Paraguay Beef and Cattle Report
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Paraguay Beef Exports are Booming
Paraguay beef production for 2015 is projected at a record high 550,000 tons, carcass weight equivalent (cwe). This is the result of a consistent and constant increase in beef production since the mid-2000’s after Paraguay was first able to control Foot and Mouth Disease (FMD)
Paraguayan beef production for 2015 is projected at a record high 550,000 tons, carcass weight equivalent (cwe). This is the result of a consistent and constant increase in beef production since the mid-2000’s after Paraguay was first able to control Foot and Mouth Disease (FMD). This key factor has positioned Paraguay as one of the world’s leading beef suppliers, ranking 8th in 2013. The sector has been experiencing large investment at the farm and processing levels, and it is expected to continue that way in the future.
Low costs of production, low taxes, low farm prices (although this has changed dramatically in the past years) and high cattle prices have encouraged vast investment from Paraguayans and from many foreigners, especially cattlemen from the region. Investments in the sector have paid off with both good operating returns and strong real estate gains. In recent years, the rural area has since increased income through substantial advances in beef production with the adoption of high productive pastures and the incorporation of higher quality genetics.
In addition, the significant expansion in crop production, particularly soybeans has added to increased earnings. Paraguay’s cattle herd is estimated at 14.5 million head in 2014 and projected at a record 15 million head for 2015. There are more than 140,000 ranches, of which 5,000 are large and 135,000 small producers. Almost 90 percent of the producers have between 1-100 head of cattle.
Approximately 65 percent of the herd (10 million head) is in hands of operations which have at least 500 head or more. Ranches are distributed in some 30 million hectares, of which only 16-18 percent is cultivated pastures. The rest are natural pastures and native forest.
The region east of the Paraguay River, which cuts across the country from north to south, holds about 60 percent of the total herd and is the most developed region, where most of the cropping takes place. In this area, there is competition for the use of land due to the expansion of agriculture over pastures. Cattle production in this area is more intensive and is more efficient than that of the Chaco region (Western area) which has a more extensive production system.
There is a lot of investment going on nowadays in the Chaco area but infrastructure is very limited, requiring huge investments in basic services. Paraguay’s cattle sector has been growing at 4-6 percent annually in the past few years. However, in 2014 production is expected closer to three percent due to the negative impact of higher than normal rainfall in the first semester of 2014.
This caused serious flooding of commercial breeding operations especially in ranches close to main rivers and in the south of the country, resulting in greater cattle losses than normal. On one hand, this increased the number of losses, but on the other, the condition of the pastures in the country was excellent and cattle gained more weight than what they normally do.
About 50 percent of the current herd are Brangus and Brafords, 35 percent are “Brazilian cattle” (Brahman and Nelore) and 15 percent other breeds (including Santa Gertrudis, Senepol, Limousin). The quality of the local herd has improved considerably in the past several years, with a strong incorporation of Angus and Hereford blood. Contacts indicate that roughly 10 percent of the herd is artificially inseminated, high for world standards.
Paraguay’s calf crop in 2015 is projected at about 3 million head. Paraguay’s average weaning ratio ranges between 48-52 percent, very low compared to its neighbors. This is a problem which also represents a great opportunity as most of the solution could come through the improvement of herd management by implementing low cost tools. However, it will take time to have most producers in Paraguay increase efficiency. Much of the herd expansion in the past years has come through the increase in the number of cattle and not as a result of a more efficient herd.
There are leading commercial breeders which are very efficient, with weaning ratios of over 80 percent. There continues to be a significant number of calves which cross the border from northern Argentina as there is a considerable price differential between feeder cattle in Formosa province and Paraguay. Calves in the Argentine side currently cost almost half the price than what they cost in Paraguay.
The price of feeder cattle nowadays in Paraguay is US$1.80 per live kilo. JBS, the Brazilian meat company which owns two plants in Paraguay, recently announced the construction of a US$100 million dollar plant in the northeastern part of the country. It will begin operation in late 2015 or early 2016. Paraguay has 12 large slaughter plants, and 16 plants prepared for export.
There are 7 plants in hands of Brazilian capital and 3 plants are owned by Mennonite cooperatives. Most of these plants are in good condition as they are periodically inspected by the sanitary services of the countries to which they ship to. Export plants slaughtered 1.6 million head in 2013, the highest ever. Cows represented 36 percent of the slaughter and weighed on average 216 kilos cwe, and steers and bulls represented the balance with an average weight of 250 kilos cwe. Some 50 small slaughter plants in the greater Asuncion city process cattle marketed in close-by auctions.
The beef of these operations is distributed locally. In 2013 these markets sold almost 200,000 head, of which 55 percent were cows and the balance steers and bulls. Cattle sold in these auctions are significantly lighter than that processed by export plants. There is a significant portion of cattle slaughtered in Paraguay in small slaughter plants throughout the interior of the country and on-farm slaughter. Although very difficult to estimate, contacts indicate that it roughly ranges between 400,000 and 600,000 head a year. Paraguay is considered by the OIE (the World Organization for Animal Health) as being free of Foot and Mouth Disease with vaccination and having a negligible risk to BSE (mad cow disease).
The last outbreaks of FMD were in September 2011 and January 2012. Since then, no other case has been reported. Most markets which Paraguay normally sells to are currently fully reopened, with the exception of the EU which, after a recent inspection, is expected to resume imports any time soon. One of Paraguay’s cattle/beef sector strengths is the good joint work between the official animal health service and the private sector. The U.S. market continues to be closed to Paraguayan beef due to FMD concerns.
APHIS recently conducted a risk assessment in Paraguay. Paraguay has two traceability systems which are demanded by two of their three main foreign buyers: the EU and Chile. In the case of the EU, the local Rural Association reports that approximately 650 producers have 1.5 million head of cattle under the SITRAP program. The producers’ association is working hard to increase significantly the number of cattle traced. In the case of cattle for the Chilean market, these have to follow a registration process.
There are currently some 1100 operations and 4 million head under this system. The Eastern part of Paraguay has a zero deforestation law, while the western region has strong limitations on the amount of land that can be deforested, having to leave some 25-50 percent with forest. However, in this area there are 14 million hectares of native forest and some 5 million hectares could be used for cattle production.
This is the area where Paraguay plans to expand cattle production by 50 percent allowing exports to reach 600,000 tons by early 2020, becoming the world’s 5th largest beef exporter. It is calculated that more than $3 billion in investment will be needed to meet this goal. Land prices in the past ten years have gone from US$20 per hectare to US$600-700 per hectare. Although a lot has being made in the past several years, a lot remains to be done, especially related to roads and general infrastructure.
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