US Imports Of Mexican Cattle Seen Declining

Fewer Mexican cattle imports are expected this year as producers there begin rebuilding their herds and lower prices make sales to the US less enticing, said Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel in a commentary this week.

Mexican cattle producers have begun to retain heifers for breeding, the US herd is growing, reducing the demand for imports, and pasture conditions there have improved.

Expected continued strength of the US dollar to the Mexican Peso offsets the herd-rebuilding incentive to some extent but is unlikely to override market fundamentals, Peel said.

 

A LONG HISTORY

 

Mexico has sent feeder cattle to the US for more than a century, and since the mid-1980s, annual US imports have averaged 1.08 million head.  In the most recent decade, the average has been slightly higher at 1.14 million head.

Mexican cattle have added an average of 2.9% annually to the US calf crop for the past 30 years, with the percentage slightly higher in recent years as US inventories declined.  In 2015, imports were 1.15 million head, up 3.5% from 2014 and just slightly higher than the 10-year average.

Imports dropped sharply at the end of last year, with November down 29.7% and December down 36.4% compared with a year earlier, reflecting lower US cattle prices and tight cattle supplies in Mexico.

The lower US cattle prices were offset partially by the rapid erosion in the value of the Mexican Peso at the end of 2015.  Record high US prices combined with a weakening Peso kept US imports of Mexican cattle high through 2014 and for most of 2015, despite declining numbers in Mexico.

 

SEASONALITIES AND PECULIARITIES

 

Mexican cattle imports typically follow a pronounced seasonal pattern with exports sharply lower from June through September, which reflects the rainy season and better forage conditions, Peel said.  These four months typically represent about 20% of total annual Mexican cattle imported by the US.

The seasonal peak usually is in November and December, with these two months accounting for 25% of the total.  But in 2015, November and December represented just 17%, while the summer months accounted for nearly 30%.

For the past decade, spayed heifers have accounted for an average of 14% of US imports of Mexican cattle.  The percentage was above this in 2011-2014, reaching a peak of more than 26% in 2012.

Exporting more heifers possibly was a response to limited feeder cattle supplies and a way to maintain cattle exports to the US with its strong market signals.  However, this was not sustainable and likely contributed to a drawdown in the Mexican cow herd.

In 2015, the heifer percentage of US imports of Mexican cattle dropped to less than 12%.  This decrease occurred all year and began well before the drop in overall exports at the end of the year.

Moisture conditions are good across most of Mexico with only a tiny area of drought in northern Baja California.  Mexican herd rebuilding is expected to accelerate with domestic prices still record high.

 

CASH CATTLE TRADE QUIET

 

Cash cattle markets Tuesday were quiet with bids at $136 per cwt on a live basis, and offers from $140 to $142.  Cattle last week traded at $134 to mostly $137 live, up about $3, and from $212 to $214 dressed, up about $4.

The USDA reported its choice cutout price up $0.99 per cwt at $218.15, and select up $0.13 at $212.97.  The choice/select spread widened to $5.18 from $4.32, and there were 79 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $159.26 per cwt, up $0.07.  This compares with Mar’s Tuesday settlement of $158.05, down $0.10.