UPDATE 1-JBS seen struggling to sell Argentine beef plants

Tue Aug 31, 2010 3:57pm EDT

* JBS plants seen drawing little interest

* Argentine government may finance transaction (Adds trade group comment, comment from source close to potential sale, background)

SAO PAULO/BUENOS AIRES Aug 31 (Reuters) - JBS (JBSS3.SA), the world's top beef producer, could struggle to sell three of its Argentine plants due to government policies that have depleted cattle stocks and hurt profits, a trade group said on Tuesday.

"It will take four to five years to recover the volume of cattle needed to meet domestic and export demand," said Miguel Schiariti, president of Argentina's Meat Industry and Trade Chamber (CICCRA). He said the business would remain unprofitable for several years because of government policies.

JBS, based in Sao Paulo, Brazil, told Brazilian regulators on Sunday that it may sell some of its eight Argentine slaughterhouses because of "scarce livestock and export restrictions." [ID:nN30213793]

Argentine President Cristina Fernandez's administration has imposed export quotas on beef and some grains to guarantee domestic supplies and tame prices.

A source based in Buenos Aires who is close to the potential sale said on Tuesday that JBS was trying to sell three plants that were "nearly paralyzed" because rising cattle prices had reduced profits.

The source said this decision was made "in desperation," although he said the company does not want to leave Argentina altogether but would rather reduce its holdings in the country until market conditions improve. The source asked not to be named because the person is not authorized to speak to the press.

Brazilian newspaper O Estado de S. Paulo, citing unnamed sources, reported on Tuesday that potential buyers would probably be discouraged by the extent of government restrictions, which have included export curbs and price caps.

Estado also reported that Argentine Domestic Commerce Secretary Guillermo Moreno had offered local industry leaders state loans to finance the purchase of JBS' units.

"Moreno wants to find someone (to buy the units). He's offering state loans," Schiariti said. "But there's nothing concrete. These are just promises."

JBS' media office declined to comment on the Estado story, and officials at Argentina's Domestic Commerce Secretariat did not immediately return calls for comment.

Argentina is traditionally a leading beef exporter, but shipments have been disrupted because of government regulations.

Increasing numbers of Argentine ranchers are turning fields over to more lucrative soybeans, pushing up beef prices and triggering state intervention to limit price increases of the nation's favorite food.

Livestock slaughter is quickly declining and Argentines are eating less beef, with annual per capita consumption falling nearly 17 percent in the first half of this year to 56.7 kilograms. (Reporting by Guillermo Parra-Bernal in Sao Paulo and Luis Andres Henao and Guido Nejamkis in Buenos Aires; Additional reporting by Maximilian Heath in Buenos Aires)

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