South American Real Estate News

The Banning of Argentine Beef: Past, Present, and Future

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Argentina, one of the world’s largest beef exporters, banned beef exports for 30 days on May 31, 2021. A similar 180-day ban occurred in 2006 and came with disastrous consequences for the cattle industry. With modern challenges like the COVID-19 pandemic already contributing to supply chain disruption, there are concerns that this ban may result in a repeat of history.

Located in Latin America, Argentina has made a name for itself with its high-quality steak, boasting one of the world’s highest consumption of beef per capita. Because of the country’s prowess in the meat industry, it exports much to other countries. In 2020, Argentina was the world’s fifth-largest beef exporter, with China and Hong Kong accounting for two-thirds of the country’s beef exports.

However, though Argentina has always been known for its steaks, a beef export ban in 2006 enacted by President Néstor Kirchner created many challenges for the cattle industry that spanned the next decade.

Because beef is a staple in the Argentine diet, the 2006 Argentine restriction of beef exports was a measure intended to keep domestic prices low against rising inflation. However, this measure, and subsequent restrictions, were counterproductive. As a result, Argentina fell from being the world’s 3rd largest beef exporter, exporting 700,000 tons in 2005, to 11th place in 2014, exporting just 200,000 tons of beef. The export restrictions disincentivized farmers to raise cattle, which decreased supply and raised domestic prices. This led to further restrictions, which ultimately resulted in a significantly weakened beef market. It was not until over 10 years later that beef exports recovered to their pre-ban levels.

To summarize the series of policy regulations, the 2006 restriction of beef exports for 180 days was followed by a regulation to export only domestic surplus. These restrictions covered all cuts of beef, including those not generally consumed domestically. The effect of these broad restrictions was a decade-long decline of Argentine beef exports. From 2007 to 2012, Argentina also saw a decline in the cattle herd of 10 million cows, which combined with inflation, contributed to a 300% rise in domestic cattle prices. Policy restrictions intended to keep domestic prices low ultimately had the opposite effect.

Historically, restrictions on exports have proven ineffective in decreasing domestic prices. Furthermore, these restrictions have curbed international demand for Argentine beef. As Argentine farmers were no longer able to sell to large international players like China and Hong Kong, buyers in these countries instead diverted purchases to other suppliers, such as the U.S. Restrictions such as these also prevent supply chains from organizing in an efficient, cost-effective manner, such as separating Argentine beef cuts for the domestic market from internationally preferred cuts.

The history of Argentine beef export restriction teaches us that policy restrictions intended to bolster a domestic industry may wreak havoc instead. As restrictions tighten in 2021, we may expect similar effects as the beef ban contributes to disrupted global supply chains. Agricultural market expertise is critical to design policies that create their intended impact.

Source: Quarterra

References:

  1. Hirtzer, M. (2021, May 21). Bloomberg.com. https://www.bloomberg.com/news/newsletters/2021-05-21/supply-chains-latest-argentina-s-beef-export-ban-to-stoke-steak-prices.
  2. Mosler, W. (2021, May 26). Argentina’s Temporary Ban on Beef Exports has Potential Market Impacts. American Farm Bureau Federation – The Voice of Agriculture. https://www.fb.org/market-intel/argentinas-temporary-ban-on-beef-exports-has-potential-market-impacts.
  3. Rossini, G., Arancibia, R. G., & Guiguet, E. D. (2017, January 16). Argentine government policies: impacts on the beef sector. Agricultural and Food Economics. https://agrifoodecon.springeropen.com/articles/10.1186/s40100-016-0070-9.
  4. Wikimedia Foundation. (2020, June 13). 2006 Argentine restriction of beef exports. Wikipedia. https://en.wikipedia.org/wiki/2006_Argentine_restriction_of_beef_exports.

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