In addition to looking to the future of the cattle and beef markets, it helps to look around in a more literal sense.
The USDA’s Foreign Agricultural Service recently issued a pair of reports on the cattle industries of the U.S.’ closest trade partners; Canada and Mexico. While the two countries are very different on cattle herd growth—Mexico’s is and Canada’s isn’t—they are in sync when it comes to trade. Both depend on the U.S. for most of their cattle and beef trade, are concerned about the current renegotiation of the North American Free Trade Agreement (NAFTA), and both are looking abroad for more opportunities.
The two reports—both titled “Livestock and Products Annual” for each country—focused heavily on cattle herd numbers and growth. As mentioned, Mexico’s is.
“The forecast calf crop production for 2018 is set at 7.5 million head, a small increase from 2017 as private sources report that the domestic herd is recovered from the 2012 drought that impacted production,” the Mexican report noted. Elsewhere it cited unofficial estimates that the national reproductive average for the herd is 50 percent. This gives a loose idea of the size of the Mexican cow herd.
Reproductive efficacy and quality was noted as a specific focus of the Mexican cattle industry. Improved genetics in the form of breeding cattle from the U.S. dominate Mexico’s live cattle imports.
“Demand for live cattle imports, principally for herd improvement (breeding cattle and dairy cows) remains stable,” the report said, estimating the 2018 volume to be around 35,000 head. “Through June of 2017, [97] percent of imported cattle in Mexico originated from the United States, with small amounts from Canada and Belize.”
Canada’s cow herd on the other hand has not risen to earlier expectations of growth.
“Canadian cattle numbers continued to decline in 2017 due to producer attrition and to higher slaughter,” the Canadian report summarized. “Expansion of the Canadian cattle herd has been highly anticipated for several years, but current data trends suggest that this expansion is unlikely to occur in 2018. At present, Canada does not appear to be retaining sufficient numbers of heifers to realize a significant cattle expansion until 2019 at the earliest.”
According to the report, the July 1 total Canadian cattle herd was estimated at just under 13 million head. It has been at this level for three years, after five years of a sustained plateau at roughly 13.5 million head. The recent high was just under 17 million head in 2005.
Though there have been market and environmental reasons for this decline in the Canadian total cattle herd, the issue of producers leaving the industry received special attention.
“Canadian cattle farm numbers have continued to contract as ranchers retire out of the industry without a successor. The number of cattle farms has fallen by 17 percent since 2010 and by 35 percent since 2005.”
The report also notes that there has been some amount of concentration of the industry, with average ranch size (head of cattle) having increased by 19 percent since 2005. However, it added that, “the loss of farms continues to outpace the rate of growth in cattle per farm, dragging down the size of the total cattle herd.”
Trade dynamics
According to July export report (most recent) compiled by the U.S. Meat Export Federation from USDA data, Mexico and Canada were the second and fourth largest markets, respectively, for exported beef and variety meats by volume year-to-date. They were the third and fourth markets, respectively, by value year-to-date.
Collectively, this pair of North American countries consumed 28.5 percent of the total volume of U.S. beef and variety meat exports through the end of July.
On the other side of the equation, almost all cattle imports into the U.S. come from Mexico and Canada, mostly in the form of feeder cattle and cull cows. Of imported beef and veal, Mexico and Canada collectively supplied 41.9 percent of all imports coming into the U.S. through the end of July.
Additionally, the U.S. represents the primary source and destination for Mexico’s cattle and beef imports and exports. As mentioned, almost all of Mexico’s live cattle imports come from the U.S., but so too do almost all of their live cattle exports go to the U.S.
“In 2014, 2015, and 2016, almost 100 percent (i.e., 99.99 percent) of the live cattle exports were to the United States principally for slaughter,” the Mexican report read. “The forecast export figure for 2018 is expected to grow to 1.2 million head, continuing the upward trend of 2017.”
Canada also looks to the U.S. as a primary destination for its beef.
“The Canadian dollar has strengthened through 2017 but will still remain low enough to create a competitive export environment,” the Canadian report noted. “The United States will continue to be the dominant market for both Canadian beef exports and imports. Imports in 2018 are forecast to increase, up 2 percent from 2017 estimates (to 5,000 metric tons) driven by a slightly stronger Canadian dollar, rebuilding of the domestic cattle herd, and a slight increase in consumer demand.”
NAFTA and beyond
Both reports noted that the countries are concerned about the current renegotiation of NAFTA. Both are also looking to expand their export market share to other countries, particularly in Asia.
“Chinese market demand will continue to remain strong while recently imposed safeguard measures by Japan will cool that market slightly,” noted the Canadian report.
The Mexican report specifically details actions taken by the Mexican government to improve export diversification. Among these efforts have been improved feeding infrastructure and utilization, improved genetics, and branching out into niche markets such as halal slaughter to make Mexican beef exports more attractive to the Middle East.
Mexican beef exports in 2017 through June went 90.5 percent to the U.S. Japan and Hong Kong were the next largest export destinations. It is estimated that 15 percent of Mexico’s total production of beef is exported. Projections for Mexican exports in 2018 is up. — WLJ
