Many European beef importers are reliant on sourcing beef from Argentina. Under the General Agreement on Tariffs and Trade significant access was given to Argentine beef in the EU, which gave Argentina a quota of 28,000 metric tonnes of high quality bone-in and boneless cuts out of its total tariff rate quota of 59,100 mt. Most of the imported beef goes to Germany.
Europe has a shortage of beef due to rising consumption and bans on UK beef due to BSE. The EU ban of UK beef is due to end this summer after 10 years, possibly helping to make up for the shortage from Argentina and keeping prices under control.
In what some consider a extraordinary move Argentine President Nestor Kirchner last week said the six-month ban on most beef exports would help the country fight rising inflation and escalating food prices. The ban took effect on Friday.
Kirchner said the ban is a way to protect Argentinians from export-driven price hikes. He expects increased domestic supplies will reduce prices, which rose by 20 per cent in 2005, according to media reports.
Cattle slaughter numbers and beef production in the EU are forecast to increase in 2006, because of the end of the over-thirty-month scheme in the UK, which is expected to make about half a million extra cattle born after 1 August 1996 available for human consumption.
The influx of new supplies is forecast to mainly displace UK beef imports from Ireland, which in turn will displace beef imports to the EU continent mainly from Brazil, according to a recent report by the EU's food and drink association.
The EU ban on beef from parts of Brazil, in response to the outbreak of foot-and-mouth Disease (FMD), is expected to push this transition, and keep EU cattle and beef markets firm.
EU cattle prices have reached record prices towards the end of 2005 as a result of the tight market situation. This has led to a slight decrease in beef consumption in 2005. Beef consumption is forecast to increase again in 2006.
A tight domestic supply and a steady demand are projected to keep beef prices at a relatively high level, attracting more imports entering at full duty, notably from South America, the association stated.
Argentina has been an important player in the world beef market for many years, despite recent setbacks due to food-and-mouth disease. Argentina ranks fourth in its share of total world beef exports at 7.36 per cent, following Australia at 21.95 per cent, the European Union at 19.79 per cent, and the US at 14.63 per cent, according to figures from the Food and Agricultural Policy Research Institute (FAPRI).
EU imports from Brazil and Argentina, the two main EU suppliers of food and drink products, resumed their increase in 2004, after stagnation in 2003. Together, the two countries account for one-fifth of total EU food and drink imports. EU companies imported €3.7 billion worth of food and drink products from Argentina in 2004, or about nine per cent of the total.
Beef exports from Argentina surged to €1.09 billion last year from €684 million in 2004.
The discovery last year of foot-and-mouth disease on ranches in the northern province of Corrientes led to a EU ban on beef from the region. The foot-and-mouth outbreak was discovered less than three months after Kirchner decided to increase Argentina's tax on beef exports to 15 per cent from five per cent and to cancel rebates of other taxes for meat exporters.
He made the 18 November tax changes as domestic beef prices soared when slaughterhouses reduced supplies to the domestic market to meet export demand.
The major Argentine beef export product includes quarter, chilled cut, frozen cut, manufacturing grade, cooked and frozen, and corned beef.
In 1997 the United States allowed access of 20,000 mt Argentine fresh and frozen beef after Argentina met US sanitary requirements for uncooked beef.
|Destinations and origins of EU-25 food and drink products (€ million), 2004|
|Total extra-EU||45,153||100%||Total extra-EU||40,706||100%|
Figures from Eurostat and compiled by the CIAA.