Mexico Market Shows Optimism for 2013 – Pricing Remains an Issue
Published: Monday, January 14th, 2013
Chad Russell, regional director for USMEF Mexico, Central America and the Dominican Republic
Leading Mexican red meat industry professionals are optimistic that 2013 will be better for their businesses than 2012, although the perennially price-sensitive market bases much of its purchase intent on price trends for U.S. products, according to a survey conducted by USMEF with funding support from the USDA Market Access Program (MAP), the Beef Checkoff Program and the Pork Checkoff.
The survey, conducted in late 2012 of leading beef and pork importers, distributors, processors, wholesalers and retailers in Mexico City and Monterrey, indicates that across the board, “high U.S. prices are a top factor outside their control that negatively affect their business.”
“The survey results give us some clear direction from leading importers of U.S. beef and pork in the Mexican market,” said Chad Russell, regional director for USMEF Mexico, Central America and the Dominican Republic. “The price sensitivity of this market is nothing new, but seeing it so uniformly from all buying sectors gives us greater certainty on how to proceed.”
While the Monterrey region of northern Mexico is slightly more beef-centric than the metropolitan area of Mexico City in south-central Mexico, both regions agree that high U.S. prices, driven in part by a weaker Mexican peso, would have a significant impact on their buying decisions in the year ahead.
The survey included approximately 100 participants about equally divided between the two regions. Russell noted that the survey participants are key traders, buyers, processors and retailers who import large volumes of U.S. red meat products and have a disproportionate effect on market trends.
When asked about their confidence level for their market for the year ahead, both the Mexico City and Monterrey participants responded positively. On a scale of one to five with one being “high” and five being “very low,” the Mexico City representatives gave the overall market a 2.37 grade (between “regular” and “somewhat high”) for the coming year while grading the outlook for their individual businesses a more optimistic 2.18 score.
The Monterrey respondents were slightly less optimistic for the country (2.68 score), but gave their own businesses a higher 2.11 score.
If current U.S. beef prices persist or increase further, both groups indicated that they likely would import less American product in 2013 – ranging from 5 to 14 percent less in the South to a 15 percent or larger dip in the North. Both groups also predict slightly higher Mexican beef production this year with somewhat higher prices.
On the pork side, both groups expect somewhat increased domestic pork production, with Mexico City buyers expecting to marginally boost purchases of U.S. pork while Monterrey buyers might see purchases dip slightly.
Because of their reliance on U.S. meat products, a high percentage (72 percent) of responding importers, processors and distributors indicated that high U.S. prices are a leading factor outside of their control that negatively affects their business. The U.S. supplies 90 percent of pork imported into Mexico (which is 68 percent self-sufficient) and 84 percent of imported beef (where Mexico is 84 percent self-sufficient).
The weak peso was cited by 89 percent of traders as being a significant factor outside their control that negatively affects their business.
As Russell noted, the price sensitivity of the Mexican market is well understood. Addressing that requires focusing both on niche markets as well as educating Mexican buyers on alternative cuts that provide value. One example of an alternative cut being explored by USMEF is “rose meat,” a beef cut from the flank that often goes into trim in the U.S.
USMEF-Mexico conducted a separate study on the market potential for rose meat in Mexico, which is used in the preparation of tacos, both by street vendors and high-end restaurants. There also could be other applications in the restaurant sector. While product sourced from the U.S. is appreciably more expensive at this time, it has a number of commercial advantages, including higher yield, more uniformity in product size, and preferred tenderness, flavor, texture, aroma and juiciness.
“There is an education process with meat buyers in Mexico to ensure that they understand the total value proposition of the products they purchase rather than just focusing on the per-pound price,” said Russell. “Rose meat is just one example of a product that may offer excellent value and help merchants with customer retention. And it is a niche that may offer growth potential for our industry.”
Russell noted that in addition to more traditional market development activities, USMEF also is involved in a comprehensive imaging program aimed at improving consumer perceptions of pork, which will support increased consumption of all pork in Mexico, including imported U.S. pork. Per capita pork consumption in Mexico is only about 25 pounds per year compared to 47 pounds in the U.S., so Russell believes there is great potential for expansion of overall pork demand.
Through the first 11 months of 2012, Mexico is the top volume market and No. 2 value market for U.S. pork, purchasing 550,408 metric tons (1.2 billion pounds) of product valued at $1.03 billion, increases of 15 percent in volume and 11 percent in value over 2011.
Mexico also is the largest volume market for U.S. beef, importing 178,540 metric tons (393.6 million pounds) valued at $761.2 million, declines of 24 percent in volume and 16 percent in value compared to 2011.