Cattle Genestocks: Trends on the Trail to Mexico

by John Toaspern

No cowboy story about the Old West would be complete without mention of the cattle trade between Mexico and the United States. As it turns out, many of the old legends have a solid foundation in both history and economics.

For many generations, our neighbor to the south has been a traditional supplier of feeder cattle and steers. In return, the United States has been Mexico’s mainstay source of breeding stock and improved cattle genetic lines.

Today, the market is responding to pressures that would amaze an old-time cattle drover. A more affluent Mexican populace hungers for more beef than ever, and a higher percentage of Mexico’s beef is consumed domestically.

At the same time, an expanded and improved domestic purebred industry is supplying a higher percentage of Mexico’s own breeding stock.

Has the North American Free Trade Agreement (NAFTA) been the driving force behind market change? No, and yes.

No, NAFTA’s hasn’t had much impact on the trade in breeding stock. By the time the agreement was hammered out, breeding stock duties on both sides of the border were already rock-bottom.

But yes, NAFTA’s provided a tremendous boost to the export of slaughter cattle and beef from the United States to Mexico. Consider that Mexico’s 15 percent tariff on live slaughter animals, the 20 percent tariff on fresh/chilled beef, and the 25 percent tariff on frozen beef were eliminated immediately upon enactment of NAFTA.

No one will dispute that the number and expertise of Mexican purebred cattle breeders is increasing. These breeders are supplying commercial breeders with a higher percentage of their improved genetics. However, they have yet to reach self-sufficiency and must still turn to foreign sources for their stock.

For both U.S. suppliers and Mexican users of animal genetic products, the road to free trade has taken a number of recent turns. Following the implementation of NAFTA in 1994, exports of cattle genetics to Mexico, spurred by an improving economic situation, began to enjoy a notable upswing.

However, the economic crisis of 1995, coupled with a prolonged drought in northern Mexico, put a temporary stop to export growth. Although recovery came swiftly in 1996, drought and financial problems in the cattle industry continued to dent sales.

A single exception: sales soared in dairy genetics, thanks to growth in that sector in response to a liberalization of price controls on milk.

Unfortunately for Mexico’s beef cattle sector, herd expansion has been squelched by a shortage of financing--a production hardship that translates into fewer sales for U.S. beef genetic products.

There have been dramatic increases in cattle which are sold for slaughter, an indication of Mexico’s new prosperity, linked to its growing appetite for beef.

While an increasing number of these are steers and heifers, the majority are older females that are sold very cheaply for slaughter in Mexico. But some of these older cows are commonly spared for breeding stock--cheap, short-term assets for rebuilding herds.

The need for breeding stock in northern Mexico remains acute at a time when Mexican ranchers face problems that impede their ability to import U.S. genetic products.

U.S. exporters realize that to remain players in this market, they would be wise to help Mexican ranchers overcome these difficulties.

As things stand, the U.S. ranchers who are making sales are those who have taken the time to learn about the market and make the necessary personal contacts.

Many have also come up with creative financing methods such as retained ownership or partial payment in feeder cattle, as a means to help Mexican ranchers manage to import the cattle they need.

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John Toaspern is an FAS agricultural outreach officer located in Denver, CO. Tel.: (303) 844-5655; E-mail: toaspern@usda.fas.gov

For More Information

Getting started? The first contact you consider should be your State Department of Agriculture. Nearly all states are involved in agricultural export promotion, and can tell you what activities they are conducting to promote cattle exports.

Many cattle producers’ associations are also involved in export promotion and can provide assistance.

Breed associations are also excellent sources of know-how; many have successfully obtained funds from the Market Access Program and other USDA-Foreign Agricultural Service sources that have been effectively spent on export-enhancing promotional activities.

For futher information, contact:

Last modified: Thursday, October 14, 2004 PM