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South America’s meat packers battle sales slump

A downturn in beef orders is forcing meat packers in South American ranching countries to sell shipments off cheap and make workers take early holidays.

Early this year, things looked rosy for beef exporters in Argentina, Uruguay and Paraguay, but with Russian importers struggling to get credit and Europeans cutting down on expensive steaks, sales have stalled and prices have fallen.

Demand “is almost zero, there are virtually no deals being done because they’re not ordering,” said Fernando Herrera, president of Argentina’s Association of Beef Producers and Exporters, or APEA.

Major export

Some Argentine firms had been forced to renegotiate previously agreed prices and even sell unwanted containers off at low prices amid a slump in Russian purchases, he said.

Demand has also slowed from the European Union, meaning the highest-quality filet mignon intended for export is being sold for less at Argentine supermarkets, he added.

Industry leaders in the southern cone say export prices have fallen by as much as 25 per cent since October, and few expect an imminent recovery, especially from Russia – a key market for all three South American neighbours.

Uruguay and Paraguay’s beef exports are still at record levels for the year, but October’s downturn is causing alarm because of the importance of beef in their small economies.

Paraguay’s Beef Chamber (CPC) says October’s sales abroad have fallen between 45 and 50 per cent due to an almost total lack of interest from Russia and Chile, which account for 80 per cent of the country’s exports.

“The most worrying thing is that it seems people have stopped eating beef,” said Maris Llorens, president of the Frigomerc meat plant.

“The outlook for 2009 looks pretty uncertain to me, we’re just praying that they finish up whatever stocks they have left and start buying again,” she told Reuters in Asuncion.

Meat plants were closing down for weeks at a time or giving workers holidays to avoid job losses, she said.

A similar situation is being played out in Argentina, the world’s No. 4 beef exporter, although some trade union leaders have blamed the slowdown on government export controls aimed at taming rising beef prices in the local market.

Argentina’s sluggish exports in recent years have been good news for its small neighbour, Uruguay, whose beef exports have surged 55 per cent in the first 10 months of the year to a record of nearly $1.1 billion (all figures US$).

Uruguay’s sales volume rose slightly in October, but prices fell about 13 per cent and will likely slip further this month, industry analysts say.

“Suddenly gone”

Russia, Uruguay’s top buyer, cut its imports to $9.3 million

last month – less than half what it spent in August, according to the National Beef Institute, or INAC.

“Russia is generally very volatile in terms of demand… while it lasted the prices were excellent, and now it’s suddenly gone,” said Rafael Tardaguila of Montevideo-based agricultural consulting firm, Blasina and Tardaguila.

“At the moment, there’s no sign that this near deadlock in the international market is going to come to an end,” he said.

Brazil, the world’s top beef supplier, has also seen sales to Russia fall.

Russian shipments dropped 42 per cent last month, according to the Agriculture Ministry, but Brazilian exporters are less dependent on Russia than their counterparts in neighbouring countries.

At Argentina’s biggest cattle market, prices have fallen steadily in recent weeks because meat plants are stocked.

An unexpected result of the fall in export demand has been lower steak prices at butcher shops in Argentina, where the government has angered ranchers with export curbs and price controls to drive down the cost of the nation’s favourite food.

“The objective of lower domestic prices has been achieved – not for a good reason but because of the collapse in world demand,” Herrera said.

– Additional reporting for Reuters by Conrado Hornos in Montevideo, Mariel Cristaldo in Asuncion and Roberto Samora in Sao Paulo

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