The most important challenge for Argentina’s livestock and meat chain is to achieve an abundant supply of steers of more than 450 kg as soon as possible in order to start up a virtuous circle and complete the goal of the entire sector; that is to say, exportation.
The present production structure guarantees an adequate meat supply to the consumer at prices relatively affordable in comparison to those of alternative meats. Nevertheless, it is not a sustainable framework for a country that needs steady growth.
The transformation of livestock into meat puts our sector in one of the major generators of genuine employment because of intensive labor and the lack of imported inputs. The meat is 100% Argentina origin, and, therefore, creates a positive figure in our currency balance.
The livestock recomposition has been done at a slow but steady pace, having achieved to more than 53 million of cattle heads, and leaving behind the scarcity of a 47 million of the last decade. We could say that the recomposition is more the result of retention than the reproductive efficiency, emphasizing on the big absence of a large steer herd. We have to consider that we are approaching to 2 million of heads of steers when the historic figure is of 4 million heads per year.
The positive stage has been more the result of the expectations of our farmers that from specific incentives. The devaluation in the Argentina currency, the derogation of the exportation license system and the removal of export duties were very positive signals that helped to end a period better forgotten. After many years of suffering harmful intervention policies, farmers are enjoying the passion to work under a more business-friendly environment.
Considering that this sector enjoys an almost perfect competition, which has practically never received subsidies, it has built its efficiency on the fertility of its lands and the more than 100-year “livestock farmer expertise”. Being self-sufficient and under the signals of a supply and demand of a free market, does not mean that public actions should be dismissed. It is imperative that public policies are intelligently designed in order to speed up the inertia of a complete program of steady growth.
The development of a heavyweight steer program with immediate results should not be built with good intentions and future expectations. It requires of a financing program that can make use of all the available financial tools, like trusts, forward contracts, warrants and futures market.
To breed a heavyweight steer is a public policy that needs as always an initial “punch”. Clear signals are essential for a long cycle process and the use of the instruments in existence is the best guarantee for a fast implementation.
The livestock forward contract is an instrument of more than 100-year in existence in Argentina but it was legally documented under an institutional framework by the Bolsa de Comercio de Rosario only three years ago. The Livestock Forward Contract became into a valuable financing instrument for different actors in the sector. The biggest value of a Livestock Forward Contract is the possibility to be endorsed in order to get financing, in such a way that a breeder can commit himself to breed a heavy weight steer.
Banco Nación is a public bank that has been working, from its own foundation, into financing the agricultural sector with active credit policies at affordable interest rates, or even subsidized interest rates. The livestock business is essentially a big financial business extended for a prolonged period of time, which was fully used as such only by the feed-lot systems as well as by some of the supply and demand intermediaries.
It does not exist a more equitable way to accompany the development process of a heavyweight steer that betting to the breeder and its raising, accompanying those that devote more time with its heads. This is the weakest link of the chain, but it is also the one who can guarantee its existence, since the time when he frees the bull to the rodeo, accompanies all the gestation and weaning phases, and starts a responsible new rebirths.