Bloomberg News

Colombia Drug Lords’ Cattle Theft Rob Rally Benefit: Commodities

February 02, 2012

Feb. 2 (Bloomberg) -- Latin America’s oldest guerrilla group’s penchant for cattle rustling is robbing Colombian ranchers of the benefits of the highest U.S.-traded futures prices since the 1960s.

The cash-strapped Revolutionary Armed Forces of Colombia is selling livestock at below-market prices after a military crackdown on cocaine production made the fighters “desperate for financing,” Juan Manuel Santos, the nation’s president, said last month. The group, known as FARC, may be Colombia’s biggest cattle owner, according to a ranchers federation.

Santos is trying to preserve gains Colombia, the world’s largest supplier of cocaine, has made to improve security for international investors and its own citizens. He’s going beyond cocaine to target secondary funding sources that also keep them active, said Michael Shifter, president of Inter-American Dialogue, a Washington-based policy analysis center. The FARC survives on revenue from crime, including illegal gold mining, drug trafficking and cattle rustling.

“They can sell at substantially lower prices since the cattle is stolen,” said Diego Ochoa, head of research at brokerage Cia. de Profesionales de Bolsa SA, which manages a livestock fund in Bogota. “They get a profit. For the legal producers and the legal middlemen, prices deteriorate.”

Stolen cattle can be sold at a discount of 20 percent to 30 percent, weighing on domestic cattle prices, Ochoa said. Those prices slipped 8.8 percent from June 15 to Jan. 24, according to weekly figures provided by the Bogota-based Colombian Mercantile Exchange.

Cattle Futures Rally

Cattle futures in Chicago rallied 23 percent in the same period. Gains in international prices typically contribute to domestic price increases with a three-to-six month delay, as farmers decide to sell more to foreign markets, Ochoa said.

Futures for April delivery rose 0.5 percent yesterday to $1.292 a pound on the Chicago Mercantile Exchange. On Jan. 25, prices reached $1.29675, the highest for a most-active contract since the commodity began trading on the CME in 1964 -- the same year that the FARC was founded in the Colombian countryside.

The FARC is moving stolen cattle to the center of the country from the south, Santos said in a Jan. 16 speech in the southern province of Caqueta. While livestock theft officially fell 14 percent to 8,265 animals last year from 9,616 in 2010, many cases go unreported, according to Colombia’s National Police. It’s putting in place policies to better identify and track cattle, to hamper transport of stolen cows and bulls.

Increased Rustling

“It’s a recognition that a broader strategy is needed,” Shifter said. “It’s necessary if Santos is going to achieve his goal of weakening substantially the FARC -- and just focusing on the drug aspect doesn’t accomplish that.”

Cattle rustling and kidnapping of ranchers has increased in the past year across the Andean nation, said Jose Felix Lafaurie, president of Colombia’s Federation of Cattle Ranchers. About 71 percent of cattle farmers said there had been a deterioration of public law and order in the past 12 months, compared to 11 percent two years earlier, according to a September federation survey.

“Since the drugs can’t get out, they need another source of funding,” Lafaurie said. “And that source of financing is kidnapping, or the use of assets they have, and in this case cattle is a good asset to improve their finances.”

Cattle rustling and ranching isn’t new to the guerrillas, especially in areas of southern Colombia that formed part of a Switzerland-sized swathe of territory controlled by guerrillas until 2002, according to Lafaurie.

FARC’s Veterinarian

The FARC probably is the largest single owner of cattle in Colombia after decades of stealing livestock, extorting farmers and displacing landowners, said Lafaurie. He said that about six years ago he met the veterinarian who tended to livestock for Mono Jojoy -- the alias of FARC’s second-in-command who was killed by the military in 2010.

“So you can see how long they’ve been into it,” Lafaurie said.

Stricter government controls should cut trafficking of stolen animals and increase prices, according to Ochoa. The government also is going after land held by the FARC as it takes steps to return property to farmers displaced by violence, Santos said.

--Editors: Dale Crofts, Todd White

To contact the reporter on this story: Heather Walsh in Bogota at hlwalsh@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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