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CME: Steady Increase in US Feeder Cattle Imports from Mexico

01 March 2019

US - US feeder cattle imports from Mexico have increased steadily in the last three years and have continued to increase in the first seven weeks of this year, according to Steiner Consulting Group, DLR Division, Inc.

Recent data from USDA suggests that Mexican producers continue to expand the cattle herd, resulting in ever higher calf crops and thus more cattle available for export to US feedlots in Texas, New Mexico and other surrounding states.

Based on data from USDA-AMS, total weekly imports of Mexican feeder cattle from Mexico in 2018 were 1.255 million head, almost 90,000 hear or 8 percent higher than in 2017. Weekly imports of feeder cattle from Mexico in 2016 were 935,138 head.

During the first seven weeks of the year, weekly imports of feeder cattle from Mexico were a total of 159,616 head, 19.3 percent higher than the same period a year ago. Higher imports of Mexican feeder cattle should be viewed in the broader context of a larger breeding herd in Mexico and a stronger US dollar.

Consider the effect of the stronger dollar first. For the week ending 22 February, the average price of a med/lrg 1&2 feeder steer from Mexico (500-600 lb) sold in TX/NM was around $148/cwt. USDA reported a range of 140-156 and we took the simple average.

For the same type of feeder cattle during the same week a year ago the average price was $154/cwt, so a 3.9 percent decline. However, the Mexican sellers get to convert the dollars they get into pesos and for them the peso price is what matters.

For the week in question, US $1 converted to 19.2 pesos while last year during the same week US $1 converted to 18.6 pesos. Once we convert those feeder cattle prices into pesos, prices are only 0.8 percent lower than the previous year. Lower feeder prices in the US market are not as big a disincentive to ship as some would think due to the stronger US dollar.

Mexican producers also have more cattle to sell and some those additional feeders are coming into the US. According to recent USDA estimates, the total inventory of beef and dairy cows in Mexico at the start of 2018 was 10.9 million head, 2.3 percent higher than the previous year.

The Mexican calf crop in 2018 was estimated by USDA analysts to be 7.7 million head, 2.9 percent than the year prior. A recent USDA country report, which is not considered official, forecasts the beef cow herd in Mexico on 1 January 2019 at 7.7 million head and the dairy herd at 3.450 million.

If correct, this would represent another 2.3 percent increase in the cow herd and an additional 200,000 head in the 2019 calf crop.

While Mexican producers have taken significant steps in increasing domestic slaughter and expanding markets for US beef, the reality is that in certain parts of the country cattle are raised to generate feeder cattle for sale into US feedyards.

It appears that given the expansion of the Mexican herd, US feeder cattle imports from Mexico will be higher, once again, in 2019. Keep in mind that so far the US cattle and beef trade has not been affected by the tariffs that have affected US dairy and pork markets.

US feeder cattle imports from Canada are notably smaller but they had an outsize effect on US feeder supplies last year. Total imports of feeder cattle from Mexico (based on weekly data) were 194,146 head, about 15 percent of what was imported from Mexico.

Yet, this supply was almost 77,000 head or 65 percent higher than the previous year. Through the first five weeks of the year (latest available data), imports of feeder cattle from Canada were a total of 11,644 head, 2,293 head or 24.5 percent higher than the same period a year ago.

The Canadian herd is expanding at a slower pace than Mexico and it is expected to contract in 2019. Drought had a very negative impact on Canadian producers in 2018 and combined with the weak Canadian dollar it pushed more feeders into the US market.

Early estimates are for the Canadian cow herd to be down as of 1 January and for a smaller calf crop. We will know more on this when StatCan issues the results of its semi annual survey in early March.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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