Livestock business: in feedlots the “numbers do not close” and there are initial losses of almost $ 13,000 per animal

Complicated moment goes through the business of corral fattening.

Bovine livestock is one of the most important economic sectors in Argentina, whose meat quality is recognized worldwide. Today there is a highly favorable international context for the activity, both due to high prices, as well as growing demand. However, at the local level and, despite being an exporting country, local production experiences different realities, beyond the impact that the decision of the national government to restrict shipments abroad may have had.

According to a report by the consulting firm AZ Group “Argentine production shows marked differences between activities”, especially between what is field rearing and fattening the animal, whether it is pastoralist or in corral. In fact, the latter is the one that has accumulated the most losses in recent times due to the increase in the price of animals to be fattened and of food, more precisely, corn.

Such is the case that the consultant’s meat market analyst, Diego Ponti, calculated that “The fattening to corral initially produces negative instantaneous results of $ 12,934 per animal, when it comes to carrying animals of 180 to 320 kilograms, due to the effects of the high cost of the calf and the ration”. If it is a question of fattening heavier animals and carrying them from 342 to 440 kilos, “the results are a little less negative”, calculating a loss of $ 8,400 per head.

The opposite case is what happens with the calf, which today is experiencing a considerable improvement in the price of the calf, an issue that complicates feedlots. According to the report, the light male reached an average value during October of $ 270 per kilo, which was 38% above the last six October and that “generates the best gross margin of the last 10 years, with $ 16,000 per hectare. , in a typical field of the Salado Basin. The current high winter prices are mainly a consequence of the lower seasonal availability of this category and the accelerated purchases of greenhouses seeking refuge of value for their working capital in the face of high inflation. Fat steer that is sold is replaced immediately with skinny animals ”, explained Ponti.

Consequences

Of course, these losses result in less occupation of the feedlots, which is where the bulk of the meat for domestic consumption comes from. And, as a direct consequence, the supply of food begins to falter and consumer prices begin to spiral. Such is the picture that the livestock consultant Victor Tonelli watch for the next few months.

As explained by the specialist, and as mentioned above, today the replacement costs of cattle are at very high levels, with a differential of more than 40% between the price of an animal to get fat with an already “fat” one that becomes slaughter, when “the reasonable thing is that this differential is located at 10% or 15%”. To this must be added the sale prices of the finished animal, whose market was intervened by the Government and the rise in the value of food.

Specialists assure that there is a very favorable international context for any producing and exporting country.
Specialists assure that there is a very favorable international context for any producing and exporting country.

This is why Tonelli assures that “today the feedlots cannot be filled. Nobody knowing this situation is going to assume a loss of this magnitude. When you start with an animal of almost $ 300 pesos per kilo to sell it for $ 220 or $ 230 and you are going to lose 80 kilos, it takes you to an emptying of the pens. The problem is that they have been losing money for two months, which guarantees that from December the price of meat will rise simply because the supply is going to fall and there is no way to solve it even if the government gets angry ”.

In addition, the expert observes that this situation is repeating itself, as it happened last October: “It is the same problem that we live now, which is repeated and it is that they do not give the numbers and instead of solving it or seeing how it is minimized, They close the exports that has nothing to do with the formation of the price in Argentina. We return to the same thing again: the basic problem has not been solved and that is that the numbers of the corral do not give, “he added.

International context

All this situation occurs in a very favorable international context for any producing and exporting country. According to Ponti, “the beef market is very demanding and with rising prices.” In fact, a particular issue is taking place: the supply of meat will only grow by 0.2% at the end of this year since the producing countries “are not in an expansionary phase and in addition, structurally, world production proves to be very inelastic due to institutional and climatic issues and also due to the limitations that arise to grow on new surfaces in a context where environmental issues are asserted ”.

At the same time, exports will increase 4.3% in the same year compared to the previous one and 3% in relation to the pre-pandemic situation in 2019, with a tendency to continue growing. In other words, according to what the specialist explained, there is a supply that cannot keep up with the growing demand and generates a market with firm prices that translate, for example, into USD 15,000 per ton for quota meat. Hilton (in November 2020 it had collapsed to USD 6,500) and USD 9,800 for the set of cuts of Quota 481. Lower-value meats also rose strongly: garrón and brazuelo are sold at USD 8,300 to China versus USD 5,000 in mid-2020.

In this sense, Ponti specified that the only factors that could threaten the horizon of firm prices for beef in the short and medium terms would be the arbitrary behavior of China in its acquisitions, renegotiating contracts again at lower prices, as it did in 2019 ; the resurgence of the COVID 19 pandemic, which brings back the openings arranged, a possibility that does not seem close, and inflation in Europe and the United States.

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Reference-www.infobae.com

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