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.
Further Reading