Price is shaped partly by reality and partly by expectations
At a time when slaughter shows signs of slowing and industrial margins are becoming increasingly tight, Eduardo Urgal, director of the San Jacinto meat plant and representative of CIF on INAC’s Board, explained that one of the main components of beef prices today is not only supply or demand, but expectations.
“The price is not going to drop to US$ 3—there’s nothing indicating that,” he clarified. “But everything has a limit: we sell food, and prices also depend on the perception of what’s ahead.” This notion of expectation, he said, is what currently defines a market in unstable equilibrium, sustained more by confidence than by fundamentals.
Urgal noted that in terms of supply, the short-term outlook is positive. “The engine is running at full speed. Weather conditions are favorable, grains are competitive for feeding, and we’re having an exceptional early spring. Expectations, in that sense, are good.” However, he warned that industry margins are currently negative. “With these beef prices, if we can’t generate results now, then when?” he asked.
The executive recalled that the beef business operates on thin margins and that “as long as there’s more turnover, value can be created.” In that regard, he highlighted the growing role of feedlot production and the importance of the 481 quota as a pillar of the system. But he also warned that the 481 quota will be reduced again next year and that tariff uncertainty has become another speculative factor distorting prices. “Today, importers take positions without knowing whether they’ll pay 40% or 60%. The difference is far greater than what they expect to earn from the deal,” he explained.
For Urgal, the main risk is not a sharp drop in prices, but the loss of clear market references. “We’re moving large sums of money, but without results. If the export price falls below the steer price, the first blow hits the industry, and the second hits the feeder.”
He also ruled out the possibility of further increases on the demand side. “I don’t see room for importers to pay more. Europe is entering its weakest quarter, with low consumption after the holidays and winter underway.” He reminded that, although Uruguay produces high-quality beef and occupies premium market niches, “we’re still selling food,” and if the gap with other proteins becomes too wide, there’s a risk of losing market share. “Uruguay displaced Australia in the 481 quota because it offered almost the same product, but cheaper. If Australia becomes competitive again, we could be the ones displaced,” he warned.
Regarding the sheep sector, Urgal acknowledged a “deep frustration” with the low level of activity. “Without an urgent production response, there’s no future. We have a valuable product, but not enough volume to sustain the business,” he said.
When asked about the broader industrial outlook, Urgal admitted that results are negative but dismissed any notion of a deliberate “strangulation” strategy in the sector. “This is a business, and businesses are meant to make money. There’s no maneuver to suffocate anyone—it’s simply a matter of scale. Without scale, you choke on your own, not because someone’s tightening the rope,” he concluded.
