Canada recently approved eight Mexican beef processing plants for beef export to Canada. This seems like an odd move just after USDA implemented their new Country of Origin Labeling plans a few weeks ago.
There has been some talk about retaliatory trade tariffs on U.S. beef products from both Mexico and Canada. But that is a World Trade Organization (WTO) process that could take up to 18 months.
I get the feeling that Canada and Mexico decided not to wait around for WTO tariffs and may be starting to sidetrack some U.S. beef markets. Logistically, it wouldn’t make sense for Canada to bring in beef from Mexico in any kind of volume to intentionally damage U.S. beef markets, but it does perhaps send a political message to USDA and the Obama administration that they’re messing up.
Ironically, most, if not all, of these Mexican packing plants are already approved by USDA to export to the U.S. and have been doing so for around 10 years.
Mexico’s beef industry is growing rapidly and has found some sustainability with beef production within its own borders. The Mexican beef industry is as sophisticated as any in the world. They have learned how to add value to those scrawny Mexican feeder cattle. They now feed them to slaughter weights and have also learned how to yield more value from the carcass, shipping the higher value products into premium markets like the U.S., Japan and Russia.
There are apparently two types of packing plants in Mexico: USDA and Canadian Food Inspection Agency approved, that focus on the high value export markets; and state inspected plants, that process cull cows for the local markets. Learning how to utilize the old technology of boxed beef, they have been able to sell the lower value meats in Mexico and export those higher quality loins and ribs for added carcass value. It’s still a lower value cut than the same ones in the U.S., but it is a higher value cut than it would be in Mexico.
The Mexican feeding industry is growing by feeding farm trash, byproducts and importing some feed grains. They produce lean carcasses that may grade Select, but they are able to get them bigger and are not required to have the same level of marbling as U.S. markets.
It appears that SuKarne, Mexico’s largest beef producer and processor, has grabbed the Mexican beef industry by the horns and is growing their business at a very rapid pace. The growing success of SuKarne and the Mexican beef industry has been fed by an emerging middle class in Mexico. The company claims to be the fifth largest grain-fed beef supplier in North America. The company has about two billion dollars in total beef sales and of that, 787 million dollars are export sales. They claim they have grown at an annualized rate of 20 percent over two decades.
They have several 120,000-head feedlots to feed their massive processing operations.
One would think that sourcing cattle could be a problem. But they have assembled a huge network of private cattle suppliers, roughly 50,000 folks, and operate 200 buying stations throughout the country, and they purchase all classes of cattle. The company currently processes over a million head of cattle a year and has grown its cattle feeding business from 292,000 head in 2010 to 515,000 head in 2013. Their typical feedlot is 120,000 head. Their feedlots and processing plants are adjacent to each other, reducing their transportation costs.
This is a fully integrated and dynamic company.
They are currently building a new processing facility in Durango, Mexico, which will be the largest beef processing facility in the Northern Hemisphere and will be one of the most efficient and modern facilities in the world.
This is a fascinating company and they have big sustainability plans. It does make you wonder if anyone could grow a company like this in the U.S. anymore. The owner, Jesus Vizcarra Calderone, is well-connected in the global beef business, and one of Mexico’s best known businessmen. He is also very politically active, as former mayor of Culiacan.
I’d say the business climate could be very friendly in Mexico, not only for local business, but also for exports and imports, if you know the right people, and it appears that Canada may just know some of the right people. — PETE CROW