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Agricultural News

Peel Finds Imports of Mexican Cattle Likely to Decrease

Mon, 22 Feb 2016 11:24:55 CST

Peel Finds Imports of Mexican Cattle Likely to Decrease Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow/Calf Corner newsletter.

The U.S. and Mexican cattle and beef industries continue to integrate, building on a long history of trade between the two countries. Mexico has exported feeder cattle to the U.S. for more than a century and continues to do so today. After increasing in the mid-1980s, U.S. imports of Mexican cattle have averaged 1.08 million head for the last 30 years. In the most recent ten years, the average has been slightly higher at 1.14 million head per year. Mexican cattle have added an average of 2.9 percent annually to the U.S. calf crop for the past 30 years, with the percentage slightly higher in recent years as U.S. cattle inventories have declined.

In 2015, imports of Mexican cattle were 1.15 million head, up 3.5 percent year over year and just slightly higher than the ten year average. Imports dropped sharply at the end of 2015, with November down 29.7 percent and December down 36.4 percent compared to the same months one year earlier. This decrease in imports of Mexican cattle at the end of 2015 no doubt reflects lower U.S. cattle prices but also likely is a result of tight cattle supplies in Mexico. Lower U.S. cattle prices reduce the incentive to export cattle from Mexico but this is partially offset by the rapid erosion in the value of the Mexican Peso at the end of 2015, which keeps U.S. cattle prices relatively higher in Mexico. Despite indications of declining cattle numbers in Mexico, record high U.S. prices combined with a weakening Peso kept U.S. imports of Mexican cattle high through 2014 and most of 2015. Domestic Mexican cattle supplies have also been boosted by increased imports of cattle from Central America.

Mexican cattle imports typically follow a pronounced seasonal pattern with exports sharply lower from June through September, which reflects summer heat but more importantly, the rainy season and better forage conditions. These four months typically represent about 20 percent of total annual Mexican cattle imported by the U.S. The seasonal peak in cattle exported to the U.S. is usually in November and December, with those two months accounting for 25 percent of the annual total. In 2015, November and December represented just 17 percent of the total, while the summer months accounted for nearly 30 percent of total U.S. imports of Mexican cattle.

For the past decade, spayed heifers have accounted for an average of 14 percent of U.S. imports of Mexican cattle. This percentage was above that average in the years 2011-2014, reaching a peak of more than 26 percent of the total in 2012. Exporting more heifers was, I believe, a response to limited feeder supplies and a way to maintain cattle exports to the U.S. in response to strong market signals. However, this was not sustainable and likely contributed to a drawdown in the Mexican cow herd during this period. In 2015, the heifer percentage of total U.S, imports of Mexican cattle dropped to less than 12 percent. This decrease in heifers exported from Mexico occurred all year in 2015 and was taking place well before the overall drop in exports at the end of the year. This decrease likely reflects decreased female cattle inventories in Mexico and the start of herd rebuilding as a result. Moisture conditions are good across the majority of Mexico with only a tiny area of drought in northern Baja California, the southern extension of the California drought. Herd rebuilding is expected to accelerate in Mexico in 2016 with domestic cattle prices still at record levels.

Overall, fewer Mexican cattle are expected to be imported into the U.S. in 2016. Limited cattle supplies, further restricted by heifer retention; along with lower U.S. cattle prices are likely to keep cattle exports to the U.S. lower year over year. The continued strength of the U.S. dollar to the Mexican Peso offsets this to some extent but is unlikely to override the underlying supply fundamentals and market incentives. U.S. imports of Mexican cattle are likely to be down in absolute numbers and certainly will be down in relative terms as U.S. cattle inventories continue to expand.


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