Main beef producers world wide

Country Share of world wide

production

United States 19.7%

Brasil 15.4%

European Union 12.9%

China 11.5%

India 6.9%

Argentina 4.4%

Beef Market

Beef Markets worldwide are divided into 5 main stages of production:

Stage Product

Breeding Cattle

Stocker Cows

Slaughter Beef hindquarters and meat by

products (fat, blood, hide)

Beef Processing Meat cuts

Commercialization Consumer sale

This report will focus mainly on the first two stages of production, breeding and fattening,
since the main goal is to understand the effect that large companies have on small and
medium producers at this level.

Three main types of agents participate in this stage of production:

- Breeder (only breed)

- Feedlot (only stock)
- Full cycle producers (breed and stock)

Market Make Up

Cattle Production: Breeding and stocking

Data shows that small operations with relatively low amounts of livestock are the most
common in the Argentine market. Out of a total of 205,000 breed and stocking operations in
the country, approximately 10.000 (5%) concentrates about 40% of the entire production.
Additionally, Table 1 shows how this 5% has the same accumulated livestock as 20% of the
entire production and double the amount of the remaining 74.5% of smaller operations with
up to 250 cattles1.

Livestock Quantity % of Quantity Accumulated Share Average per

livestock operation

Up to 250 152.901 74,5% 11.304.569 21,5% 74

251-1000 42.416 20,7% 20.345.398 38,7% 480

More than 1000 10.027 4.9% 20.986.811 39.9% 2093

Total 205.344 100% 52.636.778 100% 256

However, according to several sources the Argentine beef production chain at the breeding
and stocking stages is particularly atomized and competitive in which no firm can firmly
establish monopolistic or collusive practices to distort prices2.

The largest cattle producers in Argentina are mostly owned by Argentine capitals 3:

# Name Livestock Origin

1 Ser Beef 100.000 Argentina

2 Juramento 97.029 Argentina

3 Los Corrales de Nicanor 87.000 Argentina

4 Don Sebastián 80.000 Argentina

5 Reina Elena 74.813 Argentina

6 Grupo Duhau 64.000 Argentina

7 Compañía General de Hacienda 60.000 Argentina

8 Transcom 55.000 Argentina

9 Desdelsur 52.000 Argentina

10 Grupo Bermejo 50.000 Argentina

11 Agropecuaria La Criolla 38.000 Argentina

12 Sol de Septiembre 38.000 Argentina

13 Profeed Saladillo 36.500 Argentina

14 Las Chilcas 34.133 Argentina

15 Grupo Conecar 31.000 Argentina

Meat Processing

1
Mercado Argentino de la Carne Vacuna (argentina.gob.ar)
2
La competencia en el sector cárnico y la inflación – Valor Carne
3
Con nombre y apellido, quiénes son los 15 mayores propietarios de cabezas de ganado en
Argentina | Agrofy News
This changes slightly when the cattle pases from these stages to the slaughterhouse as is
documented by the National Commission for the Defense of Competition of Argentina states
that “firms in this sector are not as atomized as the initial stages of cattle production” which
in turn helps slaughterhouses and cool-warehouses have a better relative negotiating
position regarding cattle producers.

Market concentration increases even more when analyzing export oriented meat processing
firms as over 65% of meat exports are held by just 10 firms. However, these firms usually
have more processing capacity than they can use themselves so they sell this excess
capacity to other exporters that do not own slaughter and processing facilities. When
factoring in this number, these 10 firms account for 80-85% of exports.4

International Meat Processing Firms

JBS is a Brazilian meat processing company headquartered in Sao Paulo and is the largest
one of its kind in terms of sales. Founded in 1953 it grew throughout the Brazilian market
until 2007 when it acquired the US firm Swift & Company, which at the time was the third
largest beef and pork processor in the country.

Through the acquisition JBS entered the Argentine beef industry since Swift has had a
continuous presence in the country since 1907. In 2017, pressured by several corruption
scandals in Brazil during President Temer’s administration, JBS sold off it´s Argentine
operations to Brazilian company Minerva.

Mass Consumer Food Companies

As one progresses through the production chain closer to the final consumer, the higher the
concentration of the market. According to one study, out of 260 firms that partake in the food
industry, only 18 of them concentrate 60% of the market5 en Argentina. This is particularly
worrisome in some sub sectors such as beverages in which just 15 firms concentrate 80% of
market share and 9% of producers represent 80% of revenue.

The main mass consumer companies in Argentina that control the food industry at this
market level are the following:

Company Origin

Aceitera General Deheza Argentina

Molinos Cañuelas Argentina

Molinos Rio de la Plata Argentina

Mastellone Argentina

Mondelez Mexican - USA

Arcor Argentina

4
El pecado de la carne es la concentración | Siguen aumentando los precios. Abusos y excusas |
Página12 (pagina12.com.ar)
5
Oligopolio: 18 alimenticias concentran 60% del mercado (infoalimentacion.com.ar)
 PepsiCo USA

Coca Cola USA

Danone France

Quilmes USA

CCU Argentina

Unilever UK

Here Argentine presence is lower, although still predominant. At this stage of production
international interests and multinational corporations enter the market and compete with
national capitals. The same should be observed in the supermarket industry coming up next.

Supermarkets

The final stage of the food industry related to commercialization where the final consumer
buys finished products presents the highest degree of concentration. According to different
studies just 6 supermarket chains represent more than 80% of market share6.

This high degree of concentration exerts a high amount of pressure on prices, especially in a
high inflation economy such as Argentina. Big firms actively make use of their dominant
position in the market to force producers to sell their products at very low prices and then
hike up prices for consumers at the end of the chain.

This situation especially affects SME’s that want to access supermarkets to sell their
products, but are coerced by these big players to give up almost all their profit margins. If
they refuse, SME’s are excluded and can’t scale up their production due to the lack of
demand.

Small producers and value chains: How do big players affect SME’s?

Value chains are a concept created by Michael Porter in the 1990’s that is defined as a set
of activities that a manufacturing system carries out to create value for its customers. This
system is made up of different agents and subsystems that each take in different inputs and
generate outputs for the next stage of production7. This methodology is great at describing
production methods in advanced economies where most firms are formally constituted and
informality is scarce, but when it comes to developing nations a more broad view is needed.

In this sense, Latin American theorists created the term “Productive Linkages”8 that better
describes the rural and agricultural production process in South and Central America. These
Productive Linkages are usually composed of large, sometimes multinational companies
whose input resources are commonly provided by small and medium, sometimes even
informal, firms, organizations or cooperatives.

6
Mercados oligopólicos de bienes de consumo masivo | La característica principal de la producción
de bebidas, alimentos e higiene personal | Página12 (pagina12.com.ar)
7
Porter's Value Chain (cam.ac.uk)
8
16522IIED.pdf
Usually when smaller firms associate with large multinational companies, the former will see
their income grow quickly and substantially for a short period of time. This way producers
adapt to the processes and the general will of the larger firms long enough to generate an
unhealthy chronic dependence with them. The asymmetry in power between these players
allows the big players to slowly shift the business terms in their favor and when the SMEs try
to renegotiate their positions they find themselves too dependent on the big firms. As stated
by Guharay (SIMAS, 2012):

“Although initially these projects can strengthen productive organizations and

improve the quality of their products, over time these relationships create a high
degree of dependency on foreign companies and a lack of solvency and agency
on the part of the producers regarding the marketing of the product. In addition,
within the production, processing and marketing process, the benefits that small
producers receive are always marginal and secondary in relation to the other
benefits of the chain. “9

According to Alberto Monterroso, associations between small producers and large

multinational companies have helped to raise rural income and job creation in many Latin
American countries. However, these large players though several technical, administrative
mechanisms, both formal and informal, have obligated small producers to only work with one
large multinational firm10.

Finally, intermediaries and informal middlemen also get between large firms and SME’s
seeking to acquire resources and livestock from producers at the lowest possible price and
try to sell them to large companies and exporting firms for the highest. These middlemen
make use of their contacts and business savviness to sell products for up to six times the
price they acquire them from the producers.

But why would a large firm buy from an intermediary - or scammer - that charges a much
higher price than buying directly from the producer? One reason is that large firms keep
relations with these middlemen in case there is big enough of a spike in demand, or prices,
so that they need to turn to these intermediaries in order to satisfy demand. Another reason
is that these scammers are very handy at acquiring foodstuffs in a short amount of time and
delivering quickly. This makes them perfect partners for large firms that need to fulfill
unforeseen changes in demand fast. Middlemen can seek raw materials at low prices and
transport them much quicker than SME’s at the expense of these small producers.

9
16522IIED.pdf
10
16522IIED.pdf