A strong relationship between the U.S. and Mexico is critical for U.S. beef industry trade. Mexico remains a substantial partner in the U.S. beef market, largely due to proximity and ease of transportation.
To better understand the relationship between the U.S. and Mexico beef markets, it helps to understand the Mexico beef production industry. According to a report from the USDA Foreign Agricultural Service (FAO), Mexico’s livestock industry is predicted to continue growing in 2019 with an increased interest in opening new export markets.
According to new data from the U.S. Meat Export Federation (USMEF), the U.S. exported 3.16 billion pounds of beef in 2018, an increase in 10.3 percent from 2017. This is the highest amount of beef exports on record and the first time exports have exceeded 3 billion pounds.
Beef production in Mexico is a large influencer on U.S. market trends and prices. Mexico is the third largest U.S. beef exporter, totaling 448,790,224 lbs. in 2018, a 7.02 percent increase from the previous year. The country also ranks fourth highest in U.S. beef imports, totaling 508,236,072 lbs. in 2018, a decrease of almost 12 percent from 2017.
For 2019, Mexico cow-calf numbers are expected to remain unchanged at 7.9 million head due to stable feed prices, according to the FAO report.
Most cattle, especially those in the northern states of Mexico, are grain-finished for 120 to 200 days. It is estimated that around 1,650 lbs. of grain are required to grow a 1,210-lb. animal for slaughter. The beef cattle sector used about 11 percent of Mexican feed production in 2017, according to the National Association of Producers of Food for Animal Consumption (Asociaciуn Nacional de Fabricantes de Alimentos para Consumo Animal, ANFACA).
Cattle production systems and breeds vary greatly across the country and are determined mainly by geography and economic differences between the North, South and Center (Bajio) Mexico. Most large operations are located in northern Mexico, and small-scale backyard farming is more common in the southeastern states. The biggest beef-producing states in 2018 were Veracruz, Jalisco, San Luis Potosi, Sinaloa and Chiapas.
Mexican ag uncertainties
President Andrйs Manuel Lуpez Obrador, inaugurated on Dec. 1, 2018, came into office with promises to cut the national budget, eliminate corruption, and decrease poverty. With that promise came the elimination of many agricultural support programs to divert funding to poverty alleviation programs. This created uncertainty in the Mexican agricultural industries.
Cattle programs such as the Livestock Promotion Program (Programa de Fomento Granadero) and the Genetic Improvement Program (Programa de Mejoramiento Genйtico) were two agricultural support programs not included in the new administration’s national budget. It is believed these eliminations will not have a huge impact on production in the immediate future, but there is uncertainty whether the removal will cause long-term repercussions.
However, Mexico’s traceability program, the National Animal Identification System (SINIDA), will remain in place, but implementation and enforcement are most likely to remain an issue.
The Livestock Credit Program (Crйdito Ganadero a la Palabra) is a new program aimed at reducing poverty. Its goal is to support small livestock producers and increase the efficiency of producers with herds of one to 35 animal units (AU).
There is also an effort to develop a domestic beef carcass grading system to help producers obtain different prices on selected cuts for U.S. export. However, the main meat industry organizations have yet to come to an agreement on the program.
Trade and policy
The majority (97 percent) of cattle imported into Mexico came from the U.S. in 2018 and the remaining from Canada. That year, live cattle imports into Mexico were 29 percent lower than in 2017 due mainly to the difficulties Mexican slaughterhouses face with processing and handling the heavier and larger carcasses from the U.S.
Almost all live cattle exported from Mexico are sent to the U.S., but a small number is seen exported south of Mexico to Belize, El Savador, and Costa Rica. Mexico’s live cattle exports for 2019 are estimated at 1.34 million head, reflecting a continued growth trend, as exports in 2018 were 8 percent higher than 2017.
FAO reports that although there is an expected increase of Mexican domestic beef production by 2-3 percent in 2019, high levels of production in the U.S. and relatively high domestic beef prices will likely keep beef production flat.
Recently, Mexico has embarked on opening new export markets such as Vietnam, Indonesia, Singapore, China, the Middle East, and Egypt, but there has yet to be significant ground gained in opening new markets. The country has also looked into diversifying the industry through halal certification, but only a handful of companies are able to meet the requirements and obtain the proper certification at this time.
Mexico is an important partner in the success of the U.S. beef industry and although their market is fairly small at the moment, efforts to expand into other markets may change that. — Anna Miller, WLJ correspondent
