Argentine cattle herds seen shrinking due to high borrowing costs


By Maximilian Heath

BUENOS AIRES, Dec 26 (Reuters) - High interest rates are killing Argentine cows. That is what cattle producers say as they increase the rate of slaughter because the cost of the loans needed to keep their businesses thriving has been choked off by rates of 60 percent.

After the drought of 2008/09 left fields littered with cow carcasses, Argentina's total cattle herd has steadily grown. The increased slaughter of cows implies less calves born next year, implying downward pressure on the cattle population going forward.

"Beef producers would practically cut off their hand before writing a check or go to the bank for a loan," said Victor Tonelli, head of Victor Tonelli & Asociados cattle consultancy.

He said he expects the county's total herd to be reduced by 500,000 head to 43.5 million animals.

"I've already had to sell my tractor," wholesale cattle rancher Martin Spada said in a telephone interview from his farm in the northern province of Chaco. Lack of credit has caused his business to shrink, he said, including increasing pressure on him to sell the cows that would produce the next generation of livestock.

The central bank's policy rate, which determines the cost of money in Argentina, ended on Friday, the last trading day before the Christmas break, at 59.38 percent. The increase in slaughter comes at a time when Argentina is trying to expand beef exports beyond its main buyer, China.

Last month the largely rural South American country signed a deal with the United States allowing two-way trade of fresh beef for the first time in nearly two decades. Argentina is not expected to buy much U.S. beef.

But U.S. demand for world-famous Argentine steaks, some tender enough to be cut with a spoon, as demonstrated with a flourish by waiters in the iconic steak houses of Buenos Aires, is expected to be high enough that the trade deal included a 20,000-tonne limit on Argentine exports to the United States.

This article appears in: Stocks , World Markets , Commodities

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