Argentina ranchers turn to China amid credit drought

Exports of beef from Argentina to the world’s second-largest economy have multiplied, as farmers tap Chinese demand for meat to help pay their bills as access to credit has dried up. (Reuters)
Updated 17 July 2019

Argentina ranchers turn to China amid credit drought

  • Exports of beef from Argentina to the world’s second-largest economy have multiplied, with shipments in the first five months of the year to Chinese ports representing 72 percent of Argentina’s total 180,000 tons of beef exports, according to CICCRA
  • Tight monetary policy and high interest rates squeeze farming sector

BUENOS AIRES: Argentina’s world-famous ranchers are culling their breeding cows at the highest rate in 30 years and tapping Chinese demand for meat to help pay their bills as access to credit has dried up for farmers in South American’s No. 2 economy.
The trend underscores how Argentina’s tight monetary policy and high interest rates hovering around 60 percent are squeezing the sector, which relies on up-front investment to maintain valuable cow herds and rearing calves over several years to maturity.
“The farmers, with no real source of financing, are now looking for liquidity through these cow sales,” said Carlos Achetoni, president of the industry association Argentine Agrarian Federation (FAA).
Argentina’s meat industry chamber CICCRA said in the first half of 2019 females represented 50.1 percent of slaughtered animals, the highest level in the past three decades and well above the maximum sustainable rate considered to be around 43 percent.
This trend could cut the herd by up to 400,000 head of cattle by 2020 from a total of around 53 million in March.
“It’s a survival decision,” said Miguel Schiaritti, president of CICCRA, who said ranchers were having to think short-term and get rid of their assets because they could not borrow at current rates.
“For ranchers the cow is the machine to produce calves. It’s as if someone who manufactures bolts sold the machine which makes the bolts to finance themselves and pay their expenses.”
Farmers said that Chinese demand was a silver lining, ensuring that these sales were at least proving lucrative.
Exports of beef from Argentina to the world’s second-largest economy have multiplied, with shipments in the first five months of the year to Chinese ports representing 72 percent of Argentina’s total 180,000 tons of beef exports, according to CICCRA.
China mainly demands cheaper cuts of beef from female cows — which better suit local cuisine more focused on shared dishes than prime cuts of steak — which has boosted the price of the category by 88 percent versus a year ago to an average of 43 pesos ($1.01) per live kilo in Argentina’s main livestock markets.
Farmers sell the cows to local slaughterhouses, which in turn ship the meat to global buyers including in China.
Carlos Iannizzotto, president of Argentina’s association of rural producers CONINAGRO, said unusual “sky-high” prices from China helped, though the core issue was still farmers’ finances.

FASTFACT

China acounted for 72 percent of Argentine beef exports in the first five months of the year.

“China exports mean at least producers don’t have to give the cows away, they can get a good price. That’s a blessing,” added Schiaritti.
Officials at industry bodies added a recent, landmark deal between the South American Mercosur trade bloc and the EU — that included a larger quota for meat exports — would do little for now to resolve the crisis facing Argentine ranchers.
The bloc made up of Argentina, Brazil, Uruguay and Paraguay, struck a free-trade agreement in June after two decades of talks, providing for the entry into the EU of an annual quota of 99,000 tons of beef at a 7.5 percent tariff.
“The agreement is just pain relief really,” said Schiaritti, whose CICCRA chamber has said that because of the limited volume — shared between the four countries — the export boost from the deal would not be that major.
FAA President Achetoni added that ito benefit from the deal, ranchers first needed authorities at home to solve the issue of access to credit, otherwise farmers would continue to be squeezed and the cattle herd would decline.
Argentina’s high benchmark interest rate, set by daily central bank auctions, has helped to bolster the local peso currency after it tumbled last year, but choked off access to credit, especially for small businesses and farmers.
“Before we can even really talk about getting into international markets, we need to resolve the issues of taxation and access to finance (at home),” Achetoni said.


US removes some Chinese furniture, modems from planned 10% tariffs

Updated 17 August 2019

US removes some Chinese furniture, modems from planned 10% tariffs

  • US President Donald Trump on Tuesday delayed more than half of the proposed tariffs until December
  • The $114 billion retail furniture industry has been among the sector’s hardest hit with price increases due to Trump’s tariffs

WASHINGTON: The Trump administration is sparing some Chinese-made household furniture, baby items and Internet modems and routers from its next rounds of 10 percent tariffs, it said on Friday.
The US Trade Representative’s office released a complete list of the items that were removed from $300 billion in tariffs scheduled to go into effect on Sept. 1 and Dec. 15, some of which had already been hit with 25 percent tariffs.
Trump on Tuesday delayed more than half of the proposed tariffs until December, saying it would help shield businesses and consumers from the US-China trade war fallout during the Christmas selling season.
The new list of 44 categories of spared imports, worth about $7.8 billion according to US Census Bureau data, also includes some chemical compounds used in the manufacture of plastics. Reuters previously reported that bibles and religious texts would be spared from the tariff list.
Modems and routers made in China were part of a $200 billion list of products hit with tariffs last September that have since been raised to 25 percent. Friday’s exclusion would avoid a further 10 percent hike as Trump imposes tariffs on Sept. 1 to products in the same broad customs category, including smart watches, smart speakers and Bluetooth headphones.
The bulk of the items removed from the tariff list were furniture products, including wooden- and metal-framed chairs and those made of plastics. Some of these were previously hit with tariffs as part of broader furniture categories.
Baby-related furniture items also were spared, including toddler beds, bassinets, cradles, strollers and children’s seats.
The $114 billion retail furniture industry has been among the sector’s hardest hit with price increases due to Trump’s tariffs, which rose to 25 percent in May.
The US Labor Department said on Tuesday that the price index for household furnishings rose 0.4 percent in July, marking its third consecutive monthly increase and contributing to broad-based growth in consumer prices during July.