Comparative Advantage and Labor Issues in the Livestock and Meat Industry in Mexico and the U.S....

Comparative Advantage and Labor Issues in the

Livestock and Meat Industry in Mexico and the U.S.

Derrell S. Peel

Department of Agricultural Economics

Oklahoma State University

Comparative Advantage

• What will be produced?– Resource allocation

• Trade Implications

CATTLE IMPORTS FROM MEXICOAnnual

200

400

600

800

1000

1200

1400

1600

1800

1982 1985 1988 1991 1994 1997 2000 2003 2006

Thou. Head

I-N-1704/25/08

U.S. Beef Exports to Mexico

0

100000

200000

300000

400000

500000

600000

700000

Tho

usan

d L

bs.

1994 1996 1998 2000 2002 2004 2006

Arid/Semi-Arid

Temperate

Tropical

Geoclimatic Resources

• 1.97 million square kilometers in total

• 1.1 million square kilometers used for grazing– 9 hectares/AU stocking rate

• 11 percent arable land– 21-24 million hectares planted – 0.2 hectares/person

Traditional Cattle Marketing System

Local cow/calf production/ pasture finishing

Central Market

Local Market

Local cow/calf production/ pasture finishing

Local cow/calf production/ pasture finishing

Local cow/calf production/ pasture finishing

Local Market

Local Market

Most Sales are Pasture Finished Cattle

EXPORTS

NATIONAL

MEXICAN CATTLE AND BEEF MARKET REGIONS

Changes in Consumer Beef Demand

• Increasing Quantity

• Growing preference for fed beef

Percent of Slaughter Cattle by Type in Mexico City Monthly, April 2000 – February 2008

0

10

20

30

40

50

60

70

80

90

100

2001

2002

2003

2004

2005

2006

2007

2008

Per

cent

of

Tot

al S

laug

hter

Pla

nt A

rriv

als

Pradera Corral Cows Fuente: SNIIM

New Cattle Marketing System

Local cow/calf production/ stocker production, some pasture finishing

Central Market

Local Market

Local cow/calf production/ stocker production

Local cow/calf production/ stocker production

Local Market

Types of Cattle Sold:

Feeder Cattle

Feedlot Finished

Pasture Finished

Regional Feedlot

Local cow/calf production/ stocker production, some pasture finishing

Cattle Feeding Centers

Cattle Exports by State of Origin

0

10

20

30

40

50

60

70

80

90

100

2001/2002 2006/2007

Jal

Zac

Cam

Sin

Ver

Tam

NL

Coah

Dgo

Son

Chih

Comparative Advantage in the Livestock and Meat Industries

• Other issues– Public infrastructure

• Roads• Legal/financial systems

– Industry infrastructure• TIF slaughter plants• Boxed beef

– Retail Food Marketing

Important Factors

• Changes in beef demand• More intensive production systems• Internal animal and product flows• Regional considerations• Competition with other meat

industries

A Delicate Balance

• Opportunity– The increase in beef demand and

especially in the proportion of demand for fed beef.

• Threat– The need to use more intensive

production systems and the increase in concentrate feeds in competition with pork, poultry and milk production.

Comparative Advantage Summary

• Forage and feeder cattle production– Export and domestic markets

• Limited cattle feeding and meat processing industries– Market focused– Feed disadvantage

• Less intensive, more by-product use– Small-medium scale integrated operations

• Continued beef imports– Quantity and specific products– South American product?

Labor Issues in the Livestock and Meat Industries

• Changes in the U.S. Meatpacking industry– Large scale operations using more technology

and large amounts low-medium skilled labor– Located in rural areas

• Hispanic labor is very important