Meat does not explain the rise in inflation in January

Juan Manuel Garzón, IERAL chief economist of the Mediterranean Foundation

According to INDEC, inflation was 6% in January, exceeding the levels of the last two months of last year (4.9% in November and 5.1% in December), and certainly causing quite a few worries in the economic team. given that implies a return to 3-digit annualized inflation.

In the case of cuts of beef, its prices increased by an average of 4.4% during the first month of the yearbelow the general level and, therefore, no contribution to January price acceleration.

To be the February price index which captures the rise in prices observed in the last weeks of January and February 1 in meat prices; and it is precisely this inflation of recent weeks that explains the government’s launch of a price containment program (Fair Meat Prices) which, among other things, it looks quite small.

To give an order of magnitude, according to our supermarket surveys, beef would have increased by 30% between the third week of January and so far in February, while the farm has raked up 50% so far this year.

​ Note that the prices, for both livestock and meat, are recover what was lost in the second half of 2022 and returning to historically high values, above the average.

It’s hard and It is risky to predict how far this rearrangement of meat prices still has to go. Important information is that agricultural prices have risen more than meat prices so far, and history shows that these adjustments stabilize at some point.

Another figure is a comparison with the region which may be useful: in the first week of February the prices of beef in supermarkets in Argentina were between 10% and 15% cheaper than Uruguayan prices (similar cuts); historically our prices have not been far removed from those of our neighbor.

Economics teaches that price dynamics depend on the response of various actors, producers, exporters, consumers, etc. For example, for exporters, new agricultural prices and higher demands on the government are sure to create they deteriorate the activity; the evolution of shipments abroad will be one of the key variables for domestic prices.

Consumers, for their part, will feel the impact, some will adjust their consumption of meat, the less reactive will adjust their consumption of other goods.

Note that the second half of February and all of March They are complicated for the household economy, The start of classes generates seasonal expenses that leave less room for regular consumption, and greater resistance to price hikes for various products, including meat, can be expected.

As mentioned, the government has launched “Fair Meat Prices” with multiple announcements to deal with the increase. The range of measures includes an agreement with exporters to increase the offer of 7 cuts at differentiated prices in large commercial areas (an estimated total flow of 15,000 tons per month), reimbursement of 10% of meat purchases made.