Report Highlights:

Because of higher prices, and marginal economic performance, the rate of growth in meat consumption that Mexico has experienced lately is expected to decelerate. Though pork prices have fallen considerably this past year, pork consumption remains basically the same as the past two years. Many middle income and lower income consumers are opting to switch to poultry products as their protein source in the face of rapidly increasing meat prices. Live cattle exports to the United States continue to climb, as do dairy cattle imports from the United States.

Executive Summary

Live Cattle & Beef: Mexican cattle inventories are expected to decline slightly in calendar year 2008 due in part to increasing exports to the United States and the need for feedlot operators to reduce inventories due to increasing feed costs. Cattle slaughter and cattle export figures are forecast slightly higher in 2008. Beef production is forecast very slightly higher, along with total consumption and imports. Mexico is likely to continue importing grain-fed beef from the United States to meet growing demand from the hotel and restaurant sectors as well as from the general population.

Live Hogs & Pork: Post’s 2008 forecast figures for swine and pork have been revised slightly from the previous report (MX7066). Total imports are expected to be down considerably, domestic slaughter will remain consistent with past years, and ending inventories have been revised slightly downward. Mexico’s imports of U.S. hogs are forecast to reach 150,000 head in 2008, lower than the previous estimate of 175,000 head, though still slightly higher than the 2007 end of year estimate of 125,000. Pork production is forecast to increase in 2008 by roughly eight percent. Consumption is expected to increase by three percent, and imports are expected to decline by nearly 10 percent. Mexico’s pork exports are forecast to continue growing in 2008 as exporters take advantage of the Japan-Mexico free trade agreement and other opportunities in Asia.

Production

The CY 2008 cattle production forecast has been revised slightly downward from the previous estimate, though it is still about 3 percent higher than the 2007 level. Despite a larger calf crop and higher imports, total 2008 cattle inventories are still forecast slightly lower due to increased slaughter and greater cattle exports. Feedlot placements could decline in 2008 due to higher feed costs. Less than one-third of Mexico’s beef production comes from feedlot operations, which are most significantly affected by higher grain prices. Beef production for 2008 is forecast to increase only marginally over 2007 levels, reflecting dampened consumer demand resulting from higher prices.

Consumption

Year-over-year beef consumption is expected to increase, though very slightly, and slower than the rate of population and income growth. Demand for beef is growing more rapidly among the middle and upper population segments, particularly in Mexico’s larger cities where disposable income is higher. Higher read meat prices have significantly changed middle and lower income consumers’ purchasing decisions. Demand from Mexico’s HRI industry also remains strong.

Trade

Imports of dairy cattle and beef are forecast upward very slightly from the previous year’s figures. Trade sources estimate that total beef imports from the U.S. will include 90 percent boxed beef and 10 percent beef carcasses in CY 2008. Most of this beef will be rounds and chucks (70 percent), with the remainder comprised of high quality cuts (30 percent). Beef imports from the U.S. should continue to increase because of competitive prices and quality, while beef from most non-NAFTA countries is still subject to high import tariffs or health restrictions due to BSE and Foot and Mouth Disease.

Post anticipates that Mexico will import roughly 90,000 head of cattle in CY 2008, nearly 30 percent more than CY 2007. Nicaragua, New Zealand, and Australia remain the main suppliers of cattle to Mexico. Though U.S. exports to Mexico are increasing (in 2007 the U.S. exported 13,779), the U.S. is no where near pre-BSE cattle export levels, which were roughly 150,000 head in 2002.

Mexican cattle exports to the United States in 2007 are forecast to increase from post’s previous estimate due to continued improvements controlling cattle tuberculosis and brucelosis by the Mexican government, and a slightly improved calf crop. Domestic feeder steer exports to the United States in CY 2007 have been revised slightly downward.

Policy

US cattle exports to Mexico were banned following the detection of BSE in Washington State in 2003. In October 2006 the Mexican Ministry of Agriculture (SAGARPA) agreed to allow imports of U.S. dairy heifers. Though compliance with the dairy heifer protocol is onerous, U.S. exports to Mexico have increased in the past year. However, the trade is constrained by restrictions put in place in the protocol. Those restrictions include the stipulations that:

1. Only animals equal to or less than 24 months of age are eligible for export; and
2. Only animals originating from herds that have been registered by a purebred dairy breed association or by the Dairy Herd Improvement Association (DHIA) are eligible for export.

Following the designation of the U.S. as country with “controlled risk” for BSE, the U.S. is working with Mexican government officials to normalize the U.S.-Mexico cattle trade, in compliance with the World Organization for Animal Health (OIE) standards. Similarly, Mexico has taken no steps in recent years to re-open its market to bovine products. Below is a listing of approved and prohibited products.

Prohibited products:

• Live cattle (except for dairy cattle under 24 months)
• Boneless and bone-in meat from cattle 30 months of age or older
• Bovine offal and viscera other than those currently authorized
• Products derived from non-protein-free tallow
• Gelatin and collagen prepared from bone
• Ruminant meal
• Ground beef

Permitted products:

• Dairy Cattle
• Tallow (human consumption)
• Blood (human consumption)
• Breeding bulls
• Bone-in meat from cattle under 30 months of age
• Boneless beef from cattle under 30 months of age
• Marinated boneless beef from cattle under 30 months of age
• Beef based preparations, beef/pork based preparations, beef/sheep based preparations and beef/pork/poultry based preparations
• Veal boneless or bone-in
• Hearts, kidneys, tongue and lips from cattle under 30 months of age
• Diaphragm and trimmings from cattle under 30 months of age
• Tripe from cattle under 30 months of age
• Meat, carcasses, viscera, and heads from sheep under 12 months of age
• Meat, carcasses, and viscera from goats under 12 months of age
• Liver
• Milk
• Dairy products
• Semen
• Embryos
• Protein-free tallow not fit for animal consumption
• Dicalcium phosphate (DCP)
• Skins and hides
• Gelatin and collagen obtained from hides and skins
• Pet Food (see MX4040 for more details)
• Sausage made from beef and pork with or without cheese
• Live sheep for immediate slaughter

Marketing

Imports of breeding dairy cattle and animal genetic products into Mexico are normally performed directly by dairy cattle producers, medium and large dairy owners, distributors, and government institutions. In some cases, Mexican cattle buyers receive financial assistance from government-funded programs (PROGAN) to purchase animals of high quality genetics. Participation in major national and state livestock shows may provide opportunities for sales of U.S. livestock genetics to Mexican livestock producers.

Marketing promotion programs for U.S. red meats through the U.S. Meat Export Federation (USMEF) office in Mexico City enable exporters to access niche markets for U.S. products in the hotel and restaurant trade, and other sectors. Prospects exist in the short and medium terms for increased meat sales fueled by Mexico’s population growth and insufficient domestic production. The development of supermarket chain stores, fast food restaurants and the tourist sector all present opportunities for market growth.

Further Reading

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March 2008