August 26, 2008


US livestock industry awaits any action by Mexico over de-listings



Livestock analysts and meat brokers are cautiously awaiting what possible action Mexico may take - if any - after seven meat and poultry plants there were de-listed Friday (August 15) for export to the US. 


After an annual audit by the US Department of Agriculture, Mexico voluntarily shut down exports from the seven plants after being notified by USDA auditors of problems with food-safety procedures at the facilities.


Mexico ships only a small amount of meat and poultry products to the US, but Mexico is one the largest international customers for US beef, pork and poultry, which is why some in the US meat industry wonder if Mexico might take action against the US


For the first half of this year, Mexico ranked as the number one customer for beef and beef variety meats by volume and value, according to the US Meat Export Federation. It was the third-largest international customer in volume and value for US pork exports.


It is also an important customer for US poultry and poultry products. According to the USA Poultry and Egg Export Council (USAPEEC), Mexico was the third-largest buyer of broilers in the first half of 2008 at around 134,000 tonnes, and it purchased about 72,000 tonnes of turkey.


Mexico's meat and poultry purchases combined during January through June from the US totalled nearly 570,000 tonnes.


Concerns raised by some market analysts, traders and meat brokers are that Mexican government officials may consider the findings that led to the plant de-listings as a political action by the USDA after food safety issues arose on certain vegetables such as tomatoes and peppers earlier this year.


A Midwest-based meat broker said there is a lot of uncertainty concerning the plant de-listings, but "uncertainty is negative" for the market, he said.


Sue Trudell, vice president of EMI Analytics, said the chances that Mexico will retaliate against the US for delisting beef, pork and poultry plants depend to a large extent on how large the facilities are and whether they actually do export to the US. The larger the plant with US exports, the more likely there will be retaliation, she said.


Retaliation, if it comes, likely will take the form of a point/counter-point delisting of a plant or plants in the US as being eligible to export to Mexico, Trudell said. Even though the US exports more beef to Mexico than pork, she expected any retaliation to come in the form of a pork plant delisting.


Pork producers are more politically active in Mexico than are other producers, Trudell said. They are larger and more organized than other producers, and they have a history of success in lobbying for export markets, she said.


Narciso Perez, cattle feeder and trader, said the US could expect to see some form of retaliation from Mexico over the de-listings. However, he expected it to come in the form of import tariffs, and he thought beef was the more likely target since the US exports more beef to Mexico than other meats.


Besides, Perez said, this incident comes shortly after the salmonella-tainted vegetables issue, and nerves among politicians could be raw.


Jim Robb, agricultural economist for the Livestock Marketing Information Centre, said a working relationship his group has with the government of Chihuahua hadn't resulted in so much as a telephone call yet, indicating to him that the whole issue could blow over with no retaliation.


The cattle and hog futures markets at the Chicago Mercantile Exchange Monday didn't reflect significant concerns among traders so far. Live cattle and feeder cattle futures were higher, as was expected, following a bullish cattle-on-feed report Friday. Lean hogs were mostly weaker but only modestly so. Nearby October and December were higher, while the back months slipped on weaker corn prices.

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