The latest trade data for July provides additional indication that recent trends in U.S. and Mexican cattle and beef trade have changed dramatically. The 51 percent decrease in July imports of Mexican cattle, compared to last year, is a continuation of the change in Mexican cattle imports that has been happening for several months. Although total annual imports of Mexican cattle in 2012 were the second largest on record, the rate of imports dropped dramatically in August 2012 and has continued to date. So far in 2013, imports of Mexican cattle are down 46 percent year over year, a decrease of 459,000 head through July. Mexican cattle imports are expected to continue below year ago levels for the remainder of the year, although the percent decrease will be smaller when compared to the decreased monthly levels in the second half of 2012.
U.S. imports of Mexican beef have decreased since April, decreasing in May and July and growing only slightly in June. This follows dramatic double-digit monthly growth, year over year, for 51 of the 52 months prior to April. Since 2009, Mexico has emerged rapidly as the fourth ranked source of U.S. beef imports. However, the recent data suggests that growth of Mexican beef imports may have stalled at this point. This raises the question of what is limiting Mexican exports of beef to the U.S. There seems to be no significant change in the value of Mexican beef in the U.S. leaving the possibilities that demand is lacking for further growth or that supply is limited in Mexico.
U.S exports of beef to Mexico have decreased sharply from a peak in 2008. Monthly exports decreased year over year in 49 of the 56 months prior to June of 2013. However, June and July beef exports to Mexico were both more than 30 higher compared to one year earlier. Most of the decrease in beef exports to Mexico since 2008 has been attributed to high U.S. beef prices (especially relative to pork and poultry prices), aggravated by exchange rate effects. There have been no changes in beef prices or exchange rates that would explain the dramatic increase in beef exports to Mexico in June and July.
I believe that changes in the last year in U.S. imports of Mexican cattle and in the last two to three months in imports of Mexican beef and exports of beef to Mexico are all related to underlying changes and impacts in the Mexican cattle and beef industry. Specifically, the severe liquidation of cattle in Mexico in recent years has resulted in, first, a decrease in Mexican cattle available for export to the U.S., and subsequently, impacts on domestic beef production that are impacting beef trade flows. Reduction in beef production is likely limiting beef supplies for export and simultaneously increasing beef import demand in Mexico to maintain domestic market supplies. Though data to confirm these apparent impacts are limited, it appears that the shortage of cattle in the Mexican market is very acute. Reported prices for slaughter cattle in Mexico have been higher than U.S. fed cattle prices, adjusted for exchange rates, for most of 2013, with Mexican slaughter cattle prices exceeding U.S. prices by roughly 5 percent in June and July. It is difficult to predict if these recent trends will continue but it appears that the remainder of 2013 and 2014 is likely to be characterized by little or no growth in U.S. imports of Mexican beef; potential for the first year over year increases in beef exports to Mexico since 2008; and severely restricted imports of Mexican cattle.