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Uruguay Table of Contents


Livestock Ranching

Uruguay's livestock herds did not expand appreciably after 1930. In 1908 there were 8 million cattle and 26 million sheep in the country. In 1981 the number of cattle peaked at 11 million, while the number of sheep had declined to 20 million. Because the land area dedicated to livestock raising has not changed significantly, these figures illustrated the lack of progress in the sector. The single largest investment in cattle herds was complete by 1930, when Herefords were substituted for the original mixed breeds. Extensive ranching methods facilitated livestock raising because little investment was required. But these methods also limited the carrying capacity of the land and the size of the stock. By the 1970s, it took twenty-six Uruguayan cattle to yield one ton of beef, compared with about eighteen in Argentina and about thirteen in the United States or Western Europe. The production of wool and mutton per head of sheep was also low: 3.5 kilograms of wool per head, compared with over 5 kilograms per head in Australia or Argentina. In addition, both cattle and sheep herds were subject to losses because of limited efforts to prevent disease.

The vulnerability of the range-fed livestock herds was further demonstrated in the late 1980s when Uruguay experienced a severe drought. Millions of animals died or had to be slaughtered prematurely. The drought lasted longest in the center of the country, where most of the largest cattle ranches were located (the departments of Cerro Largo, Durazno, and Tacuarembó). The leading sheep-ranching departments in the northwest (Artigas and Salto) were not as severely affected.

Raising sheep for wool in Uruguay became less profitable during the 1960s. There was increasing worldwide competition from petroleum-based synthetic fibers. After the oil price increase in 1973, however, wool was once again in favor. Production surged from about 61,000 tons per year in the mid-1970s to 87,000 tons in 1986. Wool surpassed beef as Uruguay's most valuable export in the early 1980s. It also supplied the growing woolen textile and apparel industry, which earned additional foreign exchange.

Sheep, whose stock increased to almost 26 million by 1989, were also raised for lamb and mutton. The potential for Uruguay's export of sheep meat in 1989 was about 3 million head, as compared with annual exports of about 2 million head in the early 1980s. However, a severe drought in the first half of 1989 reduced the performance of this subsector by about 10 percent during that period.

Rising world beef prices stimulated the Uruguayan cattle industry in the late 1970s. At first, rising prices increased the profitability of cattle ranching but ultimately led to considerable instability in the sector. When many ranchers expanded their herds after the 1978-79 beef price increases, the price of pastureland grew almost tenfold. Because real interest rates were low or negative, ranchers were willing to borrow heavily to increase their landholdings. But beef prices soon leveled off, and many ranchers were left with large, unpayable debts. Land prices fell sharply; banks could not cover their loans even by foreclosing. As the bank crisis mounted, the Central Bank stepped in to provide refinancing in United States dollar-denominated loans. Most ranchers avoided bankruptcy but had to slaughter record numbers of cattle to service their debts. Many ranchers took the opportunity to switch to sheep ranching because wool appeared to face more stable world demand. Thus, Uruguay's cattle herds declined by 20 percent from 1981 to 1984.

Cattle ranchers rebuilt their herds during the latter half of the 1980s but were hindered by limited credit and severe drought. Damage from the prolonged drought had reached alarming proportions by the end of 1989, when the cattle stock was down to 9.4 million head. The number of cattle fell by 738,000 head between June 1988 and June 1989, the largest annual drop in fifteen years. About 2 percent of the total had died, and the rest had been killed and sold (50 percent more than usual). In the July-November 1989 period, the beef cattle herd was depleted by an additional 622,000 head. The increased slaughter rates allowed meat-packing plants to pay less for beef, decreasing ranchers' profits.

The continuing difficulty in the sector prompted the government to launch Operation Manufacture in March 1989. The program eased the ranchers' financial burden by extending them a special line of credit, lowering their tax rate by 20 percent, and providing for case-by-case assistance. The government also announced the opening of a line of credit with terms of up to eight years for herd replacement. Sheep ranchers, who suffered fewer losses from the drought, were not eligible for these government programs.

The dairy industry, based in the departments near Montevideo, expanded considerably in the 1980s. Milk production increased from 400,000 tons in 1979 to 635,000 tons in 1987. Even though many dairy farmers still relied on natural pastures, limiting the milk output per cow, Uruguay was more than self-sufficient in dairy products and exported to other Latin American countries. Most domestic milk processing and marketing was controlled by the National Dairy Products Cooperative, which distributed dairy products throughout the country.

Data as of December 1990

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Uruguay Table of Contents