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Agricultural News


Peel Addresses Changing Dynamics of Mexico Cattle Industry

Mon, 13 Apr 2015 14:59:56 CDT

Peel Addresses Changing Dynamics of Mexico Cattle Industry Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow/Calf Corner newsletter.


The Mexican cattle and beef industry is always dynamic and continues to evolve. The industry has faced challenges in recent years with declining cattle inventories while attempting to maintain domestic production and cattle exports; all while beef exports have increased sharply.


The Mexican beef cattle industry experienced the same drought conditions that affected the U.S. in 2011-2013 leading to forced herd liquidation. Moisture conditions improved significantly in 2014 and so far in 2015. Herd expansion has been slow to begin in Mexico but may be beginning at the current time. Cows and heifers have played a large role in maintaining domestic Mexican beef production and cattle exports in recent years and increased female slaughter contributed to herd liquidation.


Record U.S. cattle prices and a weakening Peso contributed to a 12.8 percent year over year increase in Mexican cattle exports to the U.S. in 2014 despite extremely tight cattle supplies in Mexico. Increased Mexican cattle exports in 2014 included more steers and spayed heifers compared to the previous year. U.S. imports of Mexican cattle are up less than one percent for the first two months of 2015 compared to last year. Year to date U.S. imports of Mexican steers are up 4.5 percent while heifer imports are down nearly 15 percent.


U.S. imports of Mexican beef are up 40 percent for the first two months of 2015 compared to the same period last year. Reduced U.S. beef production and record high U.S. beef prices, abetted by the strong dollar, provide a strong incentive for more beef exports from Mexico to the U.S. which, in 2014, resulted in a 23 percent year over year increase. Mexico has rapidly increased beef exports since 2009. Total Mexican beef exports increased 17 percent in 2014 compared to one year earlier. The 2014 export total is only slightly lower than the 2012 record despite the loss of the Russian market after 2012. Increased Mexican beef exports are the result of rapid growth in feedlot production, increased carcass weights (partially offsetting lower cattle slaughter), and widespread adoption of boxed beef technology in recent years. The U.S. is the largest destination for Mexican beef exports, accounting for 84 percent of the 2014 total. Mexico has been the fourth largest source of U.S. beef imports since 2010. Other major Mexican beef export markets include Japan and, in 2014, Hong Kong.


Mexico has been one of the top four U.S. beef export destinations for 20 years. Mexico imported 8 percent more U.S. beef in 2014 compared to the prior year despite record high U.S. beef prices and a poor exchange rate which makes U.S. beef even more expensive in Mexico. However, U.S. beef exports to Mexico are down 13.5 percent year over year so far in 2015.


Mexico, like the U.S. and Canada, is faced with the need for herd rebuilding which can only occur by squeezing current production to allow for increased heifer retention and reduced cow slaughter. It will be difficult for Mexico to maintain the current level of domestic beef production, cattle exports and beef exports as herd expansion begins. Continued strong U.S. prices for cattle and beef will continue to favor cattle and beef exports to the U.S. along with decreased imports of U.S. beef. Current exchange rates add to these incentives. However, limited cattle inventories and increased heifer retention in Mexico may moderate either cattle exports or beef exports or some combination of both. Early trade flows in 2015 may indicate that domestic Mexican cattle demand may be strengthening enough to retain more feeder cattle in the country.   U.S. beef exports to Mexico will continue to face the disadvantage of high U.S. prices aggravated even more by a weak Mexican Peso. However, to the extent that Mexico continues to grow beef exports, imported beef will be needed to maintain domestic beef supplies. The increasingly bilateral nature of U.S.-Mexican beef trade emphasizes that beef trade is less about an imbalance in beef quantities in the two countries and more about the value enhancement from improved quality distribution and product mix in the two countries.


 

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