The Impact of COOL on The Impact of COOL on Mexican Cattle and Beef Mexican Cattle and Beef

Production and TradeProduction and Trade

Derrell S. PeelDerrell S. PeelDepartment of Agricultural Department of Agricultural

EconomicsEconomics

Oklahoma State UniversityOklahoma State University

Background

• Mexico has exported cattle to the U.S. for many years

• Recently Mexico has become a major export market for U.S. beef

Impacts of COOL on Mexico

• Initial: COOL may reduce cattle exports to the U.S.

• Secondary: Changes in the type and quantity of beef production in Mexico will impact Mexican imports of U.S. beef

MAJOR U S BEEF EXPORT MARKETSCarcass Weight, Annual

0

200

400

600

800

1000

1200

Japan Canada Mexico Korea

Mil. Pounds

Avg.1996/00

2001

2002

I-N-1803/04/03

U S BEEF EXPORTS TO MAJOR MARKETSCarcass Weight, Monthly

0

20

40

60

80

100

120

140

1994 1995 1996 1997 1998 1999 2000 2001 2002

Mil. Pounds

Japan

Canada

Mexico

SouthKorea

I-N-3501/23/03

U.S. Beef Export Shares

0%10%20%30%40%50%60%70%80%90%

100%

1997 1998 1999 2000 2001 2002

KOREAMEXICOCANADAJAPAN

CATTLE IMPORTS FROM MEXICOAnnual

0

200

400

600

800

1000

1200

1400

1600

1800

1977 1980 1983 1986 1989 1992 1995 1998 2001

Thou. Head

I-N-1703/04/03

1,004,609 head (1986-2002)

3.2 % of Feeder Supplies

CATTLE EXPORTS TO MEXICOAnnual

0

100

200

300

400

1977 1980 1983 1986 1989 1992 1995 1998 2001

Thou. Head

Mexico

I-N-1403/04/03

Impact of COOL on U.S/Mexican Cattle and Beef

Trade• Analysis with the GANAMEX model• Assume complete elimination of cattle

imports• No change in Mexican consumption• Results show long run adjustments in

Mexican industry

““GANAMEX”GANAMEX”Ganadería MexicanaGanadería Mexicana

• A linear programming model to determine the minimum cost of providing a minimum specified quantity of beef consumption.

• Background– Cockerham, 1995– Hayes, 1999

GANAMEX: Principal Characteristics, I

• Regional Delineation– 4 Production Regions– 6 Feedlot Regions– 4 Consumption Regions

• 4 Cow-Calf Production Systems• 2 Stocker Production Systems• 4 Cattle Finishing Systems

GANAMEX: Principal Characteristics, II

• 4 Meat types• 2 Slaughter systems

– TIF-like and Local

• 3 Forage Sources– Range, Crop Residues, Irrigated Pasture

• Movement of cattle between production regions for stocker and grass finishing

GANAMEX: Principal Characteristics, III

• Exports of steer and heifer calves• Exports of feeder steers and heifers• Imports of 2 meat types• Imports of slaughter cows• Exports of beef• Imports of Central American calves and

feeders

Production Systems

• Traditional– Weaning > Extensive Stocker > Grass Finish– Slaughter Age: 36 - 48 months

• Semi-Intensive– Weaning > Extensive Stocker> Feedlot– Slaughter Age: 26 - 36 meses

• Intensive– Weaning > Intensive Stocker > Feedlot– Slaughter Age: 18 - 26 meses

COOL Impacts: Mexican Cattle Production

Baseline COOL % Change

Cow Herd 10.41 mill

10.37 mill

-0.4

Calf Crop 5.10 mill 4.35 mill -14.6

Stocker 3.36 mill 3.33 mill -0.9

Grass-fed 2.25 mill 2.28 mill +1.3

Feedlot 1.30 mill 1.55 mill +18.8

COOL Impacts: Mexican Beef Production

Baseline COOL % Change

Slaughter 4.65 mill 4.91 mill +5.5

Grass-fed Beef

429,187 mt

429,187 mt

0.0

Fed Beef 336,389 mt

394,023 mt

+17.1

Cull Beef 328,374 mt

309,994 mt

-5.6

Total Beef 1,093,950 mt

1,133,204 mt

+3.6

Impact of COOL on U.S/Mexican Cattle and Beef

Trade• Reduced Mexican cattle imports

– 981,824 head• Reduced U.S. fed beef exports to Mexico

– 56.248 million lbs.• Increased Mexican cow imports

– 83,733 head

COOL Impacts: U.S. Cattle Prices

Reduced Imports

Reduced Exports

Net Change

Calf Prices + $0.57/cwt

- $1.70/cwt - $1.13/cwt

Feeder Prices

+ $0.28/cwt

- $0.84/cwt - $0.56/cwt

Fed Prices + $0.18/cwt

- $0.53/cwt - $0.35/cwt

Summary

• Mexico has a comparative advantage in producing calves

• U.S. has a comparative advantage in cattle finishing and meat processing

• Restricting Mexican cattle imports reduces cattle and beef values in Mexico and the U.S.

http://agecon.okstate.edu/livestock/

U S BEEF AND VEAL EXPORTSCarcass Weight, Annual

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0.5

1.0

1.5

2.0

2.5

3.0

1979 1982 1985 1988 1991 1994 1997 2000 2003

Bil. Pounds

I-N-0603/03/03

U S BEEF AND VEAL EXPORTSAs a Percentage of Production, Carcass Weight, Annual

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2

4

6

8

10

1979 1982 1985 1988 1991 1994 1997 2000 2003

Percent

I-N-0703/03/03

CATTLE IMPORTS FROM CANADA AND MEXICO

Annual

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1000

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2000

1977 1980 1983 1986 1989 1992 1995 1998 2001

Thou. Head

Mexico

Canada

I-N-1303/04/03