January 12, 2009

 

A proposed change in meat import packaging requirements by Mexico, if implemented later this month as scheduled, could be a major blow to US meat exports, according to US meat industry organizations.

 

The proposed change in packaging specifications made by Mexican officials would eliminate the use of combo bins and require that all meat products be in boxes. Combo bins are large cardboard containers that hold approximately 2,000 pounds of fresh meat products for further processing.

 

The use of combos for transporting fresh meats and poultry to be used in further processing is a common practice in the US and has been for shipping to Mexico over the past 15 years as well.

 

The majority of the fresh pork cuts such as hams, shoulder butts, picnics and trimmings have been shipped to Mexico in combo bins.

 

According to meat and poultry industry representatives, combo bins account for about 80 percent of the US pork, 70 percent of the poultry and about 10 percent of the beef exported to Mexico. They said boxing the meat instead is neither cost-effective nor practical because many of the US meat plants are not designed in such a way to allow for on-line boxing of these materials. Also, many of the Mexican customers' production lines are configured to work only with combos.

 

Market analysts and industry representatives estimate the additional cost of boxing these products versus shipping in combo bins from 10 cents to as much as 20 cents per pound. The added costs will vary by plant or the product being prepared for shipment.

 

Should the change in the Mexican packaging requirements be finalized and implemented, it could result in a sharp decline in exports of US meat and poultry to that country and would raise the cost of the goods to Mexican meat processors and consumers.

 

US meat industry officials contend the proposed change in packaging requirements by Mexico is to protest the US' mandatory Country of Origin Labelling law implemented in late September.

 

"According to industry sources in Mexico, the combo policy is a tit-for-tat response by the Mexican government to the new mandatory country of origin meat labelling law in the US," said the National Pork Producers Council.

 

"If implemented, this ban (on the use of combo bins) would result in dramatically higher prices for pork and pork products and, to a lesser extent, for beef and beef products" shipped to Mexico, said Jim Herlihy, vice president, Information Services with the US Meat Export Federation in an emailed reply.

 

The proposed change in Mexico's packaging requirements "would have a very significant impact on shipments of US pork and beef to Mexico," Herlihy said. The 80 percent of the US pork shipped to Mexico in combo bins during the first 10 months of 2008 represents approximately 160,000 tonnes, he said. The combos portion of the US beef, or about 10 percent of exports to Mexico during that period represent about 18,000 tonnes. The beef shipped in combo bins is mainly trimmings to be used in the production of hamburger.

 

Herlihy said higher prices required through the use of boxes versus combo bins "would contribute to increased inflation and could negatively impact employment in those companies using US pork and beef. He said this is especially true for those companies that produce further-processed meat products."

 

USMEF estimates that the volume of exports of ham and other pork products for further processing in Mexico could plummet by 80 percent, Herlihy said. The resulting shortage of the affected pork and beef items would push up prices for Mexican consumers as well as meat processing companies.

 

Mexican pork producers could also be negatively affected because the increase in meat prices could affect the confidence and spending of price-sensitive Mexican consumers. These consumers likely would shift purchases to less expensive protein options, USMEF said. "This would come at a time when the Mexican government is struggling to keep inflation under control and minimize the impact of the global economic downturn on employment."

 

The loss of the Mexican market for these products would also weigh on domestic prices by triggering a short-term glut of the items in the US market, Herlihy said. The result would be a widening gap between pork product prices in the US and Mexico.

 

Implementation of the proposed packaging changes by Mexico "would drastically reduce US pork exports to Mexico and have devastating financial implications for the US pork industry," said the National Pork Producers Council in comments received via email Friday. "This policy must not be implemented because there is no scientific or legal justification for the new policy," said Nick Giordano, vice president and counsel, International Trade Policy, with the NPPC.

 

NPPC said "the impact on live hog prices according to Iowa State economist Dermot Hayes could be a drop of as much as US$5.96 per animal.

 

"The new Mexican policy does NOT improve food safety, bio-security, or efficiency at the border," NPPC said. "The policy would drastically increase the burden on inspectors. A single truck trailer carries 22 combo bins on average. If the same volume of product were boxed, each truck would carry between 1,000 and 1,400 boxes. This would not only increase the difficulty of inspection, it would add to the cost of packing disposal once the product arrives at its destination in Mexico."

 

The NPPC also said the US pork industry does not have adequate packaging capacity to maintain its export sales volumes to Mexico if the combo policy is implemented. "Adding new capacity would cost the US industry millions of dollars. US pork exports will decline and US live hog prices will fall significantly," NPPC said.