Report Highlights: 

Mexican beef consumption continues to fall next year while pork rebounds slightly as the more affordable meat. Similarly, beef imports are seen falling while pork imports grow. Cheaper international grain prices mean meat production grows next year. Mexico’s cattle herd recovery remains 3-5 years out, as feeder cattle exports continue to be pulled north by high U.S. prices. Over half of Mexico’s beef production now comes from federally regulated plants. PEDv issues are under control in most areas.

Animal Numbers, Cattle 

Meat, Beef and Veal

Production: 

The Post 2015 Mexican beef production forecast is 1.765 million metric tons (MMT) carcass weight equivalent (CWE). This level is slightly above Post’s revised 2014 production estimate, as the high price of beef and the availability of cheaper proteins will continue to limit demand. In addition, strong feeder cattle exports to the United States mean fewer fed cattle available for slaughter domestically. Still, cheaper grain prices, improvements in feeding practices, animal welfare, and farm management are contributing to better weight gains and carcass yields, especially in northern Mexico’s grain based feed lots. Private sources indicate that during 2013, the weight of cattle sent to slaughter was near 450 kilograms while in 2014 the average weight of cattle has increased to 510 kilograms at high-end feedlots. These higher weights are allowing the industry to increase production marginally, even with a lower cattle slaughter rate. In northern Mexico, feed lot programs are continuing to grow as international grain prices are once again attractive and should keep production costs relatively lower. Consequently, Post expects better live animal and carcass weights this year and next, compared to recent years. 

The 2012 drought and high international grain prices pushed cattlemen to select and keep the best calves and heifers for breeding and feeding purposes in farms. Combined with slightly higher imports of cattle for reproduction (which typically contain improved genetics), these factors should lead to improved calf production birth rates in the mid-long term. 

Post’s 2014 production estimate was revised downward, for many of the same reasons listed above, including demand-limiting high beef prices and lower overall availability for slaughter. Sources indicate that although the ongoing plan to repopulate the cattle herd has been in practice since last year, its effects have not yet led to increased beef production. Post’s 2013 production is unchanged based on official information from SENASICA-SAGARPA which is in charge of Mexico’s federally inspected (i.e., TIF) beef slaughter facilities. 

Total Cattle Herd Struggling to Return to Normal Levels 

Although private and public efforts towards cattle herd repopulation after the drought continue, producers are seeing higher prices for feeders and fed cattle, a near-term disincentive for the overall industry to retain substantially higher breed stock. According to industry sources, Mexico’s export of live cattle could return to its recent high levels due to attractive prices in the United States. An August Ag office visit to a Mexican border cattle export pen and discussions with brokers anecdotally confirm this situation. 

Currently, cattlemen are looking to retain their best genetics to improve upon Mexico’s low breeding rate. Progress is being made towards this goal with the ongoing practice among cattlemen that are repopulating the domestic herd specifically with improved genetics breeding cows. Also, better nutrients in feed rations (i.e., a larger percentage of grains and less dry forage) should improve cattle productivity. If successful, these two measures should not only safeguard domestic production but bolster it in a manner that eventually would allow the Mexican cattle sector to return to traditional calf exports and customary slaughter levels after 2015. 

The cattle sector is optimistic that these evolving improvements will permit overall cattle inventory to recover in 3-5 years. With recovery pushed back yet farther, Post is forecasting 2015 cattle ending inventories to continue to decline, though at a slower rate, as the industry continues to consolidate and backyard dual purpose stock continues its historical decline. Herd rebuilding has been slowest amongst small scale producers. For 2014, cattle ending inventory is increased, due to growth seen in the feeding industry, as there was less loss (compared to the drought years) and more incentive to retain and feed animals. Post’s new 2013 cattle ending inventory was kept unchanged due to the availability of official data. 

Consumption: 

The Post 2015 Mexican beef production forecast is 1.765 million metric tons (MMT) carcass weight equivalent (CWE). This level is slightly above Post’s revised 2014 production estimate, as the high price of beef and the availability of cheaper proteins will continue to limit demand. In addition, strong feeder cattle exports to the United States mean fewer fed cattle available for slaughter domestically. Still, cheaper grain prices, improvements in feeding practices, animal welfare, and farm management are contributing to better weight gains and carcass yields, especially in northern Mexico’s grain based feed lots. Private sources indicate that during 2013, the weight of cattle sent to slaughter was near 450 kilograms while in 2014 the average weight of cattle has increased to 510 kilograms at high-end feedlots. These higher weights are allowing the industry to increase production marginally, even with a lower cattle slaughter rate. In northern Mexico, feed lot programs are continuing to grow as international grain prices are once again attractive and should keep production costs relatively lower. Consequently, Post expects better live animal and carcass weights this year and next, compared to recent years. 

The 2012 drought and high international grain prices pushed cattlemen to select and keep the best calves and heifers for breeding and feeding purposes in farms. Combined with slightly higher imports of cattle for reproduction (which typically contain improved genetics), these factors should lead to improved calf production birth rates in the mid-long term. 

Post’s 2014 production estimate was revised downward, for many of the same reasons listed above, including demand-limiting high beef prices and lower overall availability for slaughter. Sources indicate that although the ongoing plan to repopulate the cattle herd has been in practice since last year, its effects have not yet led to increased beef production. Post’s 2013 production is unchanged based on official information from SENASICA-SAGARPA which is in charge of Mexico’s federally inspected (i.e., TIF) beef slaughter facilities. 

Total Cattle Herd Struggling to Return to Normal Levels 

Although private and public efforts towards cattle herd repopulation after the drought continue, producers are seeing higher prices for feeders and fed cattle, a near-term disincentive for the overall industry to retain substantially higher breed stock. According to industry sources, Mexico’s export of live cattle could return to its recent high levels due to attractive prices in the United States. An August Ag office visit to a Mexican border cattle export pen and discussions with brokers anecdotally confirm this situation.

Currently, cattlemen are looking to retain their best genetics to improve upon Mexico’s low breeding rate. Progress is being made towards this goal with the ongoing practice among cattlemen that are repopulating the domestic herd specifically with improved genetics breeding cows. Also, better nutrients in feed rations (i.e., a larger percentage of grains and less dry forage) should improve cattle productivity. If successful, these two measures should not only safeguard domestic production but bolster it in a manner that eventually would allow the Mexican cattle sector to return to traditional calf exports and customary slaughter levels after 2015. 

The cattle sector is optimistic that these evolving improvements will permit overall cattle inventory to recover in 3-5 years. With recovery pushed back yet farther, Post is forecasting 2015 cattle ending inventories to continue to decline, though at a slower rate, as the industry continues to consolidate and backyard dual purpose stock continues its historical decline. Herd rebuilding has been slowest amongst small scale producers. For 2014, cattle ending inventory is increased, due to growth seen in the feeding industry, as there was less loss (compared to the drought years) and more incentive to retain and feed animals. Post’s new 2013 cattle ending inventory was kept unchanged due to the availability of official data.

Trade: 

Post forecasts Mexico’s 2015 beef imports marginally lower compared to this year, given the expected situation in the United States of increased beef prices and lower supply. Post’s 2014 beef import estimate is kept unchanged based on trade data to date. Limited supplies and higher prices from the United States, along with higher weights for Mexican domestic cattle and the closure of the Russian market for Mexican exports (i.e., less need for replacement product) are all reducing demand, which will see import levels steady to just slightly above 2013 levels. Post’s 2013 beef import estimate is kept unchanged. 

The improved quality, food safety, and sophistication of Mexican beef operations have opened doors for increased and targeted Mexican beef exports over the past several years. Post’s 2015 Mexican beef export forecast is 185,000 MT CWE, slightly up on the retained 2014 estimate. The 2014 estimate is based on available trade data, which likely reflects the loss of the Russian market for part of the year. Also, the higher costs of certifying product to Russia curbed incentive to export, as better prices were found within Mexico. Post’s 2013 exports are kept unchanged. 

Seeking Out Niche Markets and Marketing or Process Claims 

An increasing share of domestic production is processed and distributed with certifications and superior quality standards. As such, Mexican industry and government officials are continuing to look for expanded or new trade opportunities in the United States, Japan, Angola, Panama and several Asian countries. Also, Mexico continues struggling to access the Russian market, which has been closed due to concerns over b-agonist use, specifically ractopamine and clenbuterol. Primary cuts exported to the U.S. continue to be rib eye, chuck roll, T-bone steaks, and tenderloins. Given that Mexico lacks an internationally recognized quality grading program, most Mexican beef is given a no-roll classification resulting in a discount price compared to similar quality beef from other origins. As such, several industry members look to be innovative and find ways to obtain higher premiums for their products in international markets that can garner a kosher, halal or even a USDA process verified program certification (e.g. “grass fed” or “natural”). 

Strong Demand in the U.S. Pulls Live Cattle Exports Higher 

The Post new forecast for live cattle exports in 2015 is forecast higher to 1.175 million head, given the expectation for attractive prices in the United States. Also, domestic supplies are expected slightly higher, based on the previously mentioned genetic improvements and the fact that the higher rate of heifers being kept in Mexico will deliver their offspring by 2015. Usually, cattlemen export the majority of live animals by the end of the year once the rainy season is over. Post’s 2014 export estimate is revised up, to 1.10 million head. This level is 5 percent higher than Post’s unchanged 2013 data of 1.045 million head, year on year growth that is corroborated by conversations with brokers and trade registries along the border. The 2013 Post estimate remains unchanged. 

Live Cattle Imports Grow Slightly to Boost Genetics 

Efforts by Mexican producers to repopulate beef and dairy herds are pushing import forecasts for 2015 higher. The import estimate for 2014 is kept unchanged, reflecting official figures to date. These animals are currently allowed for breeding purposes only but numerous feedlot operations have expressed an interest in sourcing U.S. animals directly for slaughter. Although negotiations are ongoing, at present, this practice is not allowed as there is not a Mexican zoosanitary requirement sheet (HRZ) available. 

Policy: 

Single Window for Trade On Its Way To Meeting Expectations 

Mexico implemented the “New Single Window for Trade” (VUCEM by its Spanish acronym) at all border crossing points in early October 2013. The system allows brokers to electronically file documentation that accompanies cargo shipments of any and all products and was specifically intended to streamline the Customs clearance process. Trade sources report, however, that the electronic system requires more time than the previous paper system and still suffers from occasional glitches. Mexican authorities are working on improving efficiencies and are looking for ways to expedite document and product reviews. Also, they are offering informative seminars towards the complete designed to generate full implementation of the system and its acceptance by Mexican users. Acceptance of the system is gradually increasing. 

Federally Inspected Type (TIF) Establishments Supported 

In late January 2014, SAGARPA announced nearly U.S. $50 million in government support to promote abattoirs and processing plants under federal oversight and inspection, known as TIF plants. SENASICA claims that the support will be used to help guarantee the production and processing of safe meat and poultry products. This program should reinforce the current trend of expanding TIF-based production at the expense of shrinking municipal production. 

Trade Liberalization Not Everyone’s Best Friend 

As previously reported, Mexican meat sector representatives report that they feel threatened by Trans Pacific Partnership (TPP) negotiations and that the domestic meat sector could be challenged as other TPP negotiating members may be able to offer less expensive beef products into Mexico. They acknowledge that countries like Chile, Singapore, Peru, Malaysia and Vietnam present opportunities for Mexican exports but other countries such as Australia and New Zealand represent a challenge to them in these third-country markets. 

Marketing: 

It is clear that the Mexican market is strategic for U.S. exports; in volume, Mexico is one of the United States’ top export markets for meat products. The majority of said volume is covered by beef and pork, with very little contribution of other “non-traditional” meats like: veal, lamb, and even bison. In both beef and pork, U.S. products have maintained a positive image in the mind of the Mexican consumer, who is aware of the high quality and safety and is familiar with the meat products available from the United States. The market is well-developed, mature but not saturated, and with knowledgeable, specialized players from both countries. 

For beef, there is not much difference between accessing the Mexican retail, foodservice, and processing industry. Importers, distributors, and brokers basically cover all three sectors in their portfolios, so there is no need to approach any sector in particular with a different strategy. The current marketing trend is to position and differentiate U.S. products based on quality in medium and high-end markets. The increase in demand for higher quality beef by the Mexican consumer can be easily confirmed by the different options available in supermarkets’ displays, as well as the average restaurant menu. The macro-economic stability and the current trend of healthy eating and staying fit reinforce opportunities for top-quality U.S. products to enter the market quite easily. 

Still, there are also opportunities in beef where the consumer is already aware of the difference in quality when using U.S. products and the product is widely used in everyday recipes. Products like knuckle, inside- and outside-round are part of the average, traditional Mexican dishes, prepared at home and consumed every day. Availability of these products has decreased, due to supply issues in the domestic industry and a shift of U.S. exports to other markets, mainly Asia. As a result of price sensitivity in this specific niche, the focus needs to change to prioritize volume rather than price. 

As for pork, the market is highly driven by food processors, which mainly use bone-in hams as a source for sausages, deli, and other added-value products. Industry sources calculate that 70 percent of total pork imports are for food processing, leaving the other 30 percent to the fresh, unprocessed products, directly distributed to the retail and foodservice sectors. In pork, there are also opportunities for specialized products that, again, are included in traditional Mexican meals like Boston butt (which can be used for the famous trompo/pastor dish). Additionally, the bone-in loin and ribs are currently becoming a popular entrée, especially in sports-themed restaurants/bars. 

Finally, for non-traditional meats mentioned before, like veal and lamb, although trade volume is fairly small, some market opportunities lie in high-end urban and tourist destinations, where specialty restaurants seek to offer “exotic” dishes and where consumers are more familiar with the taste and use of said products. Still, the distribution and commercialization of these other types of meat will probably be through the same channels as beef and pork, so importers can work with them as compliments to their regular line of products. 

Marketing and promotional activities, mostly for beef and pork, are very common in Mexico as the country is considered a strategic market for the U.S. meat industry. Through two Agricultural Trade Offices (located in Mexico City and Monterrey) and via local offices of the U.S. Meat Export Federation (USMEF), exporters can access information and assistance useful to approach the Mexican market. As referred in our 2013 Exporter Guide and other GAIN reports where market entry recommendations are listed, U.S. exporters should seek meetings with potential Mexican partners in the retail, foodservice, and food processing industries by participating in shows like Expo-Carnes (next edition to be held in Monterrey in February 2015), ANTAD (held every year in Guadalajara in mid-March), ABASTUR (also every year in Mexico City around September) and other conferences, seminars, and industry-related events.

Animal Numbers, Swine 

Meat, Swine 

Production: 

Despite disease issues, the new Post 2015 Mexican pork production forecast is 1.290 MMT CWE, up from Post’s revised 2014 estimate, due to lower feed costs, the continued incorporation of new breeding lines, better farm management techniques, and increasing slaughter weights that have allowed production of more meat from fewer hogs. The 2014 production estimate is revised marginally lower, mainly due to the after effects of the Porcine Epidemic Diarrhea (PED) in Mexico. Post’s 2013 production estimate is unchanged. Currently, industry members are expected to strengthen and expand the productivity of nearly 5,600 farms to be able to take advantage of expected better margins, with lower feed costs and expected increases in domestic prices. They will also seek to meet anticipated demand for pork cut exports for the Japanese and Korean markets as well as the potential opening of the Chinese market. 

Porcine Epidemic Diarrhea (PED) Virus Continues to be Present in Mexico 

According to private and official sources, in 2013, the PED outbreak hit some of the major producing areas of the country; including Michoacan, Jalisco, Queretaro and Guanajuato. Reportedly, PED hit the city of La Piedad, Michoacan, in July 2013 and spread to the neighboring state of Jalisco. Sources indicate that adverse climate conditions with lower temperatures later acted as a vector to spread the virus to the “El Bajio” states of Guanajuato, Queretaro, and to the valley of Mexico and Puebla as well as the northern states of Sinaloa and Sonora. Despite the geographic spread of PED in Mexico, sources report that the virus has not hit an excessive number of farms. As of May 2014, 83 PED cases occurred in Mexico, as reported to the OIE. Even though PED is not an OIE reportable disease, Mexico reported in late May that the virus was identified in 17 out of 19 producer states. Currently, commercial farms in Mexico are implementing improved biosecurity measures to control the spread of the disease. 

Virus control efforts to date is one of the leading causes for Post to project its loss forecast for 2015 lower than the loss estimate for 2014. Current year loss was revised slightly upward, given that improved biosecurity measures not yet fully implemented in all major farms. 

Private sources have indicated that even though PED targets mainly piglets in their initial growing period, the current weaning piglets’ domestic average at sophisticated operations is 18 piglets per year, while cutting-edge farms are in position to increase its weaning average to more than 25 piglets per year. This factor along with an increased number of breeding sows, and the continued improvements in biosecurity measures to control the prevalence and spread of the virus, support the idea of increased production in the mid-long term. As such, even greater losses are not yet anticipated. 

Better Genetics and Attractive Grain Prices are allowing Operators to Produce Heavier Weight Animals 

Post is forecasting slightly higher pork meat production in 2015, as swine operations will carry animals to heavier weights and continue to introduce better genetics. Industry sources report that swine continue to be slaughtered at around 120 kg live weight with a carcass weight of around 82 kg. These sources report that swine are usually held in feed lot operations for around 50 days but given the PED presence in affected areas, operators are extending this period 7 additional days in order to gain the desired market weight. It is not clear how successful this strategy will be, as the producers have stated a goal of sending hogs to market at 130kg to help support production. The packers, however, expressed skepticism that producers can meet this level. In addition, given current genetics, much of the extra weight above 125kg is expected to be fat, versus the lean meat packers and consumers prefer. Still, Post sees Mexico carcass weights increasing this year and next. The 2014 production estimate was revised slightly lower, reflecting the effects of PED virus in piglets during late 2013 that is reducing slaughter availability in 2014. This lower slaughter trend continues into 2015, even as overall inventories will increase. Post 2013 production estimate is left unchanged. 

Despite the recent trend of low international grain prices caused by expectations of increased world production of sorghum and corn, feed remains the greatest component of pork production costs. As previously reported, pork feed is based on yellow corn and sorghum and represents approximately 64 percent of the production cost. 

Consumption: 

The Post 2015 total pork consumption forecast is 2.005 MMT CWE, up on Post’s newly revised estimate for 2014, which is also above the retained 2013 figure, as total supply is expected to keep growing, and as consumers switch from higher priced beef. Competition with poultry prices has led to relatively stable, though growing, demand. Post’s 2014 estimate of pork consumption was revised slightly higher to account for weaker than expected exports and the resulting lower prices in the first half of the year. Post’s 2013 estimate remains unchanged. 

Pork Continues Gaining Acceptance among Consumers 

In order to promote consumption, some pork sector sources report that they are trying to hold prices unchanged to attract more consumers despite increasing costs for biosecurity and animal health measures. Nevertheless, pork prices have risen since mid-year, although pork and poultry prices are still more attractive for the low-medium income consumers, compared to other animal protein. Some private sources indicate that per capita consumption during the previous two years marginally increased from 16 to 16.8 kilograms which reflects the acceptance of pork meat among consumers. In 2011 the per capita consumption was around 15. 

Trade: 

The Post 2015 import forecast is 840,000 MT CWE, 3 percent higher than Post’s revised estimate for 2014, and 7 percent higher than Post’s retained 2013 figure. The 2015 forecast is based on continuing consumer demand for pork over higher priced beef. The majority of Mexico’s pork imports remain hams and picnic as well as mechanically deboned meat (MDM) for the preparation of sausages, deli hams, and other cold cuts. The Mexican processing industry continues to find it cheaper to import U.S. parts rather than to buy domestic production, which, although growing, struggles with limited presentations (e.g. half and whole carcasses instead of parts and MDM). The Post 2014 pork import estimate is revised up to 815,000 MT CWE based on trade data and prospects for market opportunities. As mentioned above, Post’s 2013 pork import figures are unchanged. 

The Post pork export estimate for 2015 is forecast slightly higher than Post’s revised 2014 estimate. Although the country continues to succeed in opening export markets and expand its share of exports to Asian markets, like Japan, some of these potential new market successes have not yet happened. USDA/APHIS announced a proposed rule that would expand U.S. market access eligibility to all Mexican states (with the exception of Chiapas), based on an improved disease status determination. A final determination and implementation of this rule is pending. Russia and China are additional near- term potential opportunities. The Post 2014 new export estimate is revised downward fractionally to 120,000 MT CWE based on trade data availability and due to the presence of PED in several Mexican states, which lifted pork prices after the middle of the year. Post’s 2013 export estimate is unchanged. 

Japan remains Mexico’s number one export market by volume and value, a situation that is not expected to change. Pork meat exports to Japan and the United States are mostly loin whereas exports to South Korea consist of bone-in pork