Feeder cattle supplies from Mexico to decline

by Meat&Poultry Staff
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ST. LOUIS – Feeder cattle availability from Mexico is forecast to sharply decline in 2013, leaving the US cattle feeding industry to find ways to supplement supplies, according to a new report from the Rabobank Food & Agribusiness Research and Advisory (FAR) group.

Mexico has been an active exporter of feeder cattle to the US over the past 30 years, according to FAR. Severe and persistent drought conditions since 2011 were a driving force behind the trend. But industry analysts now believe that levels of feeder cattle exports have become unsustainable.

“Record high feeder and calf prices in the US, as well as a favorable exchange rate, were factors in a surge of exports to the US over the last two to three years,” said report author Don Close, vice president, Food and Agribusiness Research & Advisory, Animal Protein. “However, it was really the severe drought in 2011 that prompted such a notable increase in exports to the US so that the levels became unsustainably high.”

Drought conditions have prompted a substantial increase in the shipment of heifers, according to Rabobank. At the height of the US-Mexican feeder trade, 90 percent of the cattle exported by Mexico were steers. But by September 2012, spayed heifers accounted for more than a quarter of all shipments, according to Rabobank. Analysts believe that the escalation in heifer shipments signals a depletion of total Mexican cattle supplies.

“We’re going to see a depleted inventory, of course, but more importantly, there is going to be a sharply reduced retention of potential replacement heifers,” said Close. “We’ll undoubtedly see lower shipments of feeder cattle into the US for the next two to three years, as well as challenges for the Mexican cattle industry related to rebuilding a supply that will bring exports to the US on par with historical levels.”

Consequently, southern US cattle feeders will be forced to look to Canada for supplies and be more price-competitive in the central and western US, in spite of the freight disadvantage, Rabobank reported. Coupled with a US cow/calf herd that is already at a 50-year low, feeders with weak supply sources or operating finances may be forced out of the market, according to Rabobank.

Mexican cattle feeder exports into the US are characterized by a five- to six-year cycle of spikes and drop-offs, Rabobank said. However, experts expect the current decline may require additional time to rebuild due to the increased heifer exports, which will slow herd rebuilding.

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