Argentines turn to chicken and pork as beef prices soar

Argentines ate an annualised 56 kilogrammes (kg) of beef in the first quarter [of 2016], down 5.9% from a year earlier – the sharpest decline in six years, according to data from Argentina’s meat industry and trade chamber CICCRA (La Cámara de la Industria y el Comercio de Carnes y Derivados de la República Argentina). That is significantly less than the 69kg per capita eaten in 2006 and the 78kg average over the past six decades. The decline comes after inflation surged to 40% this year, up from 26% in 2015, according to private estimates. While Argentina’s new government is making efforts to improve its poor previous performance on official statistics, it has yet to produce new corrected figures.

“Inflation has taken its toll on beef consumption,​” says Matias Togni, a research analyst at London-based market research firm Euromonitor International. “Consumers are shifting to poultry mostly and, to a certain degree, lower-grade red meat.​”

The drop in beef consumption also comes after a weakening of the Argentinian beef industry, once a leading world supplier. Profits shrank after the populist-left government of former President, Néstor Kirchner, imposed a 15% tax on beef exports in 2006 to keep local supplies steady and prices low. Farmers turned over grazing land to more profitable soybeans, causing cattle supplies to shrink. They fell to 48 million in 2011 from 58 million in 2007, before recovering to 52 million in 2015, according to Servicio Nacional de Sanidad y Calidad Agroalimentaria (SENASA), the agricultural health and sanitation service.

With fewer cattle supplies, production has steadily declined from a record 3.4 million metric tonnes in 2009 to 2.7 million tonnes (t) in 2015, pushing up prices.

But it wasn’t until current right-of-centre President, Mauricio Macri, took office in December that prices really took off. In a bid to rebuild cattle supplies and beef production, Macri axed the export tax and allowed the peso to depreciate by more than 40%. This has made it more profitable to sell beef abroad and domestically. Retail beef prices were up 44% in March on the year, according to CICCRA. Ribs, a favourite cut, shot up by 50% in price between December and March.

The higher prices – coupled with fast inflation, a recessive economy (the International Monetary Fund has projected a 1% contraction for this year, but the actual performance could be worse), slowing wage growth and the threat of job losses – have sparked public outcry. Consumer groups organised a boycott on supermarkets on 7 April. Macri has tried to temper the surge in beef prices, a hot-button issue in a country where barbecues are a weekly affair. First, he opened imports of popular cuts from Uruguay, another major producer, and then he urged supermarkets to cap prices. But prices still rose, causing domestic demand by volume to drop 5.9% in the first quarter of 2016 on the year, according to CICCRA.

Chicken production tripled in 2015​

Despite Macri’s proactivity, it will take time to bring down beef prices, according to a study by ABECEB, a consultancy in Buenos Aires. More cows must be withheld from slaughter for breeding, and then calves take six months to reach slaughter weight. What is more, cows must be fattened to a pre-slaughter 450kg versus a recent average of 300kg to boost production, a process that could take three years.

All this bodes well for the Argentina chicken and pork industries, which have been gaining market share over the past decade on rising production and demand.

While beef has historically dominated diets because of its low price and abundance, consumers began turning to chicken after a surge in beef prices back in 2002. This rise in demand, coupled with ample domestic supplies of corn and soybean feed, encouraged investment by leading producers such as Granja Tres Arroyos. As a result, chicken production nearly tripled to two billion tonnes in 2015 from 671 million in 2002, according to SENASA. This has helped contain chicken costs and prices despite the surge in inflation. So while beef prices have risen since December to an average of US$8.50/kg in March, chicken prices are three-quarters less at US$2.20/kg, says Roberto Domenech, president of the Centro de Empresas Procesadoras Avícolas, the association of poultry processing companies (CEPA). The result: Argentines ate 47kg, up from 20kg in 2002, Domenech said.

Over the same period, pork consumption has more than doubled to 15kg per capita, up from 6kg, according to the Asociacion de Frigoríficos e Industrias de la Carne (AFIC – the Association of Meat Slaughterhouses and Processors). That is half the 30kg global average.“Traditionally, pork wasn’t very well known in Argentina,​” says Daniel Urcia, executive director of AFIC. “Now it’s gaining acceptance, mostly because of the lower price.​” The price is slightly lower than beef, in part because producers such as Cabaña Argentina and Magret, as well as Brazil’s BRF, have more than doubled pork production to 480,000t in 2015, from 171,000t in 2002.

Beef’s not down and out​

The higher demand for pork can be seen at PIAF (Proveeduría Integral de Alimentos Frescos), a butcher’s shop in the trendy Palermo district of Buenos Aires. “Argentines like pork,​” says Hernán Méndez, the owner. “Pork matambre [a thin cut of meat taken from between the skin and the ribs] is a must for any barbecue.​” There has also been an increase in demand for bacon and ribs, as consumers discover new ways to cook pork, learning from Europe and the US. “I’ve gone from not even stocking pork ribs to selling 100kg per week,​” Méndez says.

This doesn’t mean that beef is out. On the contrary, beef still accounts for 50% of PIAF’s meat sales, Méndez says. But the price surge has pushed consumers to experiment with lower-grade cuts. Once limited to flank steak, ribs, tenderloin and sweetbread, Argentines are now putting cheaper cuts like matambre on the barbecue. It can make a great meal at ARS98/kg (US$6.75), well below the ARS130 (US$8.95) for ribs, Méndez says. More people, too, are trying out different cooking techniques learned from popular TV programmes, such as braising lower-grade cuts like roast beef and rib cap into savoury, tender meals, he adds.

“This is good for the industry because we can sell the whole cow, not just traditional cuts,​” Méndez says. To stoke interest in lesser-known cuts, PIAF holds workshops with chefs to explain how they can best be cooked.

The situation is similar at La Tierna Tierna, a nearby butcher’s shop. “The consumption of chicken and pork has gone up, but it’s not at all close to equalling the consumption of beef,​” Nelson Bragil, a 40-year-old butcher at La Tierna Tierna, says while attending a line of customers stretching onto the pavement. A big reason is the versatility of beef. Chicken, he reckons, lacks the diversity and yields of beef, whereas beef cuts like tri-tip can be baked, barbecued, grilled and put in a casserole, or made into breaded steaks or sliced for empanadas and tacos. The surge in beef prices is causing more consumers to shop at the likes of La Tierna Tierna. “The independent meat retailers, known as ‘carnicerías’, are gaining traction in consumer preference due to more attractive prices and offers,​” explains Euromonitor’s Togni.

Supermarket fight-back​

There are around 5,500 butcher shops around Buenos Aires, according to the Buenos Aires Butcher Shop Owners Association. Most of them are independent, but there has been an expansion of chains such as Friar, La Lonja, Almacén Los Hermanos, Res and Total Carnes over the past few years to tap the steady demand for all kinds of meat, with annual consumption now at 115-120kg per capita in the country of 42 million.

Indeed, business is brisk for cold cuts at Don Roberto, a delicatessen in Buenos Aires. “People who eat meat will always eat meat in Argentina,​” says Natalia Lillo, the manager. Customers have shrugged off recent 8% to 10% price hikes for higher-end matambre and pastrami, and visit shops like hers because the independents are offering lower prices and fresher produce, which is sliced on the spot, she says.

That’s not stopping the three leading supermarket chains from fighting back. Disco in April offered a 50% discount on Campo Austral, Cabaña Argentina and Doina sausages and black puddings, while Carrefour cut 25% off of its own-label ground beef. Coto slashed the price of frozen Paty hamburgers and Granja del Sol battered chicken by 25%. Supermarkets still do a higher volume of business than butchers’ shops, thanks to their scale and convenience, says PIAF’s Méndez. But butchers’ shops, he says, offer a personalised attention that helps to build loyalty, such as by offering cooking tips. “Argentines like this,​” he says. “In Argentina, you have your butcher just like you have your hairdresser. You can have a coffee anywhere, but if you want good cut of beef then you go to a butcher you can trust.​”