Market Matters Blog

I've got a soft spot for Mexican feeder cattle. I know that sounds strange. It goes back to how I've gone about learning agriculture during my three and half years here at DTN: upfront and in person.

The first time I saw Mexican feeders, I was attending an animal health meeting in San Antonio. We took a bus tour to a feedlot and USDA inspection facility in Eagle's Pass, Texas. It was the first time I'd ever set foot in a feedlot.

Ernie Morales, our host, explained feed milling to me for the first time. It's the first time I saw corn become feed -- and it all started making sense. When walking the pens, he saw some feed that missed the bunk and shook his head, frustrated at the waste. Then he pointed to a pen of beautiful, black steers. Now, I'm the first to admit I know very little about judging cattle, but this pen of fully fed Black Angus-Wagu mix looked like a meal I wanted to eat right then, right there.

Morales explained the he loved Mexican feeders' heat tolerance, docile nature and U.S.-derived genetics, but the big black M brand on their side meant he'd get a much discounted price since COOL required the meatpackers to separate the pen and label the resulting beef as originating in Mexico.

"There's a big misconception than Mexican feeders are just junk," he told me on that 2011 tour. Then out on grass I saw a lot of scraggly Brahman-blooded cattle with the M brand. They were from the heart of drought lands in Mexico, and I could see the basis for the stereotype.

Mexican feeder cattle came to U.S. feedlots in droves that year. Imports swelled from the average to 1.38 million in 2011 and 1.44 million head in 2012 on strong U.S. prices, a favorable exchange rate and above all poor pasture conditions. The drought that forced the U.S. herd to its smallest in more than 60 years did a similar thing to the Mexican cattle industry.

A recent report by Rabobank points to the substantial increase in spayed heifer exports to the U.S. By September 2012, spayed heifers accounted for more than a quarter of all shipments, a signal of depleted Mexican cattle supplies.

"We'll undoubtedly see lower shipments of feeder cattle into the U.S. 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 U.S. on par with historical levels, "said Don Close, the report's author and vice president of the animal protein research division of Rabobank's Food and Agribusiness Research & Advisory group.

Imports of Mexican cattle have reached an unsustainable level, and U.S. cattle feeders will need to start rethinking how they procure cattle. They'll be forced to look further north and pull from deeper in the southeast despite the freight disadvantage. Imports from Canada increased 77% last year, but still amounted to less than 135,000 head. Any increases there will likely be overshadowed by the decline of Mexican imports.

Historically, the Mexican cattle feeder imports into the U.S. show a five- to six-year cycle of spikes and drop-offs, Close notes. The recent liquidation of heifers has elongated the process of rebuilding Mexico's herd.

It's all one more reason why competition for the small cow/calf herd will be stiff in the next few years. But for me, I'm going to miss the plenty of nice, fat Mexican black hides keeping my steak prices low.