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14/07/2007 | Biofuel boom drives cattle, gauchos from Argentina's Pampas

Shane Romig

The traditional scene of gauchos on horseback roaming across Argentina's cattle-specked Pampas is rapidly becoming a rarity.

 

The country's beef sector is in the midst of monumental changes in response to high grain prices driven by biofuel demand and government price controls on meat.  

Ranchers are liquidating herds or driving the animals to new pastures in the semitropical north to convert lands in the traditional farm belt for the growing of soybeans or other grains.  

"Per hectare, soybeans are three times more profitable than raising cattle," said Kiko Nazaar Anchorena, a farmer from Entre Rios Province.  

Nazaar, who raised cattle on his lands for years has switched to grains and rented scrublands in the northern province of Corrientes to hold his herds.  

In Entre Rios, about 40% of the traditional pasture lands were switched to grains recently, "and this is going to continue happening," Nazaar said. Small and medium-scale ranchers are selling off their herds and renting out their land for soy cultivation, he said.  

While the movement is most dramatic in Entre Rios, the changes are sweeping across the agricultural heartland known as the Pampas due to surging grain prices and land values.  

In the central farm belt, land is selling at between $7,000 and $10,000 per hectare, compared with an average of $3,500 six years ago, according to local daily La Nacion. The cost of renting land for grain cultivation rose between 10% and 15% over the last year.  

Cattle were displaced by grain on some 1.2 million hectares across Argentina last year, according to Agripac Consultores Analyst Pablo Adreani. He said he sees almost a million more hectares being converted from beef to grain this year.  

Some ranchers are simply selling their herds for slaughter and renting out their lands to grain growers.  

"We're in a period of liquidation of stocks," said the president of the beef chamber, or Ciccra, Miguel Schiaritti. "In two years, there's going to be a shortage of beef supplies."  

It generally takes two years for the effects of such shifts to be felt because of the life cycle of cattle. It would take just as long to rebuild stocks.  

During the first quarter of this year, 45.6% of the cattle slaughtered were females, the highest rate in 10 years, according to Ciccra. The percentage of female cows slaughtered must be below 43.5% to maintain herd sizes, Schiaritti said.  

Argentines have the world's highest per capita rate of meat consumption, with each individual consuming about 65 kilograms per year. With beef prices comprising 7% of the nation's consumer price index, they are a hot political issue.

The government has intervened in the sector repeatedly over the past year to reign in surging meat prices. Exports were banned last March in an effort to increase domestic supply. When exports were reopened a couple of months later, they were limited to about 70% of 2005 levels. The government has also forced producers and butchers into price accords to keep down consumer prices.  

All these pressures are changing the face of beef production in Argentina, and the future is likely to see herds shift to feedlots and newly opened lands not suitable for grain production.  

Substantial investments are being made in the northeast areas of the country, primarily Chaco and Formosa provinces, Schiaritti said. Ranchers are buying land and spending money on cattle infrastructure, he said. Newly cleared land is being seeded with African varieties of grasses that prosper in the semitropical climate in the area.  

"In two or three years we're going to see very high beef production coming from that area," Schiaritti said.   Environmentalists are raising the alarm, however, over the growing pace of deforestation spurred by the shift.   Between 2002 and 2006, more than 1.1 million hectares of forests were cleared for agricultural development across the country, according to a report by Greenpeace, citing data from the Environment Ministry.  

But not all of Argentina's cows are likely to move to the tropics, with growing biofuel production seen spurring a greater shift to feedlots. The large amount of soymeal and corn residue from biofuel production will provide a cheap source of animal feed, Schiaritti said.  

Biofuel production is expected to explode over the next years, with the government providing tax incentives and mandating a 5% content of biodiesel or ethanol in the nation's fuel by 2010. Argentina also hopes to export biofuel to the European Union, which has mandated a 5.7% biofuel blend by 2010. Argentina will likely be producing 1.5 million to 2 million tons of soy-based fuel within two to three years, Miguel Almada, the director of Argentina's biofuel program at the Agriculture Secretariat, said recently.  

While the shift to feedlots will rile those who laud the superior quality of Argentina's grass-fed, free-range beef, a significant share of the nation's cattle already spend the last months of their life fattening up in feedlots. About a quarter of the animals slaughtered each year have gone through a feedlot, according to the animal feed chamber, or Caena

Dow Jones International News (Estados Unidos)

 


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