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By Maximilian Heath
MAGDALENA, Argentina (Reuters) - Argentine cattle raiser Jose Trivino fears the end of a decade-long boom in feedlots that is changing the face of traditional ranching on the legendary Pampas plains.
As the nation's farmers turn over more land to lucrative soybeans, cattle that once roamed freely over vast expanses are increasingly being reared in feedlots and fattened on grains instead of grass.
The government, keen to keep prices low for steak-loving Argentines, has encouraged feedlot expansion with millions of dollars of subsidies. But producers like Trivino say a recent suspension of state payments risks putting them out of business.
"We're waiting (for the subsidies), but in the meantime our business is going down the drain. If they don't pay me ... by March I'll be out of business," Trivino said, standing beside the rambling corrals at his feedlot in Magdalena, some 60 miles (100 km) south of Buenos Aires.
"The suspension of payments caught us by surprise. We're in debt and feedlots are only profitable if we get compensation," he added.
His Santa Maria feedlot used to house 8,000 animals, but today Trivino is only able to maintain 5,000.
Without the subsidy of the state agency ONCCA, which oversees Argentina's multibillion-dollar agricultural trade, feedlots are losing nearly $40 per animal every day, some industry analysts say.
Argentina is a leading beef exporter and Argentines eat more steak than anyone else in the world -- 161 pounds (73 kilograms) per year, compared with the 95 pounds (43 kg) eaten by the average American.
But as more land is turned over to crops, some industry analysts say the country could soon be forced to import beef for the first time -- something unthinkable in a nation famed for tender, grass-fed beef reared on the Pampas.
Feedlots have helped stave off supply shortages in the last few years. This year, feedlots will rear between 4.5 million and 5 million cattle for slaughter compared with 1.5 million in 2001, according to the Argentine Feedlot Chamber, CAF.
That figure would represent nearly half the total of cattle sent to market.
COSTS RISING
However, feedlot managers say the boom may come to a sudden halt if the government does not resume subsidy payments. Delays mean some feedlots have not received payments since February and a more recent suspension has frozen subsidies altogether.
"Costs have been rising but livestock prices have fallen 10 percent. This means the subsidies have to arrive correctly and on time," said CAF President Juan Carlos Eiras.
The former head of the ONCCA agency resigned early last month after local media revealed irregularities in subsidy payments to feedlots. Subsidies are also paid to dairy farmers and wheat growers in a bid to control bread and milk prices.
The media reports triggered an internal audit, prompting the agency to halt usual payments. Government officials say the subsidies will be resumed once an investigation is concluded.
"A review is being carried out in relation to the alleged irregularities ... the payments will be resumed. We'll soon be up to date," a government source told Reuters on condition of anonymity.
The agency said this week it had already resumed payments to wheat millers and dairy farmers, but many producers are suspicious of the government following months of bitter conflict over a soy export taxes and wider farm policy.
"Farmers fear the subsidies will disappear for good," said ranching analyst Ignacio Iriarte, adding the industry could eventually become dominated by larger companies linked to the meatpacking sector.
While uncertainty lingers, Argentina's feedlot boom is on hold.
"At the moment, we're not restocking livestock. We'll start doing so again when we have a signal about what's going to happen in the next month or two," said Daniel Malenky, owner of the El Progreso feedlot in Buenos Aires province.
(Writing by Helen Popper; Editing by David Gregorio)

Reuters