Beef

Until the late 1970s the beef slaughter and processing industry in Uruguay was under government control. In 1978 the government opened the market to private companies and from then private slaughter houses were allowed to operate and domestic quotas were reduced. Capital was attracted to the industry and new more advanced small and medium sized facilities were built. By 1980, the government had quit the industry and more private firms had entered to compete in both the export and domestic markets.

While foot and mouth disease has been endemic in South America, Uruguay was declared FMD free in 1995. This opened up new markets that had until then been closed to non-cooked meats. However, in April 2001 Uruguay suspended exports when new cases of FMD were discovered near the border with Argentina. Export markets began to reopen when no new cases were discovered after August 2001 and Uruguay was granted “FMD-free with vaccination” status by the World Organisation for Animal Health shortly after. In November 2001 it resumed exports to the EU and in June 2003 to the United States. Uruguay prohibits the import of live animals and/or genetic material from countries affected by FMD or other exotic diseases. The country is also classified as low risk for bovine spongiform encephalopathy (BSE) by the World Organisation for Animal Health.

The MGAP regulates the industry and is responsible for assuring food safety, quality control, animal welfare (all cattle are now vaccinated for FMD free of charge) and environmental control, issuing permits to slaughter houses. The MGAP has issued approval certificates and export permits to 37 slaughter houses. Of these, the USDA has awarded permits to the USA to 19 facilities and the EU permits for 24 (New Zealand has 34 beef and 39 sheep plants licensed). These facilities use state-of-the-art technology and highly skilled labour to fulfil the demanding sanitary regulations of these two major markets based on HACCP principles. Commercial transparency is supervised and assured by the National Meat Institute (INAC).

From around the mid-1990s the industry has operated at around 60% to 70% of capacity, only a little higher than New Zealand’s average of around 58%, which has limited the entrance of new players. Since 2002, the increase in demand driven by the devaluation of the peso and ready access to the NAFTA area has attracted new investment in chillers, coolers and other infrastructure. Labour productivity has also increased as excess labour has been removed.

Exports are concentrated in the top six slaughterhouses which accounted for more than half of the total exports in 2005. Traditionally, slaughtered animals have been priced on a live weight basis, but in the last few years this has moved towards carcass pricing and in 2004 almost 70% of animals were priced in this way. A number of firms are now moving towards new meat grading systems to provide carcass measurements linked to value based marketing programs. There is also the start of a shift to more intensive production systems moving away from extensive grazing and low inputs to improved pastures producing prime animals in 18 months as opposed to three years under the old system. This is in response to market demands for younger animals.

Beef production increased following achievement of FMD free status in 1995, which allowed access to new markets for meat and live animals. The expansion was facilitated by a significant decline in sheep numbers. Cattle slaughter averaged 1.5 million head during the 1990s, falling to 1.37 million in 2001. Since then, slaughter numbers have increased rapidly reaching a record 2.39 million head in 2005, a similar level to New Zealand.

Exports

Meat exports play an important role in Uruguay’s economy. In 2005, meat exports accounted for 27% of the total value of exports, with beef accounting for 21%, somewhat higher than New Zealand’s 16% and 6% respectively. During the 10 years to 2005 total meat export value has increased by 194%. The FMD outbreak in 2001 reduced beef exports to $226 million from $479 million in the previous year. Since 2001, beef exports have trended up to a record high of US$765 million in 2005 (478,000 tonnes carcass weight equivalent) of which about 15% was chilled and 80% frozen.

Prior to its achieving FMD free status, the MERCOSUR countries (the Southern Common Market comprising Brazil, Argentina, Paraguay, Venezuela and Uruguay),the European Union and Israel were the primary destinations for Uruguayan beef. Since then the United States has become by far the most important export market for beef taking around 76% on a carcass weight basis and 65% by value. The next most important markets are the United Kingdom (8%), Canada (6%), and Germany (4%). Exports to the United States are regulated by a WTO negotiated tariff rate quota (distributed to Uruguayan companies by the Uruguayan government) which is currently set at 20,000 tonnes each year for chilled and frozen beef. Exports within the quota are subject to a nominal fixed tariff of 4.4 cents per kilogram while above the quota there is an ad valorem tariff of 26.4%.

Beef exports to the European Union amounted to approximately 25,500 tonnes in 2005. Of this 6,300 tonnes comes under the Hilton quota which is subject to a 20% ad valorem tariff, while quantities above the quota pay a significantly higher rate. Given the tariffs structure, exports to the EU comprised mostly high-value cuts such as tenderloin, striploin, rumps and ribeye.

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