Drought in Argentina Led to Increased Beef Output And Depressed Prices and Export Values in Jan-Feb 2023

The “La Niña” meteorological phenomenon, which lasted for almost three years and caused severe drought in many areas of Argentina, was declared over in mid-March. Its ending coincided with the end of a severe heatwave in the country. According to Argentina’s National Weather Service (SNM) rain is expected to be normal or slightly higher than normal in most of the country from April through June.

Among the various effects of the dry conditions was poor pasture, which in turn led Argentinian beef processors to increase cattle slaughter below the desired sizes and weights. This caused a temporary increase in beef supply in the country, which led to depressed prices. While domestic prices through H2 2022 and early 2023 still grew annually by double-digit rates, this growth pace was much lower than the average inflation rampant in the country. The real decline in prices can be seen better through export prices, which were, in January and February 2023, at multi-year lows.

Source: Tridge and INDEC

The increase in beef production led to soaring exports in terms of volume, but the price decline led to a double-digit fall in export value. According to INDEC data, exports of Argentine fresh/chilled or frozen beef, excluding offal, totaled 102.9 thousand mt in Jan-Feb 2023. This represents an increase of 19% year-over-year. Most of the volume (76%) went to China, to which export volume grew 22% YoY. Nonetheless, in terms of value, total exports declined by 13% YoY, as the average unitary value fell 27% YoY to USD 4.10/kg.

Despite the increase in cattle slaughter and beef production during early 2023, as the rains start to come, beef production will decline as processors enter into a herd rebuilding phase. Accordingly, beef production and exports are expected to decline in the full 2023 compared to the previous year. According to its latest Livestock and Products Semi-annual Report, the USDA was expecting Argentine beef production to decline YoY by 140 thousand mt to 3 million thousand mt this 2023. This will reduce exports by 45 thousand mt to a total of 780 thousand mt.

Exported volume in March is expected to continue showing an annual increase, and this might be exacerbated by the temporary suspension of Brazilian beef exports to China, which started in late February and ended in late March. Nonetheless, if pasture conditions improve, as expected in the upcoming months, total beef supply in Argentina will decline, along with its exports. Yet, this will also result in a recovery in prices along the way, which will mitigate the losses in exported volume through a higher export value.