the role of u.s. beef in the mexican market derrell s. peel department of agricultural economics...

The Role of U.S. Beef in the Mexican Market

Derrell S. PeelDerrell S. Peel

Department of Agricultural Department of Agricultural EconomicsEconomics

Oklahoma State UniversityOklahoma State University

Improved Policy Decisions

• Understanding industries in both countries– Production– Consumption

• Industry changes– Change in either country affects both

countries

• Increased economic integration– More rapid and dramatic impacts

CATTLE IMPORTS FROM MEXICOAnnual

0

500000

1000000

1500000

2000000

1975 1978 1981 1984 1987 1990 1993 1996 1999

Thou. Head

Mexico

I-N-1310/09/01

CATTLE EXPORTS TO MEXICOAnnual

0

100000

200000

300000

400000

1975 1978 1981 1984 1987 1990 1993 1996 1999

Thou. Head

Mexico

I-N-1410/09/01

U. S. Beef Exports to Mexico(Variety Meat Excluded)

0

50000

100000

150000

200000

250000

Met

ric

Ton

s

1994 1995 1996 1997 1998 1999 2000 2001

Cattle and Beef Markets

• Many products => different markets

• Different values– Production system– Consumer preferences

• Regional differences in Mexico– Production– Consumption

Factors Affecting U.S. Beef in the Mexican Market

• Insufficient domestic production• Changing preferences of Mexican

consumers• Price

– Specific products and quality

Domestic Mexican Production

Mexican Beef Demand

• Quantity– Total Kgs/Year

• Consumption Profile– Carne Norte, Carne de Engorda,

Tradicional, Carne de Vaca• Regional Consumption Profile

– Different Tastes and Preferences

• Population

Mexican Beef Demand is Changing

• Income• Population demographics• Urban Migration• Lifestyle changes

Income by Decile, Q3, 2000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

I II III IV V VI VII VIII IX X

Pe

sos

Income Average

Household Food Expenditures

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Low 10 Low 30 Nat

19982000

National Average Food Expenditures, 1998 and 2000

• Cereals/Veg decreased from 30.3% in 1998 to 28.3% in 2000

• Meat decreased from 24.3% in 1998 to 23% in 2000

• Dairy/Eggs unchanged from 16.5% to 16.7%; dairy up/eggs down

0500

10001500200025003000350040004500

1998 2000

OtherFatsSeafoodTubersFruitsEggsDairyCarneVegCereals

Low-Income Food Expenditures, 1998 and 2000

• Cereals/Veg decreased from 45.9 in 1998 to 43.2 in 2000

• Meat increased from 14.3 % in 1998 to 14.9 % in 2000

• Dairy/Eggs increased from 11.5 % to 12.5 %; dairy up/eggs down

0200400600800

1000120014001600

1998 2000


Food Expenditures by Income Group, 1998

• Total food exp by low 10% are 36% of national average

• Exp on meat by low 10% is 21% of National average 0

500

1000

1500

2000

2500

3000

3500

NA

TIO

N

LO

W10

%


Food Expenditures by Income Group, 2000

• Total food exp by low 10 are 38% of national average

• Exp on meat by low 10 is 25% of National average

0500

10001500200025003000350040004500

NA

TIO

N

LO

W10

%


Food Budget Allocation, 1998

• Cereals/Veg are 46% of exp by Low 10 compared to 30.3 % nationally

• Meat is 14.3 % of exp by Low 10 compared to 24.3 % nationally

• Dairy/Eggs 11.5 % compared to 16.5 %

0%

20%

40%

60%

80%

100%

NA

TIO

N

LO

W 1

0%


Food Budget Allocation, 2000

• Cereals/Veg are 43% of exp by Low 10 compared to 28.3 % nationally

• Meat is 14.9 % of exp by Low 10 compared to 23 % nationally

• Dairy/Eggs 12.5 % compared to 16.7 %

0%

20%

40%

60%

80%

100%

NA

TIO

N

LO

W 1

0%


Income-Expenditure Elasticities by Income Decile

• Food– I to II 0.81– II to III 0.63– III to IV 0.44– IV to V 0.48– V to VI 0.20– VI to VII 0.57– VII to VIII 0.47– VII to IX 0.21– IX to X 0.19

• Meat– I to II 1.37– II to III 1.37– III to IV 0.61– IV to V 0.46– V to VI 0.41– VI to VII 0.60– VII to VIII 0.36– VII to IX 0.22– IX to X -

0.09

Rural-Urban and Other Regional Differences

States with more than 40 percent rural population

States with more than 60 percent large urban population

Mexican Meat Types

• “Carne Norte”– Quasi-American style, more fat and some marbling

• “Carne de Engorda”– Finishing in feedlots or on pasture with

supplementation– Little fat (but white) and no marbling

• “Carne Tradicional”– Grass finished– Little fat (yellow) and no marbling

• “Carne de Vaca” or “Carne de Desecho”– Cull cow and bull beef

Changes in Meat Retailing

Traditional


“Old” Modern


ModernModern

Food Service

Different Consumer Preferences

U.S. and Mexican Beef Carcass Values

60

70

80

90

100

110

120

US$

/cw

t.

1994 1995 1996 1997 1998 1999 2000 2001

MEXUS

Summary

• Mexican industry is in transition– Demand changes are driving

production changes

• U.S. beef is providing needed supply• U.S. beef helps improve the product

mix• U.S. beef is price competitive (for

specific products)

Observations

• The impacts of beef demand change on the Mexican cattle and beef industry depend on the quantity of beef demand and on the composition of beef demand.

• The increase in demand for fed beef implies increased semi-intensive production with impacts on total production potential

• Changes in regional animal and product flows

Observations

• Equilibrium between U.S. and Mexican markets

• Growth in cow-calf and stocker production

• Limited growth in feedlot production• Productivity growth?• International trade

Household Food Expenditures, 2000

• National– Food Expend = 44.1 Pesos/day ($4.66/day)– Meat Expend = 10.1 Pesos/day ($1.07/day)

• Low 30 Percent– Food Expend = 25.4 Pesos/day ($2.69/day)– Meat Expend = 5.0 Pesos/day ($0.53/day)

• Low Income– Food Expend = 16.7 Pesos/day ($1.77/day)– Meat Expend = 2.5 Pesos/day ($0.26/day)

the role of u.s. beef in the mexican market derrell s. peel department of agricultural economics...

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