Argentina’s beef export tariff removed – so what for Australia?

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Argentina recently removed its 15% export tariff on beef and eased the restrictions on export permits. What potential impacts will this have on Australian beef?

First and foremost is greater competition in international trade. The once third largest beef exporter (now tenth) will have much greater incentive to export significantly more, rather than keeping it on the domestic market. Argentina’s largest export year was 2005, when 437,547 tonnes swt of beef were exported, before falling to a low of 111,053 tonnes swt in 2012, as illustrated in chart 1.

In 2015, Argentina shipped beef to 47 different countries – most of which were common with Australia – although some notable exclusions were Japan, the US and Korea (Australia's largest markets). Nevertheless, Argentina’s presence in the EU is large, while at the same time is growing in China and the Middle East, and the potential to increase further is more likely now. Considering most Argentinean beef is grassfed, this will create greater competition for Australian product in these regions specifically.

For the first 10 months of 2015 (latest export data available), Argentina’s beef exports reached almost 140,000 tonnes swt, with China accounting for 31% of shipments, followed by Chile (17%), Germany (15%) and Israel (13%).

The weak Argentinean peso will also assist the competitiveness of Argentinean beef in international markets, particularly in the developing countries where the competition with Australia will probably be greatest. As a point of reference, the A$ is currently buying 71.5US¢, while the peso is purchasing just 7US¢ - down from 25US¢ in 2011 (XE Currency Converter).

Interestingly, the peso may be volatile in 2016 under the leadership of the newly elected President, Mauricio Marci, as in addition to the removal of export tariffs, the controls around the peso were also removed, allowing it to float again (The Economist).

While there will be some competitive impacts for Australia, there will still be restrictions on Argentina’s capacity in 2016, including:

• The speed at which shipping capacity/infrastructure can be increased to cater for greater needs;
• Beef availability, with the herd currently estimated by the USDA to be 51.5 million head and production at 2.7 million tonnes cwt (compared to Australia’s near equivalent beef production (2.5 million tonnes cwt) from a significantly smaller herd of 27.6 million head);
• and access to Australia’s three highest value markets of Japan, Korea and the US.

In summary, the greatest likely impact on Australian beef will be increased competition in the grassfed sector of China, the Middle East and the EU.