The Impact of COOL on Mexican Cattle and Beef Production and Trade

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

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

3. 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

6. U.S. Beef Export Shares

7. 1,004,609 head (1986-2002) 3.2 % of Feeder Supplies

9. 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

10. “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

11. 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

12. 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

13. 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

14. Production Systems • Traditional • Weaning > Extensive Stocker > Grass Finish • Slaughter Age: 36 - 48 months • Semi-Intensive • Weaning > Extensive Stocker> Feedlot • Slaughter Age: 26 - 36 meses • Intensive • Weaning > Intensive Stocker > Feedlot • Slaughter Age: 18 - 26 meses

15. COOL Impacts: Mexican Cattle Production

16. COOL Impacts: Mexican Beef Production

17. 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 • 56.248 million lbs. • Increased Mexican cow imports • 83,733 head

18. COOL Impacts: U.S. Cattle Prices

19. 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.

20. The Oklahoma Livestock Market Website OSU http://agecon.okstate.edu/livestock/