The Impact of COOL on Mexican Cattle and Beef Production and Trade Derrell S. Peel Department of Agricultural Economics Oklahoma State University

Background Mexico has exported cattle to the U.S. for many years Recently Mexico has become a major export market for U.S. beef

Impacts of COOL on Mexico Initial: COOL may reduce cattle exports to the U.S. Secondary: Changes in the type and quantity of beef production in Mexico will impact Mexican imports of U.S. beef

U.S. Beef Export Shares

1,004,609 head ( ) 3.2 % of Feeder Supplies

Impact of COOL on U.S/Mexican Cattle and Beef Trade Analysis with the GANAMEX model Assume complete elimination of cattle imports No change in Mexican consumption Results show long run adjustments in Mexican industry

“GANAMEX” Ganadería Mexicana A linear programming model to determine the minimum cost of providing a minimum specified quantity of beef consumption. Background –Cockerham, 1995 –Hayes, 1999

GANAMEX: Principal Characteristics, I Regional Delineation –4 Production Regions –6 Feedlot Regions –4 Consumption Regions 4 Cow-Calf Production Systems 2 Stocker Production Systems 4 Cattle Finishing Systems

GANAMEX: Principal Characteristics, II 4 Meat types 2 Slaughter systems –TIF-like and Local 3 Forage Sources –Range, Crop Residues, Irrigated Pasture Movement of cattle between production regions for stocker and grass finishing

GANAMEX: Principal Characteristics, III Exports of steer and heifer calves Exports of feeder steers and heifers Imports of 2 meat types Imports of slaughter cows Exports of beef Imports of Central American calves and feeders

Production Systems Traditional –Weaning > Extensive Stocker > Grass Finish –Slaughter Age: months Semi-Intensive –Weaning > Extensive Stocker> Feedlot –Slaughter Age: meses Intensive –Weaning > Intensive Stocker > Feedlot –Slaughter Age: meses

COOL Impacts: Mexican Cattle Production BaselineCOOL% Change Cow Herd10.41 mill10.37 mill-0.4 Calf Crop5.10 mill4.35 mill-14.6 Stocker3.36 mill3.33 mill-0.9 Grass-fed2.25 mill2.28 mill+1.3 Feedlot1.30 mill1.55 mill+18.8

COOL Impacts: Mexican Beef Production BaselineCOOL% Change Slaughter4.65 mill4.91 mill+5.5 Grass-fed Beef 429,187 mt 0.0 Fed Beef336,389 mt394,023 mt+17.1 Cull Beef328,374 mt309,994 mt-5.6 Total Beef1,093,950 mt 1,133,204 mt +3.6

Impact of COOL on U.S/Mexican Cattle and Beef Trade Reduced Mexican cattle imports –981,824 head Reduced U.S. fed beef exports to Mexico – million lbs. Increased Mexican cow imports –83,733 head

COOL Impacts: U.S. Cattle Prices Reduced Imports Reduced Exports Net Change Calf Prices+ $0.57/cwt- $1.70/cwt- $1.13/cwt Feeder Prices + $0.28/cwt- $0.84/cwt- $0.56/cwt Fed Prices+ $0.18/cwt- $0.53/cwt- $0.35/cwt

Summary Mexico has a comparative advantage in producing calves U.S. has a comparative advantage in cattle finishing and meat processing Restricting Mexican cattle imports reduces cattle and beef values in Mexico and the U.S.