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World food prices endanger premium Argentina beef

For 100 years, cattle breeders refined their beef on the vast Argentine grasslands.

With the help of mild winters, regular rainfall and fertile soil, ranchers grazed top-notch British breeds like Hereford and Angus on rich grasses, producing meat with a texture and taste craved throughout the world.

"Argentina is to beef what Cuba is to cigars," says Juan Pablo Thieriot, co-founder of Estancia Beef, which exports Argentine and Uruguayan grass-fed meat.

But soaring world food prices may spell the end of the great Argentine steak.

Demand for grain and soy is pushing Argentine ranchers to till their pastures in crops. Cattle that once roamed the pampas are increasingly fattened on corn in cramped feedlots instead. Top beef producers are being pushed toward a system that has been criticized in the United States for putting cattle in unnatural environments and creating meat with a mass-produced taste.

About 30 percent of Argentine cattle now finish their lives in feedlots, according to the Argentine Feedlot Chamber. Ten or fifteen years ago, that number was zero.

"Ranching here is going from an artisan craft, based on grass, to a more industrial system, similar to the United States," said Eduardo Pereda, whose family founded the Nueva Castilla ranch in Trenque Lauquen in 1883.

Nueva Castilla now devotes vast tracts of land to corn and sunflowers, while thousands of cattle are crowded into mud-floored corrals lined with plastic feeding troughs.

Three years ago, about half the ranch's arable land was devoted to pasture. Today, that number is below 9 percent. This year will be the first that some of Nueva Castilla's animals never see pasture.

Feedlot cattle are now two-and-a-half to three times more profitable than those raised on pasture when combined with crop production.

"One hectare (2.5 acres) in crops brings in US$500 per year," said Pablo Tassone, who oversees the Nueva Castilla herd of 24,000 head. "A hectare in pastured beef, if you're really good, won't bring in more than US$200."

Tassone said feedlot beef does tend to be fattier than grass-fed meat. But by feeding his cattle primarily corn husks, he says, he can produce beef that is practically the same quality while meeting the pressures of an international market.

"We're giving them food much like what they eat in pasture," he said. "But they grow faster this way."

Other major beef exporters such as Brazil and Australia are joining the trend, which is also fueled by rising beef consumption worldwide as middle-class incomes and tastes take hold in developing countries. Corn-fed cows in lots where they can't roam fatten quicker. In the last 10 years, Australia has seen about a 50 percent hike in the number of cattle on feed instead of grass, while Brazil has seen a threefold increase.

"The cows that are leaving the pampas are not coming back," said Federico Lahusen, a ranch manager and consultant based in Buenos Aires.

The change so far will have little impact in the United States, which bans imports of raw Argentine beef because of concerns about foot-and-mouth disease. Argentina says it has eradicated the disease and that the ban has more to do with politics than health.

The country's best steaks are sent to Europe under the European Union's Hilton Quota, which regulates the import of top quality beef  -always grass-fed -from a number of places. Argentine steaks fetch the highest prices under the quota and make up the majority of beef imports, Thieriot said.

Argentina's switch to crops started about a decade ago with the introduction of new technology, including genetically modified crops and no-till farming, a technique that prevents erosion and improves moisture retention in soil. The trend accelerated as international prices for grain and other commodities began to rise in 2002 and have soared in the last two years.

When the Argentine government implemented price controls and export bans to keep domestic beef prices low, even more ranchers switched to farming.

The government began subsidizing feedlots to ensure a steady supply of beef to Argentines, who lead the world in beef consumption at an average of 143 pounds (65 kilograms) a year.

American agribusiness sees opportunities in Argentina's switch from ranching to farming. Last year, Tyson Foods said it planned to expand feedlot capacity in central Argentina, investing in a 25,000-head lot jointly run by Cresud, an Argentine agribusiness, and Cactus Feeders, a Texas-based operator.

In the United States, feedlots have been criticized for their use of growth hormones and antibiotics. But in Argentina, hormones are banned by the government, and antibiotic use is at a minimum.

While fat-marbled, corn-fed beef is considered premium in the U.S., producers of grass-fed beef says the meat cultivated on the pampas has a richer flavor.

"Beef that tastes like it comes from a ranch. The smell, the taste, the texture, everything, versus something that comes out of a Styrofoam package," said Bill Reed, an Estancia partner. "It's almost like a different experience."

Some longtime fans say they can tell the difference. Malcolm Harris began importing Argentine beef to the United Kingdom under the label Pampas Plains five years ago because he missed the meat after living in Argentina for five years.

"It was like an itch I couldn't scratch," he said.

He said he was disappointed on his most recent trip to Argentina.

"Years ago, I never had a bad steak in Argentina," Harris said. "This year was the first."