China’s Dominance and Argentina’s Meat Export Challenges in a Competitive Market: A Look into Livestock Sector

Employees of a meat processing plant work with beef, in Buenos Aires (Argentina), in a file photograph. EFE/Juan Ignacio Roncoroni

The livestock sector continues to suffer the consequences of a completely atypical year. The drought and the consequent shortage of pastures forced the acceleration of the departure of animals from the fields, which led to an increase in production that generated a strong oversupply in the domestic market during the first half of 2023 and lower prices in real terms. -The situation began to reverse in the second half of the year and would take a sharp turn after the recent rains.

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The scenario pressured meatpackers to intensify their external sales: they found refuge in an insatiable Chinese market, which increasingly buys more meat. According to a report from the Rosario Stock Exchange, so far this year, China’s imports of beef abroad amount to just over two million tons, which marks a new record in purchases. exceeding by 5% the volume imported in the same period of 2022.

But in terms of prices, the September figure (USD 4,924 per ton) is 27.5% lower than the values ​​recorded a year ago and only exceeds the floors reached at the end of 2020, in the midst of the pandemic. In this scenario of high demand in volume, but at low prices, Argentina is completely exposed.

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“According to our own output statistics published by Indec, so far this year (January-September) China is taking more than three quarters of our beef exports, having even reached 83% participation in May”, they pointed out from the entity.

It is a relationship in which the negotiating cards are very unbalanced, since while China absorbs 76% of the volume of beef exported by Argentina, the country supplies it with less than half of what the Asian giant exports. buy from Brazil. And the sums of what it buys from Uruguay, Australia and the United States exceed what Argentina provides. Ergo, Argentine meat exporters depend on Chinese buyers much more than they depend on them.

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From January to September of this year, China’s import data show Brazil supplying 41% of the market, followed by Argentina with 20%, Uruguay 10%, Australia 8% and the United States 6% of the total. your purchases.

In that same period – although computing output statistics that, depending on the origin, may have a lag of between 20 and 60 days until reaching the destination – Argentina is the supplier with the highest concentration in this market with a 76% share. In this order, Uruguay follows with 56%, Brazil this year with 49%, Australia with 20% and the US with a 15% concentration. That is, Argentina is the country most “played” with the Chinese market.

“Without a doubt, this year the meat market is under pressure from the strong competition exerted by two major players such as Brazil and Australia; the latter contributing nearly 300,000 additional tons of meat to the external market,” they said from the Rosario Stock Exchange.

“At the same time, Argentina is not immune to this situation either. In a year in which a strong livestock supply as a result of the dry season is combined locally with a domestic market without the capacity to absorb additional production volumes, the exportable balance must inevitably find a destination,” they added.

Lower livestock production is expected in the next season. Reuters

In short, within a market characterized by oversupply, China is the “heavy weight” that defines the fate of each producer. In the case of Argentina, the Asian country is absorbing more than 75% of its export beef, but is paying much less than in previous seasons.

According to the United States Department of Agriculture (USDA), by 2024 global beef exports would increase by 1% to 11.9 million tons. Again, for both Brazil and Australia the organization projects a significant increase in production, which would largely be transferred to exports. This generates strong competition for Argentina, which will put even more pressure on values.

At this point, the Rosario Stock Exchange raised two unknowns that could lead to a key opportunity. “Unlike what has been seen this year, it is about testing the market’s reaction to the lower livestock supply expected for the next cycle and, on the other hand, in this context, determining how assertive we manage to be, working strategically towards a greater diversification of our markets,” they noted.

2023-10-29 18:26:00
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