Articles

Argentina’s Meat Trade: A Cut Above the Rest

August 31, 2021

During 2020 in Argentina, around 2 million workers were employed in the beef, chicken and pork industry, producing over 5.7 million tons in meat, of which close to 20% makes its way to 112 countries worldwide [1]. From June 2020 to May 2021, Argentina exported close to 929 thousand tons of beef for a value close to 2,700 million dollars [2]. This made Argentina the world’s fifth largest exporter of beef. 

The country is a small player in the pork trade, with only 18,000 tons shipped abroad. Most of the meat is China-bound: about two-thirds of all Argentine beef, chicken and pork exports are shipped there. In May 2021, beef exports to China accounted for approximately 83% of all shipments [3]. Other major destinations include the US, EU, South Africa, Chile, Israel, Canada and Russia [4]. 

Luckily, the flow of Argentine meat did not suffer a huge slowdown in the midst of COVID-19: About 870,000 tons of it shipped to China alone in 2020, matching 2019 exports despite the global pandemic. 

Exports in 2021 are being influenced by four main factors: Chinese demand, the post COVID-19 market overall, the efforts of the Argentine government to control domestic inflation and the evolution of Argentina’s cattle/beef supply chain in the post-pandemic environment. 

The EU has been the second most important destination for Argentine beef this year, primarily under the Hilton Quota*. Of the approximately 231.5 million dollars entered by exports of beef in May 2021, about 23.4% originated from chilled boneless cuts, including the Hilton cuts [5]. The recent quota limiting Argentine beef exports to 50% of the average monthly volumes exported from July to December 2020 does not apply to high-quality cuts destined for the EU under the Hilton Quota Agreement and the 481 Quota, as well as the 20,000 tonne quota to the US and 800 tonnes to Colombia.

In 2021, the poultry industry hopes to increase exports to the UK and move more chicken meat to satisfy growing demand in Mexico, Canada and Chile. They already see stronger appetite in key growth markets like the US – expected to fill the current tariff rate quota of 20,000 tons by mid-summer – and Mexico, which ended a 20-year shipment hiatus imposed after a foot-and-mouth disease outbreak in Argentina in 2001.



Defending against Covid-19 and Inflation while Positioning for Meat Trade Growth

Since the pandemic began, large poultry companies are operating plants with 20% fewer personnel while keeping production steady. A USDA report said they are also weathering high export/VAT taxes and high labor/electricity costs that undercut competitiveness and curtails export growth. Also, animal diseases have in the past disrupted poultry, beef and other livestock markets, and can do so again during the coming decade. Finally, how much changing consumer preferences – such as the rise in vegetarian or vegan lifestyles and climate change activism/legislation – will leave their mark is difficult to assess. 

The Argentine government estimates that for every 100,000 tons of meat exported translates into 10,000 jobs [6], helping position the industry for medium-term growth. Exports are expected to continue flourishing, stimulated mostly by China [7]. Indeed, in the first four months of 2021, 28.8% of the beef produced in Argentina was exported with 76.6% of it going to China [8]. However, at the same time the Argentine government is determined to tackle domestic inflation which, Reuters reports, is expected to approach 50% during 2021, and will limit exports of some beef cuts for the next six months to control domestic food price inflation [9]. 

Traditionally, the beef sector was segmented between large companies focused on exports and small to medium plants in the local market, but rising export demand has seen many of the medium-scale plants entering the export market as well. Going forward, Argentine meat exporters will focus on expanding sales in the wide variety of niche markets found in the US, such as kosher, grain-fed, grass-fed and organic.

In the sixth month of 2021, 34,775 tons of beef were sent abroad, which represents 25 thousand tons less compared to the same month of 2020, when they had reached 60 thousand and represent a fall of 41%. Fortunately, the government is expected to make the beef trade more flexible by the end of August. This will help exports to resume their upward trend. 

For now, Argentine meat exports show promise, poised to grow a robust 17% through 2025 and boost exportable surplus almost fourfold until then. Global beef production will continue to grow over 2020-2029, particularly in Argentina, Brazil and the United States with developing countries projected to account for 81% of the additional beef produced by 2029, when compared to the base period. The majority of this expansion should occur in Argentina (despite the export tax on beef) and countries such as Brazil, China, Pakistan, Sub-Saharan Africa, and Turkey [10].

To assist Argentine businesses in overcoming the post-covid crisis, Stenn launched "Made in Argentina!", a special fast financing program for Argentine meat manufacturers and exporters. The program is supported by a pool of world-known investors with a reserve of $500m USD, and intends to help companies unfreeze working capital and avoid deferred payments with pending invoices.

 

Stenn – Fueling Export Growth Via Innovative Invoice Financing 

Smaller Argentinian beef and other exporters are increasingly trading without relying on the financial clout of banks. Instead they are turning to fintech financiers like Stenn – especially since, as the WTO recently reported, banks reject a good 50% of financing requests stemming from SMEs. 

Whether supporting SME Argentine beef demand in China, Mexican furniture exports to the US, or regional coffee grower shipments to Europe, Stenn is committed to filling the financing gap, by providing invoice finance solutions to release working capital where it is most needed. 

By maximizing the promise of digitalization, automation, and blockchain technology, it can help SMEs throughout Latin America bypass antiquated banks and profit from the lower costs, reduced transaction speed, reliability, safety and flexibility Stenn offers – all with no hassles!

 

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Sources:

[1]  El Agrario,Argentina, 2020

[2] IPCVA, Argentina, May 2021

[3] IPCVA, Argentina, May 2021

[4] La Nación, Argentina, Feb 2021

[5] IPCVA, Argentina, May 2021

[6] La Nación, Argentina, July 2020

[7] fleischwirtschaft.com, July 2020

[8] OECD, 2019

[9] Just Food.com, June 2021

[10] OECD, 2019

* The ‘Hilton Quota’ is another name for the High Quality Beef (HQB) Tariff Rate Quota, whereby almost 67,000 tons of carcass weight equivalent can be imported into the EU at a 20% tariff.

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