By Andres Stapff
CERRO COLORADO, Uruguay, Jan 19 (Reuters) - Just a year ago, Uruguayan rancher Dimar Delgado couldn't believe his good fortune. His cattle fetched high prices at market and plentiful rains meant pastures were lush and green.
But a sudden drop in international beef prices and an acute drought have changed everything.
The global economic slowdown has sent grains and beef prices tumbling, hitting farmers and governments in South American farming nations. Concern is perhaps greatest in Uruguay, where ranching is the motor of its small economy.
Farmers like Delgado, 45, are tightening their belts while the uncertainty lasts. The country's center-left government has slashed growth forecasts for the sector from 6 percent in 2008 to just 1 percent this year.
"We'd planned to do up the house but because we don't know what's going to happen we haven't been able to," Delgado's wife Claudia said while feeding the chickens besides the family's modest house.
"We don't know if we're going to need to buy feed for the cattle, and we have to save the cattle," she added at the ranch, near the town of Cerro Colorado, some 105 miles (170 km) northeast of the capital, Montevideo.
Uruguayan ranchers are not the only ones to see their fortunes reverse almost overnight.
In neighboring Brazil, which has the world's largest herd of commercial cattle, some meat-packers are operating at a loss.
Next door, in Argentina, another leading global beef supplier, beef processing plants have been forced to give workers early leave and ranchers say their incomes have plunged due to slack demand for beef and leather.
TRADITIONAL
The Delgados have a herd of 900 cattle on their farm of some 2,280 acres (924 hectares), which Dimar Delgado's father bought 20 years ago.
It is typical of Uruguay's traditional cattle ranches. Animals have plenty of room to graze and are mainly grass-fed.
But pastures have become yellow and scraggy after one of the worst droughts in decades, forcing some ranchers to buy extra feed to keep their animals from starving at a time when money is already tight.
The poor condition of the cattle being taken to market is exacerbating ranchers' financial woes.
"You can buy a cow and a calf for less than $100 when they were going for $500 before," said Delgado. "Some buyers aren't even interested if you're giving them away."
Uruguay sells most of its beef to the United States, Europe and Russia, and its exports soared in the last few years due to robust demand from Russia and a jump in international prices.
Despite the sudden downturn in demand for its steaks in the last three months, Uruguay's beef exports still clocked a record $1.2 billion last year thanks to strong sales in the first nine months.
ANXIETY
A slight upturn in corn, wheat and soy prices in recent weeks will do little to ease farmers' worries, analysts say.
"The modest improvement in terms of prices will not compensate for the anxiety that farmers' are suffering due to the lack of rain and the mounting crop losses," Montevideo-based agricultural consulting firm Blasina & Tardaguila said in a report.
It said crop yields would fall and that farmers would plant less than planned because of the severe dry spell, which is also causing outbreaks of locusts and ants.
Central-southern parts of the country have been worst hit by the dry weather, and some have seen less than half their normal rainfall in the last 12 months, prompting the government to announce a package of emergency aid for farmers.
Uruguay's grains output is tiny compared to its neighbors, agricultural giants Argentina and Brazil, but the lure of bumper earnings saw farmers dedicate extra land to wheat last year and the 2008/09 harvest is seen at a record 1.3 million tonnes.
Some industry analysts say the soaring prices for farm goods that stoked global food inflation in 2008 were unsustainable and that farmers should be content if prices settle at lower levels.
"The spike in prices in the first half of 2008 were exceptional, it was an exceptional price bubble," said Nicolas Lussich, an analyst at the Seragro consulting firm, adding that the drought was making it harder for ranchers to ride out the lower prices.
"The more interesting comparison is with 2006 and 2007, which were very good years for farming. If prices return to those levels, it wouldn't be too dramatic. That said, the drought is a serious problem," he added.
On his ranch near Cerro Colorado, Delgado said rain would at least mean he could hold onto his cattle in the hope that prices at local markets pick up.
"If it rains we'll get the pastures back, then you can keep the cattle on the farm and wait until prices go up," he said, touring the fields on horseback. "If it doesn't, it's going to be very tough." (Reporting by Andres Stapff; Additional reporting by Conrado Hornos in Montevideo; Writing by Helen Popper; Editing by Eddie Evans)