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