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Global Outlook Symposium Mexico. Chad R. Russell Regional Director October 29, 2007. U.S. Beef Exports- Mexico. Thousand MT. Source: USDA and USMEF Forecasts; BVM= Beef Variety Meats. U.S. Pork Exports-Mexico. Thousand MT. Source: USDA and USMEF Forecasts; PVM= Pork Variety Meats.

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Global Outlook Symposium Mexico

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Global outlook symposium mexico

Global Outlook SymposiumMexico

Chad R. Russell

Regional Director

October 29, 2007


U s beef exports mexico

U.S. Beef Exports- Mexico

Thousand MT

Source: USDA and USMEF Forecasts; BVM= Beef Variety Meats


U s pork exports mexico

U.S. Pork Exports-Mexico

Thousand MT

Source: USDA and USMEF Forecasts; PVM= Pork Variety Meats


Key drivers for exports to mexico

Key Drivers for Exports to Mexico

  • Market access

  • Competitor developments

  • Domestic production

  • Political situation

  • Economic situation

  • Consumer trends


Market access

Market Access

  • General, both beef & pork

    • NOM-30: Mexico’s principal meat regulation is under review

      • Zero tolerance for Salmonella

      • Zero tolerance for bone fragments in boneless meat

    • New Animal Health Law: Legislation recently passed by Mexico’s Congress

      • Secretariat of Health will “coordinate” approvals of meat plants

      • Provisions for traceability

      • Provisions for animal welfare (GPP)

    • Periodically more stringent enforcement of import requirements


Market access1

Market Access

  • Beef

    • Six Prohibited Products: beef feet, weasand meat, sweetbread, small intestine, ground beef, and head meat

    • Anti-dumping Duties: On May 4th NAFTA panel lets stand anti-dumping duties until April 2011

  • Pork

    • Local producer groups continue to pressure their government, especially Congress, to impede the importation of pork

    • To date, the Executive Branch has rejected pleas for a safeguard and anti-dumping duties; however, Congress largely remains supportive of producer concerns


Competitor developments

Competitor Developments

  • U.S. import market shares for beef and pork are 83% and 88%, respectively

  • Increased sharply over the past five years

  • U.S. gains have been Canada’s losses

  • Uruguay recently approved to export beef to Mexico

  • Mexico’s self sufficiency for beef has changed little since 1992

  • Conversely, Mexico’s self sufficiency for pork has deteriorated 13 percentage points since 1992

  • However, Mexico’s pork industry is consolidating, modernizing, and becoming more vertically integrated


Product as a percentage of meat consumption in mexico

Product as a Percentage of Meat Consumption in Mexico

Percent

Source: SAGARPA Statistics.


Per capita meat consumption

Per Capita Meat Consumption

Kilograms

per year

Source: SAGARPA Statistics.


Domestic production

Domestic Production

  • Beef

    • Production increased 2.3% per year from 1990 to 2005, but decelerated to 2% the last five years

    • Limited investment in the sector

    • Beef production largely dependent on precipitation in northern Mexico

    • Cattle exports forecast down over 8% for 2008

    • Price elasticity of supply is inelastic

    • $110 peso per head subsidy for slaughter

    • Rising grain costs a problem for many feedlots

    • Congress considering subsidy for users of grain


Domestic production1

Domestic Production

  • Pork

    • Production increased 2.5% per year from 1990 to 2005, but decelerated to 1.4% the last five years

    • Increasing investment in sector

    • Larger operators moving from hog producers to meat producers

    • Price elasticity of supply for pork is three times greater than for beef

    • $100 peso per head subsidy for slaughter

    • Rising grain costs are accelerating transition to more efficient, integrated production

    • Congress considering subsidy for users of grain


Political situation

Political Situation

  • Current government solidly pro trade and market oriented

  • To date, has not supported efforts of producer groups to impede imports of U.S. red meats

  • Many congressmen sensitive to plight of local producers and continue to pressure the executive branch to take action

  • Next presidential election in about five years


Economic situation

Economic Situation

Source: Bank of Mexico and IMF


Consumer trends

Consumer Trends

  • General

    • Over 90% of retail consumers are price driven

    • Over 60% of consumers prefer to buy meats at traditional markets or local butcher shops

    • Consumers becoming aware of brands and their benefits, but less than 4% of products are branded


Consumer trends1

Consumer Trends

  • U.S. Beef

    • Appreciated for its tenderness, color, and ease of preparation

    • Consumer perceptions about fat content represent the greatest constraint to non purchase

    • Many consumers perceive U.S. beef as not fresh

  • U.S. Pork

    • Recognized for its convenience and ease of preparation

    • Many consumers perceive pork, independent of origin, as not being clean or safe to eat

    • Mexican pork is more likely to be associated with positive attributes (delicious, natural, nutritious, and fresh)


Summary

Summary

  • Excellent market access compared to other foreign markets

  • Price sensitive market

  • Poultry has become the preferred meat, primarily at the expense of beef but to a lesser extent pork.

  • Expect increased competition for a more efficient and price competitive Mexican pork industry in the next 2-3 years

  • Conversely, the U.S. beef industry will not anytime soon face a more efficient, competitive Mexican beef sector

  • However, the threats are the growing popularity of poultry meat and over the longer term the prospect of more competition from South American origins and the Mexican pork industry


Summary1

Summary

  • Mexican consumers are becoming more aware of the importance of a healthy diet but often are not well informed about the role of red meat in such a diet

  • Mexico will remain a large, growing market for U.S. beef and pork for many more years because of its

    • unrealized economic potential

    • geographic proximity to the U.S.

    • population growth

    • expanding modern supermarket sector

    • popularity as a tourist destination

    • limitations to self sufficiency in the production of red meats


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