The Rising Price of Beef: Increased Production and Oversupply in the Local Market

The Price of Beef Continues to Increase Below Inflation

The price of beef and the hacienda continues in a process of increases below inflation general of the country two months ago, and this trend is expected to continue, at least, until spring as a consequence of an increased production and oversupply of meat in the local market which responds to a premature shedding of animals destined for fattening pens and slaughter.

Beef Prices Rise at a Slower Rate than Inflation

According to the Institute for the Promotion of Argentine Beef (Ipcva), meat rose 1.9% in retail stores in May compared to 7.8% released by the Consumer Price Index (CPI) published by the National Institute of Statistics and Censuses (Indec), while the cumulative year of the product was 70% while the cost of living climbed 114% in the same period.

Consumer Finance Also Affected

In that same section, consumer finance had a 44% increase in its order price according to the Cañuelas Livestock Market Index (MAG).

Reasons for the Increase in Beef Prices

This phenomenon, according to specialists who spoke with Télam, has its genesis in the drought that affected our country during a large part of 2022 and the beginning of this year, in which the lack of rain combined with stretches in which there were extreme temperatures, forced producers to part with the animals because they did not have pastures and forage resources natural to feed them.

This led to the fattening pens or feedlots receiving revenue in advance and achieving record occupancy according to a report from the RosGan livestock market, thus ensuring a consistent supply of meat in the market and price stability at present and also for the coming months, predicted the experts consulted.

“Today we are seeing a greater supply of farm partly, forced by the drought situation which led to the confinement of lighter animals in quantity and in advance,” the vice president of IPCVA and the Federation of Argentine Regional Refrigeration Industries (Fifra), Daniel Urcía, told Télam.

Urcía stated that “That greater offer combined with the little purchasing power, leads to a supply of meat and even increases its consumption because of the competitive prices it has”.

For the business leader “until spring this is going to stay like this, because the level of replacement of the animals in the pens remained stable and that indicates that there will be stability until September”, an issue for which he maintained that the price “will continue to be delayed, because I do not think that July and August are months with price variations. It’s good news for the consumer, but it also indicates that the sector is losing capital,” he said.

For his part, livestock consultant Victor Tonelli assured that “there is a very strong delay” in prices that “the price of meat to the consumer continues to move further and further away from inflation and real costs, with which what it is doing is putting more pressure on the pot.”

“It is very clear that as long as the winter continues with little grass, which the producer cannot keep (the animals for breeding) and with the number of heads that are locked up in corrals – more than two million at the end of May – for now the supply is insured,” Tonelli said, although clarified that “when the grass returns, and that will be from October, there will be a change in the trend the liquidation will be stopped and a retention process will begin and That’s where prices will surely start to recover.”

In the same line, the President of the Chamber of Slaughterers and Suppliers (Camya), Leonardo Rafael affirmed that “the counter and the table of the Argentines are supplied at a logical level, with 50 kilos per capita. For two or three months, we are not going to have any variation in prices.”

“There will be a lot of fat cattle (animals ready for consumption) because we had a very strong dry season and they went directly to the feedlot. The market will be oversupplied” indicated the business leader, but warned that “Starting in October or November we are going to see significant increases. We may have a rearrangement of between 30% or 50%”, he estimated.

Tion between suppliers. However, this excess supply is being absorbed by a decrease in purchasing power, leading to lower prices compared to inflation rates.”

How does excess supply impact the relationship between PAA suppliers?

Excess supply occurs when there is a surplus of a particular product in the market, meaning that the quantity supplied is greater than the quantity demanded. This can have several impacts on the relationship between PAA (phenylacetic acid) suppliers.

1. Increased Competition: Excess supply leads to increased competition among PAA suppliers as they try to attract buyers and offload their excess inventory. Suppliers may engage in price wars or offer discounts and incentives to gain a competitive edge. This competition can strain relationships between suppliers, as they vie for the limited number of buyers.

2. Lower Prices: Excess supply puts downward pressure on prices as suppliers try to sell their excess inventory. This can result in lower prices for PAA, which benefits buyers but can negatively impact suppliers’ profitability. Suppliers may become frustrated with the situation and blame each other for the price decline, causing tensions in their relationships.

3. Reduced Profitability: Excess supply can lead to reduced profitability for PAA suppliers. When the market is flooded with excess inventory, suppliers may be forced to lower their prices to sell their products. This can result in lower profit margins or even losses for suppliers. In such a scenario, suppliers might become resentful towards each other and perceive their competitors as contributing to the excess supply problem.

4. Collaboration Opportunities: On the other hand, excess supply can also create opportunities for collaboration among PAA suppliers. They may come together to find alternative markets or explore innovative uses for their excess inventory. Collaboration can help suppliers mitigate the negative impacts of excess supply and foster stronger relationships among them.

In summary, excess supply in the PAA market can strain relationships between suppliers by increasing competition, lowering prices, and reducing profitability. However, it can also create opportunities for collaboration and the development of new solutions, ultimately strengthening relationships between PAA suppliers.