Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel looks Mexican beef exports and their role in supplying beef to the US as well as competing with US Beef exports.
"Mexican beef exports have grown rapidly in recent years. Total beef exports began increasing in 2009 and have increased from about 28 thousand metric tons in 2008 to over 161 thousand metric tons in 2015, a nearly six-fold increase. Currently, Mexico is the tenth largest beef exporting country, exceeding Argentina for the first time in 2015. The U.S. is the largest destination for Mexican beef exports and the U.S. share of total Mexican beef exports has increased from around 60 percent a few years ago to 90 percent in 2015. Mexico also exports beef to Japan but the quantity and share of exports to Japan has decreased the past two years. Previous exports to Russia in 2011and 2012 have ceased because of issues with beta agonists.
"Much of Mexico’s beef export growth is due to Sukarne, the largest cattle feeding and beef processing company in Mexico. SuKarne ranks as the fifth or sixth largest beef packing company in North America. The company also handles pork and chicken. Meat+Poultry magazine lists SuKarne as the nineteenth largest meat company in North America with projected 2016 sales of 2.5 billion dollars. SuKarne has been processing over 1.2 million head of cattle annually and accounts for roughly 74 percent of total Mexican beef exports.
"Sukarne announced in late March that a new feedlot and packing plant complex is beginning operations in Tlahualilo, Durango. This huge facility has affiliated feedlot capacity of nearly 300,000 head and the plant has capacity to process over 800 thousand head of fed cattle and cows per year. The majority of product from the new facility is expected to be exported. The plant will represent a substantial increase in demand for cattle across much of Mexico and will also require large amounts of feed grains for the cattle feeding operations. Much of the feed grain will be imported from the U.S.
"The Mexican beef industry has changed dramatically in the past 10-15 years. There has been a significant and rapid expansion in federally inspected slaughter and widespread adoption of boxed beef technology which expanded domestic and international market opportunities. The SuKarne company can be credited with being well positioned and for recognizing and capitalizing on the tremendous opportunities in Mexican domestic and export markets in the past decade. However, this growth occurred simultaneously with and depended on a number of concurrent changes in Mexican food markets and infrastructure. Mexico has significantly expanded and improved highways over and around the nearly unlimited supply of mountains in the country. These improvements greatly increased the ability of Mexican beef companies to source, assemble and ship cattle over much longer distances to support large feedlots. Meat distribution systems similarly benefited from improved transportation infrastructure. The rapid growth and expansion of supermarkets and increased use of cold storage and refrigerated shipping all facilitated the growth of large scale meat processing and distribution. I witnessed the initial construction of the first rail port in Torreon, Mexico (near to Tlahualilo) some 24 years ago and it is the continued growth and expansion of these facilities that make importing feed grain for the large feedlot operation in the new Sukarne facility logistically and economically feasible.
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