El Ieral estimated that in the third week of August the average price reached $3,100 per kilo, an increase of 55 to 60% compared to the start of the month (AP Photo/Natacha Pisarenko)
Although there is a week left until the end of August, a study on the very strong increase that the price of beef has had so far this month calculated that the product will contribute between 3.2 and 4 percentage points to the monthly inflation that it estimates by 12 percent.
It may interest you: Dollar, inflation, level of activity: how the year will end, according to local economic consultants and large banks in the world
Although official statistics that specify the increase in bovine meat are not yet known, taking into account the values of 18 cuts monitored by the Institute for the Promotion of Argentine Beef (IPCVA) Juan Manuel Garzón, a specialist in agricultural issues, and Franco Artusso, researchers from the Ieral of the Mediterranean Foundation, estimated that in the third week the average price reached $3,100 per kilo, an increase of 55 to 60% compared to the beginning of the month.
This is the largest monthly increase of this key product in the consumption basket of Argentine families in the last 18 years, the authors point out.
It may interest you: For the IMF, inflation in 2023 will be at least 120% and it required the government to accumulate reserves of USD 8,000 million in four months
The rise in the price of beef contributed to a large extent to the acceleration of retail inflation in August, especially since the STEP, the 22% devaluation of the official dollar the day after and the uncertainty about the future generated by the electoral result . The expectations of a new devaluation jump generate effects that feed back into the inflationary problem by generating production stoppages, preventive price adjustments and retraction of products on shelves, Garzón and Artusso point out, to which are added the increasing government restrictions on imports.
The expectation of a new devaluation jump feeds back the problem by generating production stoppages, preventive price adjustments and retraction of products in gondola
Beef alone represents 6% of the typical consumption basket of the Argentine family, a proportion that increases to 8% if the average expenditure on animal proteins is considered, which also includes the consumption of other meats, cold cuts , eggs and processed hamburgers, the report says.
It may interest you: One week after the devaluation, what happened with the reduction of the exchange rate gap and the accumulation of reserves
Taking these proportions and estimating an increase in retail prices of this group of products of between 40 and 50%, the authors estimate the 3.2 to 4 incidence points in inflation for the month. The increase in meat in August would thus be not only the largest nominal increase, but also the largest real increase (discounted inflation), since 2005.
The evolution of real farm prices throughout the year, by category of animals. The increase was stronger in the last 2 months than it was in the entire year
In addition, analyzing the meat production and value chain, they highlight the impact of the large increase in the price of live animals, since between the third week of July and the third week of August, the price of the steer in the Cañuelas Market (ex Liniers) rose 70 percent. In any case, it should be noted that in recent days the price of the farm in Cañuela fell between 10 and 12% compared to the peak of almost $1,000 per kilo that the average kilo of live cattle had reached.
The factors behind the increase in farm prices are not so clear. Among the hypotheses are a possible seasonal imbalance between the supply and demand of animals destined for export, the need to rebuild feedlot margins (affected by the price of corn and other factors), and a very rapid and complete transfer of the devaluation post STEP to farm prices due to retraction and/or less availability of animals.
Beef alone represents 6% of the typical consumption basket of the Argentine family, a proportion that increases to 8% if the average cost of animal protein is considered
On how you can track the prices of farm and meat, the report is very cautious. “The response of the consumer must be monitored, if it validates the new values or, on the contrary, a retraction of consumption is observed and, on the side of the exporters, if the businesses continue to be profitable at the new prices, with an official dollar of $350 through October.
Prudence is certainly advisable when predicting the ups and downs of this market. Just over a month ago, an analysis of the same type had risked that the price of meat could remain relatively stable until the end of the year, helping to “slow down the rate of inflation.”
Regarding the latter, the work indicates: “note that the prices in dollars of local finance have remained well above the values of the region (Brazil, Paraguay, Uruguay), which limits the competitiveness of exporters and puts some ceiling to the values for the next weeks”.
In the opposite direction, factors play such as the high “awareness” of economic agents, the high devaluation expectations that remain, the shortage of reserves worsens and the red trade balance continues, which, according to the data already reported by INDEC, it was in deficit in 6 of the first 7 months of the year. In this scenario, the calculation is that as the year progresses, the lack of dollars that the farm usually contributes will be more noticeable (due to the drought) and that they will not appear “no matter how much more soybean dollars or agricultural dollars are implemented” , the authors note.
The price of the steer is closely related to the price of meat in gondola
Regarding the price of meat, the report calculates that, if prices are maintained during the last week of the month, the consumer price will average around $2,700 per kilo, an increase of 40% nominal and 25% real (discounting inflation). “Note that the fact of averaging the values observed in August (which is the INDEC method) softens the increase; if the end-to-end price variation for the month of August is taken, the increase would be higher, closer to 55%-60%”, I remember the report.
In turn, the authors affirm that the recent increase must also be related to what happened (or what did not happen) in the previous stage, in which the price of meat fell 14% in real terms. “They were 5 months in which meat prices ran behind general inflation,” says a passage from the report.
Until the third week of July the price of the steer in the Cañuelas Market (formerly Liniers) was $500 per kilo on foot, but in the third week of August it reached $856, 70% more, with a strong boost in the week post-STEP. “If the price is maintained during the last week of the month, the steer will be averaging $750 per kilo in August, an increase of 48% nominal and 32% real compared to July,” says the report.
Where there seems to be no cause for increases is in the sending of animals to slaughter, which remained at very high levels REUTERS/Agustin Marcarian
The authors cite possible causes for such a strong increase in the herd, such as a combination of seasonal factors, a lower flow of certain categories of animals (particularly low-quality, discarded cows), basically due to the sustained level of exports of this type of meat to China. It is true, say Garzón and Artusso, that it is a segmented market, because the domestic market consumes better quality meat, “there are many communicating vessels and an imbalance in one of the two submarkets automatically leads to an imbalance in the other.”
In fact, the authors speculate, “the beginning of the process of increasing the price of cattle could have been generated in the revaluation of cattle destined for China, which later derived in an adjustment of relative prices in all categories.”
Where there does not seem to be any reason for the increase is in the data on shipments of animals to slaughter, which remained very sustained. In July 2023, some 178,000 more heads were slaughtered in the country than in the same month 2022 (+16% year-on-year) and in the first 7 months of the year, the flow of animals sent to slaughter was 13% higher than last year, with what which “the market continues to be very well supplied, at least in perspective to what happened in 2022”.
This is the highest monthly increase of this key product in the consumption basket of Argentine families in the last 18 years
Regarding August, in the first 22 days some 84,700 head entered the Cañuelas concentrator market, at an average of 3,850 per day. If, in the 7 days remaining with operations until the end of the month, only 1,000 heads per day entered, the total revenue for the month would reach those of August 2022 and if they entered some 2,000 heads per day, they would be similar to the income of last month (July ), for which reason –the authors emphasize– “it is difficult to explain the recent escalation of livestock prices on the side of the total supply of animals that are being sent to the market”.
On the other hand, there could be a mismatch between the demands and offers of the different categories of animals (by case, due to the effect of Chinese demand) that eventually triggered an adjustment and was maintained and deepened with the post-PASO devaluation. This, in turn, “may have generated an excess of ‘preventive’ demand, to ‘cover’ ‘strategic’ delays in sending animals to slaughter, a process fed back as prices continued to rise,” says the report.
The last answer will be given by consumers, if they validate the increases or reduce consumption, and exporters, if the businesses continue to be profitable or not at the new prices.
Another link is that of the feedlots, since the expectation of a possible lower flow of animals in the near future can also put pressure on present prices.
The last response will be that of internal consumers to the new values, if it validates them or, on the contrary, reduces consumption and, on the side of exporters, if businesses continue to be profitable at the new prices.
The truth is that in a raging August, meat will have added between 3.2 and 4 points to already double-digit monthly inflation, a very worrying level even by Argentina’s inflationary standards.
Keep reading:
For the IMF, inflation in 2023 will be at least 120% and it required the government to accumulate reserves of USD 8,000 million in four months. IMF technicians, the fragility of the Argentine economic situation increased due to electoral uncertainty
2023-08-26 03:50:29
#price #meat #close #August #highest #monthly #increase #years
