July 30, 2004

Mexican 2004 Beef Calf Crop Seen At 9.15 Million Head

The Mexican beef calf crop is projected at 9.15 million head in CY 2004, up one quarter of million from the drought-reduced levels of CY 2003. In CY 2005, calf production is expected to drop to 8.6 million head reflecting low fertility rates fueled by lower beginning stocks and increased slaughter in CY 2004, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site, dated July 23 and released Wednesday.
 
The drought that affected much of northern Mexico in CY 2002 and into CY 2003, appears to be subsiding, with precipitation returning to a much more normal pattern, especially in the north-central and northeastern states, the report said. For CY 2004, fodder availability for range-fed livestock has improved in recent months; however, fodder reserves and feed prices have yet to return to more normal levels. In spite of a return to more normal weather conditions, the drought's impacts will likely continue to linger for the next couple of years.
 
The drought in northern Mexico forced many producers in CY 2003 to sell animals, many of which were stressed, due to a lack of feed and water. The considerable number of animals sold domestically, led to a marginal drop in animal prices in the first half of CY 2004 and also reduced cattle inventory. The closure of the border to imports of live cattle and selected beef cuts from the United States due to bovine spongiform encephalopathy concerns, allowed domestic cattle and beef to take up the lack of imports in the first quarter of CY 2004.
 
With the continued ban on imports of live cattle and bone-in beef from the United States due to BSE concerns and the expected high slaughter rates in CY 2004, cattle inventories are estimated to continue with a downward pattern into CY 2005 and are expected to begin rising, perhaps, toward the end of CY 2005 or early CY 2006, as producers seek to rebuild their herds. Higher feed grain costs brought on by the drought also limited the profitability of Mexico's cattle feedlot and swine sectors and reduced inventories of cattle on feed and pigs.
 
Nevertheless, the ban on live cattle and selected beef imports due to BSE concerns is providing some relief to these intensive livestock feeder whose cost structure is heavily influenced by grain costs.
 
Beef production is expected to remain at relatively high levels in CY 2004, taking up the slack caused by the reduction of imports of live cattle and selected beef products due to BSE concerns. For CY 2005, production is forecast downward as cattle inventories are being depleted due to high slaughter rates during CY 2004. Exports are expected to stay strong in CY 2004 and CY 2005. The United States and Japan are the leading markets for Mexican beef, taking about two-thirds of all shipments. Live cattle exports are also expected to continue at near-record levels through CY 2004 but are expected to drop in CY 2005 due to low inventories.
 
Pork exports and imports both remain at near-record levels. Mexico's exports of pork, principally to Japan, have grown in recent years and are expected to continue upward due to the free trade agreement recently signed between Mexico and Japan. Pork imports continue at high levels, with the United States and Canada being the leading suppliers. Estimated and forecasted increases in Mexican pork production for CY 2004 and CY 2005 have been the result of attractive domestic prices fueled by the ban on imports of selected beef products from the United States due to BSE concerns. Pork imports are projected to reach 385,000 metric tons in CY 2004 and CY 2005, almost 11.2% greater than the revised figure in CY 2003.