 7 months of the year, compared to the same period of 2023, due to the drought effect, ”said Urcía. The lack of steers causes a shortage to export. “We are talking about biological cycles. Adding 100 kilos of meat to an animal is 100 days. The heaviest steer of 400 kilos is the one that is missing and complicates the export market and not the consumer market. Sometimes they try to make tricks to increase the internal offer without knowledge of how the sector works”, said Urcía.

The gadgets are nothing more than the threat of closure of beef exports that the Government announced this week and then dismissed. Of course: he called the exporting refrigerators, with Mario Ravettino, in his role as president of the ABC Consortium, to negotiate an agreement, not yet defined, and establish a volume of tons at “agreed” prices in the supermarket chains. A tonnage that does not reach 10% of consumption and not to butcher shops, which concentrate at least 80% of internal consumption of beef.

Beyond the international discredit that this causes Argentina in the world beef market -which recognizes its quality, but also penalizes the country’s non-compliances due to extemporaneous government measures- the truth is that it was a new attempt to further intervene in the meat market, with officials who decide on what they do not know, making “football for the tribune”, in a game that is played again from time to time and whose final result is known.

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2023-08-20 13:31:09
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