MercoPress. South Atlantic News Agency

Brazilian beef producer wants to sell abattoirs and reduce Argentine operations

Ban on beef exports and price caps have turned grasslands into soy bean plantations

Brazil’s JBS, the world's top beef producer is trying to sell three of its Argentine plants due to government policies that have depleted cattle stocks and supply and hurt profits, a trade group said on Tuesday.

“It will take four to five years to recover the volume of cattle needed to meet domestic and export demand,” said Miguel Schiariti, president of Argentina's Meat Industry and Trade Chamber (CICCRA). He said the business would remain unprofitable for several years because of government policies.

JBS, based in Sao Paulo, Brazil, told Brazilian regulators on Sunday that it may sell some of its eight Argentine slaughterhouses because of “scarce livestock and export restrictions”.

Argentine President Cristina Fernandez de Kirchner administration has imposed export quotas on beef and some grains to guarantee domestic supplies and tame prices.

A source based in Buenos Aires who is close to the potential sale said on Tuesday that JBS was trying to sell three plants that were “nearly paralyzed” because rising cattle prices had reduced profits.

The source said this decision was made “in desperation,” although he said the company does not want to leave Argentina altogether but would rather reduce its holdings in the country until market conditions improve. The source asked not to be named because the person is not authorized to speak to the press.

Brazilian newspaper O Estado de S. Paulo, citing unnamed sources, reported on Tuesday that potential buyers would probably be discouraged by the extent of Argentine government restrictions, which have included export curbs and price caps.

Estado also reported that Argentine Domestic Commerce Secretary Guillermo Moreno had offered local industry leaders state loans to finance the purchase of JBS' units.

”Moreno wants to find someone (to buy the units). He's offering state loans,“ Schiariti said. ”But there's nothing concrete. These are just promises.“

Argentina is traditionally a leading beef exporter but shipments have been disrupted because of government regulations and have fallen behind neighbouring Uruguay in the ranking of top world exporters.

Increasing numbers of Argentine ranchers are turning fields over to more lucrative soybeans, pushing up beef prices and triggering state intervention to limit price increases of the nation's favourite food.

The annual per capita consumption fell nearly 17% in the first half of this year to 56.7 kilograms, leaving Uruguay as the world’s top beef per capita consumer with over 58 kilos.

Cattle numbers in Argentina according to the National Service for Animal Health and Agrifood Quality have fallen 15% between March 2008 and March 2010, from 57.5 million head to 48.9 million. In 1977 the national herd was 61 million head.

Furthermore this year Argentina was unable to fill its portion of the ”Hilton quota” of high-quality beef accepted on preferential terms by the European Union since 1979.

Its allocation is 28,000 tonnes, the largest slice of the total quota of 60,000 tonnes, but this year it only delivered 18,000 tonnes because the necessary export permits to Europe were delayed, according to industry sources.