CME: Exports to Mexico to Continue This Week

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Latest Pig Industry News

Tuesday, December 30, 2008

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CME: Exports to Mexico to Continue This Week

US - CME's Daily Livestock Report for 29 December 2008.

After a brief spat that roiled the markets over the Christmas holiday, it appears that US meat exports to Mexico will resume for the most part this week. According to news reports, Mexican officials have lifted the suspension on 20 of the 30 affected plants and USDA appears to have presented Mexican authorities with plans on corrective actions for another five plants, which are expected to resume shipping to Mexico shortly. In all, the suspension issue is now expected to have almost no impact on the meat markets. But...and there is always a but coming, just as the suspension issue appears to have been resolved, another issue related to exports to Mexico will likely come up.

According to a notice that the US Meat Export Federation sent to its members over the holiday, Mexican officials have changed the packaging requirements for pork exports to that country, banning the use of bulk packaging and requiring that almost all US pork exports to that country (with some exceptions) be shipped in boxes. The elimination of combo shipments (i.e. product packaged in large containers, sometimes as heavy as 2000 lb.) is more important than it appears. Processing plants like to have product packaged in combos because it cuts down significantly on labor and disposal costs. A large portion of US hams, bellies and trim going to Mexico currently is packaged in this way.

Changing the packaging requirement will tend to raise costs both for US packers and Mexican processors, costs that will eventually be reflected in the price of the product. USDA was notified of this change on 19 December, coincidentally the same day that Mexico filed a complaint with the WTO over COOL. The change is scheduled to come into effect on 15 January but Mexican officials are expected to visit with USDA next week on this topic. So far they have not indicated if they were willing to delay the implementation in order to provide US plants with some time in addressing the issue. We do not know enough to even speculate as to why Mexican officials have decided to change packaging requirements after so many years of successful trade between the two countries. Likely we will know more next week when everyone is back to work. The US Meat Export Federation is generally on top of these issues and more information will likely be forthcoming.

The link below presents the latest analyst estimates of the upcoming USDA Hogs and Pigs report according to a survey conducted by Dow Jones. We will discuss the numbers and implications in the next issue of the DLR.