By Maximilian Heath

BUENOS AIRES (Reuters) - A sharp reduction in thenumber of cattle roaming Argentina's Pampas plains is hittingthe country's meatpackers, forcing some to cut workers' hoursor close their doors for good.

The South American nation, one of the world's leadingsuppliers of beef, corn and soybeans, still has more cattlethan people, but the national herd has shrunk by 10 millionheads in the last three years to about 48 million.

Many ranchers have sold off their herds due to severalyears of harsh drought. Others have turned their fields over tomore profitable soy, blaming the government for erodingranching profit margins with export curbs and price caps.

Brazil's JBS, the world's biggest beef producer,said last week it was considering selling some of its Argentineplants and meatpackers have protested in recent months overcuts to hours

A few of the country's approximately 440 beef-processingplants have closed down since the livestock shortage started tobite late last year, raising the cost of Argentines' favoritefood and prompting fresh government export restrictions

"As of now, 10 meat-packing plants have closed and another10 are having serious problems," said industry consultantIgnacio Iriarte.

Argentine beef production is set to fall 24 percent thisyear to about 2.6 million tonnes, Iriarte said.

Meat-packing plants are currently operating at just 60percent of installed capacity due to the lack of livestock,according to private sector industry think-tank CREA.

The dwindling livestock supplies have driven up prices atthe country's Liniers cattle market, where the rambling pensand horse-riding assistants are a reminder of the country'srich ranching heritage.

Prices of steer, used as a benchmark at Liniers, have risen90 percent over the last year, market data shows. Butcher shopshave hiked their price tags to reflect that, forcing manyconsumers to abandon their beloved steak.

DISENCHANTMENT

Until recently, Argentines were the world's No. 1 beefeaters, but per capita beef consumption fell 18 percent in thefirst seven months of the year compared with the same period ayear ago to 56.6 kg per year, industry groupCICCRA said in a recent report.

While some analysts say a thriving black market means realconsumption is higher, CICCRA's data would make neighboringUruguay the country with the highest rate of beef consumption.The average Uruguayan ate 58.2 kg in 2009, according to thestate-run National Beef Institute (INAC).

In Argentina last year, "consumption levels were high aswere exports, but that was due to a massive (cattle) sell-off,caused by ranchers' disenchantment and the sharp drought," LuisBameule, head of the Quickfood meatpacking company,told a Uruguayan radio station over the weekend.

Quickfood is part of another giant Brazilian meatpacker,Marfrig.

Argentine farmers, who have been at odds with thegovernment for years, blame agricultural policy for the crisisin the beef industry.

They say the repeated use of export curbs, sporadic pricecaps and deals with certain government-friendly companies andsupermarkets have distorted the market and driven many ranchersto sell off their herds.

Soybeans have escaped government intervention because theyare barely consumed locally, so have no impact on consumerinflation running at an annual rate of at least 20 percent.

Argentina was the world's fourth-biggest beef supplier in2009, shipping 653,000 tonnes to markets including Russia andthe European Union, according to the U.S. Department ofAgriculture (USDA).

This year the country is expected to slip to eighth placeas the supply crunch hits. Between January and July, shipmentsfell by 46 percent year-on-year to 185,900 tonnes, data fromthe CICCRA industry group shows.

Some meatpackers lost out on a lucrative contract with theEuropean Union, called the Hilton quota, by which they supplytender filet steak and sirloin.

"This is going to be the worst year for exports, exceptwhen we were excluded (from global markets) due tofoot-and-mouth disease in 2001/02," said Quickfood's Bameule.

Researchers and industry specialists gathered at a seminarat Argentina's Catholic University (UCA) said last month itcould take a decade for the country's cattle stocks to bereplenished.

"The crunch is going to last," Iriarte said. "This is justthe beginning." (Additional reporting and writing by Helen Popper; Editing byMarguerita Choy)