In the U.S., within the small retail and high-end foodservice niches for premium grass-fed beef, the competition from foreign-produced product can be fierce, especially from Uruguay. But a severe drought in Uruguay may shift the American grass-fed market’s dynamics.

The drought is so severe, according to press reports, that Uruguayan dairy farmers have been selling cows for as little as US$10 per head. One farmer, posting a must-sell offer in the online edition of Ultimas Noticias, wrote that he had already lost three cows after they were gored "in their scrambling for water from a gutter."

Beef is Uruguay’s most important agricultural export, with sales of US$1.33 billion posted in 2008. The nation also exports more than a billion liters of milk every year, about seven percent of total Uruguayan milk production. Over the past two years, as the taste for premium grassfed beef has grown in the U.S. in certain metro areas such as the San Francisco Bay Area, Seattle-Portland, Los Angeles, Boston and New York City, Uruguayan beef exporters have found success with Whole Foods stores and other high-end chains with meat departments featuring grass-fed meat.

Dr. Silvana Montes de Oca, the foreign service secretary at the Embassy of Uruguay in Washington, D.C., told MEATPOULTRY.com that recently, President Tabaré Vázquez met with the top administrators of several agricultural and environmental agencies to develop a strategy for dealing with the crisis. "They are trying to void two things. First, to avoid more wildfires in the very dry grasslands and forests, and second, to avoid further rising food and meat prices," she said.

Laurie Bryant, executive secretary of the Meat Importers Council of America, said that Uruguayan beef imports in the U.S. are "way down from last year; they didn’t even fill the quota," but he pointed out that unfavorable currency exchange rates may have had as much impact as the drought. Since July of 2008, the value of the Uruguayan peso has fallen about 18 percent against the U.S. dollar. "I don’t think the drought will have a lasting impact, actually," he said, adding, however, that it was unusual that more cattle have not come to market in Uruguay as the drought has worsened. "That’s the usual pattern, but it hasn’t happened this time."

Will Harris, a grass-fed beef producer and processor based in Georgia (White Oak Pastures is the name of Harris’s operation), told MEATPOULTRY.com that "most of the large retailers source their grassfed beef from Uruguay, Australia and New Zealand, and if there’s a lack of Uruguayan product in the market, Australia and New Zealand will probably fill the hole.

"Ours is a very niche product," continued Harris, who just opened his own on-farm packing plant – his goal is to build volume up to 10 head per day. "I don’t ever expect grass-fed beef to occupy a major share of the domestic beef market. But there are people that really like it and are willing to pay for it. That keeps guys like me in business, even though there will always be foreign meat in the marketplace, I expect."