South American Real Estate News

No Bull: The Trade of Cattle Genetics in the Mercosur countries

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Since the earliest days of livestock domestication, the people who raise cattle have been striving to increase their productivity. Over the millennia, this mission has included adopting improved management practices and incorporating new technologies. But perhaps no shift has had such a profound impact as the active use of genetics to achieve the expression of certain sought-after characteristics in these bovines.

Strategies for improving animal genetics revolve around the selection of sires and dams which pass desired traits on to their offspring. Traditionally this goal was pursued through the selection and intentional pairing of a bull and a cow. However, with the emergence of reproductive technologies ranging from artificial insemination to embryo transfers, and even cloning, the geographical limits to the sharing of genetic material have fallen away.

According to data from the United Nations, over $430 million USD worth of bovine semen was exported in 2018. The trade of cattle genetics is truly a global business with dozens of countries participating in the market. As a major cattle producer, Mercosur (comprised of Argentina, Brazil, Paraguay, and Uruguay) participates heavily in the global market for cattle genetics. Furthermore, geographical particularities and the challenges that are likely to rise in the future suggest that Mercosur is likely to become an even more appealing market for cattle genetics in the coming years.

Mercosur

The Mercosur countries are major producers of both meat and milk, and as such have a large cattle populations. Cattle farmers in Mercosur have been actively developing their genetics for years and generally speaking, the region is considered to have very high-quality genetic material in the cattle herd. However, as the push continues to ever increase efficiency and productivity, producers have long sought to incorporate genetic material from other nations’ herds, as well.

In 2018, the Mercosur countries imported $44.2 million USD worth of bovine semen. This amount has grown significantly in recent years, nearly tripling over the last two decades. The vast majority of product comes from North America, with the United States and Canada boasting 60.2% and 22.2% share in 2018.

Other countries, notably New Zealand, the Netherlands, and France, are important suppliers, as well.

In the same period, exports of cattle semen from Mercosur have also grown. However, totaling $5.3 million USD in 2018, the amount pales in comparison to imports. Nearly two thirds of exports by Mercosur countries are destined for other countries within Mercosur – capitalizing both on demand and the lack of tariff barriers that exist within the trade bloc.

Within Mercosur, the different countries carry different weights with respect to the trade in cattle genetics. Unsurprisingly, Brazil is the largest importer in value terms, followed by Argentina then Uruguay and Paraguay.

Because of the manner in which the trade statistics are classified, it can be difficult to determine exactly what percentage of the trade in cattle genetics is destined for the beef industry versus the dairy industry. Nevertheless, by comparing different data sets, we can infer that the vast majority (over 90%) of cattle genetics imported into Mercosur are destined for the dairy industry. This conclusion squares with data from the National Association of Animal Breeders which show that approximately 86% of exports of US cattle genetics in 2018 pertained to the dairy industry.

Looking Forward

Looking ahead, there will only be increased pressure on cattle farmers in Mercosur to increase their efficiencies. These pressures will arise from several sources including:

  • Emissions Reductions – As the conversation swirls around climate change, farmers will be increasingly challenged to produce the same amount of product from fewer cattle. Genetics can play a key role here with respect to production capabilities of individual animals, as well as maturity rates and growth percentages.
  • Climate Adaptability – With global weather patterns shifting, it will become increasingly important that farmers have animals capable of tolerating climatic swings from year to year. The incorporation of new genetic material can help farmers develop a more robust cattle herd that can thrive even in challenging weather conditions. 
  • Natural Resource Availability – Similarly, as environmental pressures mount, producers will be keen to target those traits which allow them to fully utilize their land and other natural resources. Farmers will want to maximize the conversion percentages of their herd, so that the pasture and concentrates that they use to nourish their animals turns into an optimal amount of finished product.
  • Profitability – It is no secret that farmers across the globe are under increased economic strain. Improving livestock efficiencies can be a key tool in helping producers extract higher margins from their businesses and ultimately improve their solvency and financial stability
  • Consumer Preferences – Consumers are fickle, and their demands are likely to shift. Incorporating specific genetics enables farmers to produce agricultural products that best meet the needs of consumers.

Of course, genetics will not be a silver bullet to resolve these issues, and it will be necessary for producers to continue improving their management techniques, utilizing all the tools at their disposal. However, selecting for specific characteristics that allow both cattle and their owners to prosper will be an important strategy for producers to implement. As such, in the near term, it is likely that Mercosur cattlemen will continue to seek genetic improvements from outside their own borders.

Challenges

Even as increasing the import of cattle genetics into Mercosur seems to carry great promise for cattle producers in the region, there are certain risks which need to be considered and mitigated, where possible.

Firstly, some real, relevant concerns have been raised recently about a lack of genetic diversity within the cattle herd. Geneticists from Pennsylvania State University identified that nearly all of commercial Holstein dairy cattle in the United States are descended from just two bulls. The finding startled the industry and galvanized the sector’s understanding of the fragility of the genetic code. There is almost certainly more genetic diversity in the Mercosur cattle herd since reproductive technologies are less utilized and because geographically traditional breeds still have an influence. Nonetheless, going forward it will be critical for this issue to be managed in a thoughtful way.

Any time animal products are moved from country to country concerns arise around sanitary risks and requirements. This vulnerability is particularly front of mind at the moment, as the world’s health authorities grapple to contain the coronavirus. As the global flow of bovine genetic material grows, it will be important to find the balance between regulations that allow for the healthy development of commerce while simultaneously insulating the markets from these risks.

The importation of cattle genetics in Mercosur will also be heavily affected by the prevailing macroeconomic environment. When currencies in Mercosur are weak relative to the US dollar, importing genetic material from abroad will be relatively expensive for domestic farmers. In addition, the risk of economic shocks and meddling government policy always has the potential to derail growth and investment in agricultural production in Mercosur.

Conclusion

Improving the quality of the cattle herd by incorporating genetic material is a strategy that has long proven effective. Cattlemen in Mercosur, in particular, have leveraged imported genetic material from North America, Europe, and Oceania in increasing amounts for years in order to increase the productivity of their cattle.

Given the challenges that lie ahead, Mercosur’s need for imported genetic material is only expected to grow in the coming years. Even in spite of the challenges that exist in the background, the Mercosur market will provide an attractive opportunity for exporters of bovine genetic material into the future.

Source: Quarterra News & Views MONICA GANLEY

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