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Prior to restricting poultry-product imports from the U.S. following the discovery of avian flu in Texas late last week, Mexico had already barred U.S. beef in response to bovine spongiform encephalopathy, or mad-cow disease, concerns.

Chicago Mercantile Exchange live cattle futures rose sharply following a recent statement by the U.S. Department of Agriculture's chief economist, Keith Collins, that said he expects Mexico to ease its ban on U.S. beef "in a matter of days."

U.S. Department of Agriculture's 2003 export totals showed that by volume, Mexico was the second-largest export customer for U.S. beef and pork. Japan accounted for 29.4% of U.S. beef and beef variety meat exports while Mexico was close behind with 26.3%.

For pork and pork variety meats, Japan held the No. 1 spot with 35.6%, and Mexico was second at 28.9%.

Russia was the U.S.'s largest export customer for poultry in 2003, with China/Hong Kong second and Mexico third.

It is a widely held view that foreign pork demand increased dramatically after countries such as Japan curbed U.S. and Canadian beef imports on mad- cow concerns then cut itself off from major poultry suppliers over worries about bird flu.

A meat futures broker said that Mexico is a major importer of beef and chicken and is relying more on pork now because of bans on the other two competing proteins. Pork "could be in trouble" if beef is taken out of that equation, especially if Japan considers doing the same thing, he said.

The broker pointed out that while Japan no longer imports North American beef, it still takes in beef from U.S. competitors such as Australia. However, Australian beef, which is grass fed, has a different flavor than beef from the U.S., which primarily comes from cattle finished on a high- grain ration, he said.

"Japanese consumers are accustomed to our beef in a variety of dishes and are probably pressuring their government to eliminate (lift) the ban against U.S. product," the broker added.

There have been recent reports of near riots in Japan over the lack of ample and suitable supplies of U.S. beef for use in a popular beef and rice dish there. This has prompted one of Japan's largest chain of restaurants that serves the dish to consider introducing a pork and rice substitute.

Chuck Levitt, senior livestock market analyst with Alaron Trading Corp., was less troubled by the prospect of the removal of the Mexico beef barrier, saying that lifting the ban might have a minimal impact on pork because of that country's U.S. poultry restriction, which remains in place. After getting a boost from the cutoff of two of the three top meats in Mexico, pork would resume its normal relation to other meats, he said.

It would appear that Mexico's ban on U.S. poultry would be of a shorter duration, perhaps weeks, rather than Japan's ban on beef that could last into September or October, said Levitt.

The longer time frame would allow an "appropriate" amount of time to pass for mad-cow fears to subside, to see whether other BSE cases in the U.S. would develop and for newly implemented herd health safety measures to take hold, Levitt said.

Source: eFeedLink - 1st March 2004