CAMINOS GANADERA (CG)
Santa Fe, Argentina

ONE OF THE LARGEST CATTLE AND AGRICULTURE RANCHES CONGLOMERATES IN ARGENTINA

MORE THAN 35,500 HECTARES OR 78,000
ACRES OF HIGHLY PRODUCTIVE LAND
16,000 heads of cattle
4,200 hectares (9,240 acres) in Agriculture

 

    Contents:
    I. Overview of the company and ranches
    II. Main characteristics of the Argentina cattle industry
    III. Strategy of the company development
    IV. General characteristics of the cattle business
    V. General characteristics of the present Argentinean economy
    VI. The company as a beef and agriculture producer
    VII. Location of the ranches

 

I. Overview of the company and ranches:

        Caminos Ganadera (C.G.) is a privately owned, for profit company dedicated to the production of lean, low cholesterol, grass feed beef, without the use of hormonal products. C.G. is also a company involved in agriculture and has presently more than 9.000 acres under cultivation. In 1999 the area dedicated to cultivation is expected to reach 11,000 acres.

        All cattle finishing is done in pastures and alfalfa with minimal use of grain supplement and no hormones. Cattle grazing is all year round as never snow at our ranches. The area climate is temperate with few frost days in winter (as in south Georgia).

        The company owns one of the largest conglomerates of cattle and agriculture ranches in Santa Fe and Argentina. C.G. is one of the larger producers of beef in Argentina. The provinces of Santa Fe, Buenos Aires, La Pampa and Cordoba have the reputation of having the best soil qualities in Argentina, and one of the best in the entire world. Many of the company ranches can be converted for dairy production as they are in one of the top dairy areas in Argentina with tremendous potential for productivity . Due to several local and international market changes, C.G. plans to continue aggressive expansion. The company is presently planning to add a dairy section in one of its ranches for milking of 1,200 cows per day.

        Sancor, Williner and other very large Argentinean milk processing industries are in the area. Their milk collecting trucks make daily trips in front of the ranches collecting milk from hundreds of local dairy farms.

        The company owns fourteen cattle ranches comprising approximately 100,000 acres (more than 42,500 hectares), all located in the central area of the province of Santa Fe, Argentina. Its Argentinean main office is in the city of Suardi, Santa Fe and in the province of Santiago del Estero. The enterprise is managed directly by its owners who reside in the U.S. The owners are in contact with the ranches on a daily basis by telephone, tele-copier, fax and computer. They direct the operation of the company from the U.S. through their Argentinean manager and accounting office. The owners travel to Argentina an average of four times a year to inspect the operation of the company first hand.

        The on-site management is directed by a local Agronomic Engineer acting as the administrator from Suardi, Santa Fe and a second administrator for the area of agriculture. The accounting offices and legal address of the company are Suardi. The central office maintains complete accounting records, farm records and statistics.

        The main foreman and the veterinarian both live on one of the ranches. Presently, approximately thirty workers attend to the 16,000 head of cattle. The ranches with their present structure have the capacity for more than 30,000 animals, and with further improvements may exceed 55,000. The company sells directly to meat packaging plants and local cattle brokers in the local Argentina market, and has contacts to eventually sell directly "brand name" beef, now that the US market is open to Argentina.

II. Main characteristics of the Argentina cattle industry during the last few years:

        Despite its prestige and international reputation of having "the best beef in the world", the Argentinean cattle industry has suffered through a 10 year depression. During this period, the price of Argentinean beef has been extremely depressed in comparison to other local goods, and in comparison to the price of other nations beef in the international market. This was due to the fact that most of the Argentinean beef could not be sold in European, American and Asian markets, on account of the presence in Argentina of endemic "Hoof and Mouth" disease, now completely controlled. It is expected that the disease will be entirely eradicated in the next two years through a very aggressive campaign of massive vaccinations, overseen by special agencies of the government for the last five years. In fact, several areas and provinces of Argentina already have been declared free of "Hoof and Mouth" disease in the last two years. No new episodes of the disease have occurred over the last three years.

        As the problem of "Hoof and Mouth" disease is controlled, it is expected that the price of Argentinean beef will reach international prices during the next few years. Argentina's entrance into the Mercosur (a South American free market agreement with Brazil, Uruguay, Chile and Paraguay) has already increased the local price of beef by 25 % in only the last ten months, due to rapidly growing sales of beef to Chile and Brazil, resulting from the high quality and extremely competitive prices of its beef. Recently the U.S. completed an agreement to buy more than 20.000 tons of the top quality "Hilton Cut". Many Asian countries are also beginning to buy from Argentina. The present average price of beef in Argentina (Liniers Market, Buenos Aires) is approximately $ 0.39 U.S. dollars per pound, which is 45% to 55 % of the price of similar beef from Australia or the US. The Argentine beef is leaner and lower in cholesterol, as it is mostly grass feed with minimal grain supplement and no hormone use.

III. Strategy of the company development:

        The owners took advantage of the depressed market prices, and the consequently depressed value of ranching land and related cattle implements, to aggressively grow and expand during the last several years.

        During the last seven years, the value of the ranches has increased significantly to over $18,000,000 U.S. dollars, including animals, land and other assets. The company however, still has a relatively low number of animals and a low number of acres dedicated to agriculture, in relation to the total land and investment, since the last few years were characterized mainly by land improvement at the expense of herd number growth and agriculture. The company expects to double its productivity and sales over the next three to four years with only a 35% increase in the total number of animals and 70% increase of the land allocated to agriculture.

        The company will place more emphasis on increasing the number of animals for sale during the next two years, now possible, due to the progressive land development of the last several years (i.e., pasture implantation, 400 miles of fence fixing, water sources development and repairs, roads repairs, etc.). This investment should result in directly increase the future profitability of the company, expecting a gross income from agriculture and cattle ranching of more than $4,500,000 for 1999.

        The land improvement and development, and different techniques implemented in feeding, rotation, new pastures, and personnel training, artificial insemination and education in agriculture, allow the ranches to now more repidly finish a heavier beef for the market than before. The quality of its beef has also significantly increased over the last four years.

IV. General characteristics of the cattle business:

        The cattle business is one of the oldest and most conservative industries. It is characterized by unusually long-term returns on investment when it produces its own animals, however continued and steady income can be generated later for years by maintaining a balanced herd size. C.G. produces its own animals and fattens them for final sale and consumption to the local market. The company commercialized more than 2,200,000 kgs (more than 4,800,000 lb.) of meat from its own production during the last 12 months, and expects to increase that number significantly during the next few years.

        The cattle ranching industry especially if practiced in the Argentinean style ( grass feeding only with minimal grain supplement for very sort periods of time to finish the product ) can eventually generate a steady source of income and significant capitalization. This occurs once the animal productivity chain is established, and generations after generations of new animals follow for marketing and sale.

V. General characteristics of the present Argentinean economy:

        For the last several years, the Argentinean peso has been pegged to the dollar with an exchange rate of .99 dollars to 1 peso. More recently however, the Argentinean Central Bank issued new dictates that changed the rate to a one to one ratio, allowing both currencies to be used freely and equally without discrimination for financial transactions inside the country. This is known as the Argentinean dolarization of the economy.

        The tremendous inflation rate of the past four years (exceeding 2000% in 1990) was reduced to less than 5% for the year 1994, and is expected to be less than 4% in 1995. This was the result of profound changes introduced by the government, the privatization of state companies, the convertibility of the peso to the dollar by constitutional law, and the formation of a Currency Board which takes direct control of the Argentinean currency, (formerly controlled by the government).

        During the last few years, Argentina has continued to develop at a 5% to 7% annual rate, one of the fastest development rates for any country. This rate is roughly equivalent to the rate of development of some Asian countries.

VI. The company as a beef and agriculture producer:

        Total sales for 1996 were approximately $1,630,000. Sales should continue to expand annually at a 25% growth rate during the following years, as the number of animals and agriculture expands further. C.G. is doing this by its own production and by the acquisition of young calves in local markets. The company has no debt. The number of workers per animal is now reduced 20% since last years values.

        The current appreciation of agriculture commodities, as the constant development of new markets for Argentina in Asia, Africa North America and Europe, will allow the company to profit greatly from price appreciation now and in the years to come.

VII. Location of the ranches:

        The company has today a total of 14 large ranches . Based on their soil quality the ranches are divided as five for agriculture and nine for cattle ranching.

        The agriculture ranches:

        These five ranches are all located in central Santa Fe, close to the limit with the province of Cordoba and near to the cities of Suardi, San Guillermo, Villa Trinidad and Ceres, in Santa Fe. Their soil quality is equal to the best in Argentina for agriculture The area total annual rain precipitation is approximately 1000 to 1200 mm per year. These ranches are almost 100% apt for agriculture and for the finishing of cattle on pastures for sale. They have the best alfalfa in the world. All five agriculture ranches are planted almost entirely with corn, soy bean, sun flower, sorghum, and with alfalfa. two of these ranches are apt for cotton. ("La Josefina"," La Poupee", la "SantaEmilia", "Don Alfredo" and "El Vasco").

        The cattle ("cria") ranches:

        These nine adjacent ranches are in central Santa Fe, 65 to 75 kms away from the agriculture and "invernada" ranches ("Santa Barbara" ranch, formed itself by nine adjacent ranches: "Achalay", "La Tigra", "El Palenque", "La Veronica", "La Corina", "Cuatro Torres", "Itati", "El Bataraz", and "El Embudo") Santa Barbara has approximately 55,000 acres (25,000 hectares).

        In addition to the agriculture and beef production, the company has a great potential to expand in the "fruit business", with more than 250 acres to be used for that purpose in the next two years.


Oliver W. Caminos

President, Caminos Ganadera
owcc@aol.com