Soft U.S. Prices For Live Cattle Lead To Lower Imports

11/17/2009

The United States is expected to import 1.9 million head of cattle in 2009, the lowest import total since BSE-related bans on Canadian cattle were in place in 2005. Imports from Canada and Mexico have been below recent year-to-date averages. Low prices for feeder and fed cattle, caused by lower demand for beef, and unfavorable currency exchange rates have diminished the incentive for foreign cattle producers to market their livestock in the United States. Imports are expected to increase in 2010 to 2.1 million head, as improved U.S. prices should encourage the shipment of Mexican and Canadian cattle to the United States for further feeding or slaughter.

Mexican cattle imported into the United States are almost all cattle that have been fed on pasture and are being sold for further feeding, either in backgrounding operations or feedlots, in the United States. While year-to-date figures are above last year’s exceptionally low import levels, they are well below the 5-year historical average. Recent pasture conditions in Mexico have been mixed. Some areas near the Texas border have been experiencing the same dry conditions that have occurred in Southern Texas, while other areas further west and south have had better precipitation. Imports from Mexico have been lagging behind historical levels as feeder cattle prices in the Southern Plains remain low, partially as a result of drought conditions in Southern Texas.

Imports of Canadian cattle have also been dramatically lower year-to-date. According to AMS weekly reports, year-to-date feeder cattle imports have been down over 50 percent and slaughter steers and heifers nearly 20 percent. Price differentials between U.S. and Canadian cattle markets have been lower than in 2008 and 2007, adjusted for the exchange rate. Both U.S. and Canadian cattle prices have been lower than last year in U.S. dollar terms. However, with a lower price premium than is typical in the United States for Canadian producers, there is less incentive for Canadian cattle producers to market animals in the United States.