the role of u.s. beef in the mexican market derrell s. peel department of agricultural economics...
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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
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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
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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
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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
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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
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Cattle and Beef Markets
• Many products => different markets
• Different values– Production system– Consumer preferences
• Regional differences in Mexico– Production– Consumption
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Factors Affecting U.S. Beef in the Mexican Market
• Insufficient domestic production• Changing preferences of Mexican
consumers• Price
– Specific products and quality
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Domestic Mexican Production
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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
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Mexican Beef Demand is Changing
• Income• Population demographics• Urban Migration• Lifestyle changes
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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
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Household Food Expenditures
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Low 10 Low 30 Nat
19982000
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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
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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
OtherFatsSeafoodTubersFruitsEggsDairyCarneVegCereals
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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
%
OtherFatsSeafoodTubersFruitsEggsDairyCarneVegCereals
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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
%
OtherFatsSeafoodTubersFruitsEggsDairyCarneVegCereals
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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%
OtherFatsSeafoodTubersFruitsEggsDairyCarneVegCereals
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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%
OtherFatsSeafoodTubersFruitsEggsDairyCarneVegCereals
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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
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Rural-Urban and Other Regional Differences
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States with more than 40 percent rural population
States with more than 60 percent large urban population
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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
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Changes in Meat Retailing
Traditional
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Changes in Meat Retailing
“Old” Modern
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Changes in Meat Retailing
ModernModern
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Food Service
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Different Consumer Preferences
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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
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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)
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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
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Observations
• Equilibrium between U.S. and Mexican markets
• Growth in cow-calf and stocker production
• Limited growth in feedlot production• Productivity growth?• International trade
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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)
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