January 22, 2004

 

 

Mexico's Reaction To Mad Cow Case In US

 

After Mexico banned U.S. imports of beef and cattle following the detection of bovine spongiform encephalopathy, or mad-cow disease, in Washington state, many market segments of the country are scrambling to find alternate products or alternate suppliers, according to a report issued by the U.S. Department of Agriculture attache and posted on the Foreign Agricultural Service Web site.

 

Mexico's middle-income consumers are expected to shift to pork and poultry, while lower income consumers could shift to dry beans.

 

Mexico Implements BSE Import Restrictions

 

On December. 24, 2003, the government of Mexico banned imports of cattle, beef and certain related products following the detection of BSE in Washington State. Imports of the following products are currently banned.

Live cattle

Bovine meat

Bovine viscera

Bovine offal

Bovine meat preparations

Products derived from non-protein-free tallow

Gelatin and collagen prepared from bone

Ruminant meal

 

The following products are exempt from the ban.

Milk

Dairy products

Semen

Embryos

Protein-free tallow

Dicalcium phosphate (DCP)

Skins and hides

Gelatin and collagen obtained from hides and skins

 

Mexican Market Reaction

 

U.S. beef accounts for about 85 percent of Mexico's total beef imports and imports account for an estimated 20-25 percent of consumption. Consequently, the recent ban on imports of beef and bovine products has had an immediate effect on prices and supplies in market segments that are most dependent on imports. While there is no daily or weekly source for beef market prices in Mexico, trade sources indicate that retail prices for beef and related products are up 20-40 percent over the past few weeks and are continuing to rise. Mexican buyers point out that supplies in countries like Chile, Uruguay, Australia, and Canada are limited and will not come close to filling the void created by the current ban. Domestic beef producers are saying they can fill the void. A brief summary of the current status in key market segments follows.

 

Supermarkets

 

Supermarkets are becoming increasingly important as food retailers, accounting for about half of all beef sales in Mexico. Supermarkets tend to prefer the quality, consistency, and ease of handling provided by imported U.S. beef cuts. Beef in Mexico is typically marketed as whole carcasses, requiring more butchering and purchasing of unwanted cuts and parts.

 

Additionally, carcasses tend to be mixed (i.e., no differentiation between steers and culled dairy cows) which makes quality and consistency a real concern for supermarket buyers. Buyers are also concerned about the reliability of domestic suppliers. Supplies of imported U.S. beef will run out on or about Jan. 12 at one major national supermarket chain. In addition to the absence of certain cuts, prices are at or near the point where retailers anticipate that consumers will seek to substitute other products for beef. Consumers are returning from their Christmas holidays during which poultry is typically preferred and are likely to be surprised by the poor availability and price of beef.

 

Retailers are preparing to offer more pork and poultry products, which are currently 30-40 percent cheaper than beef for some popular cuts. Middle class consumers who frequent supermarkets are expected to shift to pork and poultry. Supermarkets are also expected to use their market power to bid for much of the domestic beef supply, which could hurt small butchers and stores who are unable to compete for domestic carcasses.

 

Hotel, Restaurant, and Institutional

 

U.S. beef typically accounts for 80-90 percent of the beef supplied to this market segment. Supplies of U.S. beef imported prior to Dec. 24, 2003, are dwindling fast and distributors to restaurants and hotels are struggling to find alternative supplies. Additional imports may come from countries such as Canada and Chile and some business may shift to the domestic market, but quality and consistency are a concern for suppliers. Many buyers may simply have to alter their menus and do without until the ban is lifted.

 

Offals

 

Mexico is one of the world's largest consumers of offals and lower income consumers often depend on offals and lower quality cuts of beef as inexpensive sources of protein. In some areas of the country, 50 percent of the offal supply is imported. Supplies of imported offals are running low and one major importer expects to run out of imported offals during the week of January 12. Consumers in this segment are expected to shift to inexpensive sausages and lower quality pork products as well as dry beans.

 

Pet Food

 

In the days immediately following the ban, Mexican officials expressed some concern that customs agents were changing pet food labels at the border to indicate that products were derived from non-bovine meats. In response, an informal policy of testing all pet foods to determine the species was implemented. Shipments were to be detained until test results were final (24- 36 hours). Officials now indicate that as long as pet food arrives with its original plant labels and the proper certification indicating that the pet food is made from something other than banned bovine materials, shipments will not be detained for species testing.