The Mexican beef cattle industry has been severely impacted by the drought the past two years, much as the U.S. has been impacted. Additionally, changes in Mexican domestic beef consumption and beef trade have significant implications for the interaction of the Mexican and U.S. cattle and beef industries in the coming years.
Mexico emerged as a major customer for U.S. beef in 1997, replacing Canada as the second place export destination behind Japan. Mexico remained the number two market until 2004 when it became the number one export market for U.S beef following the first BSE case in the U.S. Mexico remained the top beef export market until 2011 when it dropped to number two behind Canada. In 2012, Mexico dropped again to third place behind Canada and Japan. Beef exports to Mexico have declined every year since 2008, with 2012 levels less than half of the peak exports in 2008. More disturbingly, beef exports to Mexico have declined while pork and poultry exports have continued to expand. U.S. pork exports to Mexico have increased 77 percent since 2008, while poultry exports have increased 31 percent over the same period. U.S. beef dropped from 36 percent of total meat exports to Mexico prior to 2009 to less than 13 percent of total meat exports to Mexico in 2012.
The decrease in U.S. beef exports to Mexico seems to be part of a bigger issue of stagnant or declining beef consumption in Mexico. While general economic conditions, including a struggling economy, no doubt contribute to weak beef demand, the issues seem to be more specific to the beef market with sharply higher beef prices and changing relative values for specific beef products contributing to changes in Mexican beef demand. The role of U.S. beef in the Mexican market and the potential for beef exports to Mexico may well have changed compared to the past 15 years.
Simultaneously, Mexico continues to grow as a beef exporter. This has been facilitated by rapid expansion of boxed beef processing with the Mexican beef market relying less on carcass trade. In 2012, Mexico exported nearly 250 thousand metric tons of beef, with over 40 percent of that to the U.S. Though data is limited, it appears that Mexico is exporting between 10 and 15 percent of total domestic beef production. U.S. imports of Mexican beef have grown sharply the past four years and Mexico has been the fourth largest source of beef imports since 2010, following Canada, Australia and New Zealand. Mexican beef exports to the U.S. consist primarily of middle meat cuts which have higher value for export compared to the domestic Mexican market. The combination of reduced domestic supplies due to exports and the change in proportions of middle and end meats in the Mexican market appears to have contributed to a relatively larger increase in end meat values in Mexico. This may be a significant part of the price impacts which are limiting beef consumption in Mexico. As beef values in the U.S. and Mexico continue to approach an economic balance, the impetus for beef exports to the U.S. may moderate resulting in slower expansion of Mexican beef into the U.S. market.