Modeling the Evolving Mexican Cattle and Beef Industry and the Economic Impacts of Additional Beef Fabrication

Abstract

Beef packing infrastructure in Mexico has changed dramatically in recent years with a significant proportion of domestic beef production now fabricated into boxed beef in place of the carcass based system that dominated historically. Conversion to a boxed beef system increases beef value potential as boxed primals can now be targeted to appropriate markets to increase overall carcass value. An important component of this increased value is the ability to export specific products to higher value foreign markets. This research adapts and expands the GANAMEX model, a regional linear programming of the Mexican cattle industry to compare a scenario without boxed beef production to a benchmark where boxed beef production occurs. The addition of fabrication technologies begins to move Mexico from a cow-calf industry built on live cattle exports and U.S. meat imports to an industry that produces higher quality cows and is more feedlot oriented. As the gap between comparative advantages in beef production and beef prices narrows, the trade relationship between the U.S. and Mexico will become more sensitive to arbitrage opportunities in the world beef market and geographical product flows.