Changes in Mexico-U.S. cattle and beef trade flows

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The latest livestock trade data provides additional indication that the Mexican cattle industry is undergoing rapid and dynamic change.  Changes in cattle and beef flows between the U.S. and Mexico have significant implications for the cattle industries on both sides of the border.  The newest component of the increasingly complex and integrated U.S.-Mexico cattle and beef industries is the rapidly growing imports of Mexican beef into the U.S.

Mexico U.S. imports of Mexican beef have increased rapidly the past four years resulting in Mexico becoming the fourth largest source of U.S. beef imports.  However, imports of beef from Mexico for the month of May were down just over 4 percent year over year.  This may not signify a new trend but it is significant as it represent the first decrease after 48 months of double digit year over year increases.  It raises the question of whether imports are slowing because of demand limitations for Mexican beef in the U.S.; or because the supply of beef in Mexico is limited and high domestic prices are reducing the economic incentives to export beef? Data to answer the question is not complete but there are indications in the U.S. beef export and cattle import data.

U.S. beef exports to Mexico have being decreasing since 2008.  For most of the intervening period a combination of high U.S. beef prices and a weaker Mexican Peso have made U.S. beef more expensive in Mexico and limited U.S. beef movement into Mexico. Mexican beef prices have risen significantly over the past 20 months to catch up with U.S. prices and bring domestic beef prices closer to a balance with imported beef prices.  Though U.S. beef exports continue to fall, the decrease the past two months has been less and may indicate that U.S. beef exports to Mexico will stabilize.  U.S. beef exports were down an average of 12 percent year over year for the past two months compared to average decreases of nearly 36 percent for each of the preceding 11 months. 

More evidence that the supply of cattle and beef in Mexico continues to tighten is in the data on Mexican cattle imported into the U.S.  Mexican cattle exports increased in 2011 and the first half of 2012 as strong U.S. markets and severe drought in northern and central Mexico forced significant cattle liquidation.  Despite dropping sharply in late 2012, total Mexican cattle imports for the year totaled nearly, 1.5 million head.  This total included over 384,000 spayed heifers, much more than typical.  In fact, U.S. imports of Mexican steers were actually down in 2012.  So far in 2013, total imports of Mexican cattle is down nearly 43 percent, over 406,000 head, compared to last year, based on weekly data through the end of June.  Mexican heifer exports to the U.S. are down more than 57 percent year over year for the year to date.  It appears that in Mexico, much as has happened in the U.S., significant female liquidation has occurred the past several years.  Mexican beef production, cattle exports and perhaps beef exports may be curtailed for the next couple of years at least.



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