A new market for U.S. pork is coming on strong, and it could someday challenge Japan as the United States' No.1 importer. To find that market, look no further than your neighbors to the south.

U.S. pork exports to Mexico grew 80 percent in 2000 over 1999 levels, making Mexico the fastest-growing market for U.S. pork. That trend is continuing into this year, as U.S. pork exports to Mexico increased another 27.9 percent in the first quarter, notes Ron Plain, University of Missouri agricultural economist.

The net result of expanding pork exports to Mexico is money in your pocket. Last year, those exports meant $248 million for the U.S. pork industry, says Nick Giordano, trade counsel for the National Pork Producers Council. That trend appears to be holding strong, as this year's first quarter sales totaled $69 million.
Plain estimates a year ago, about 1.6 percent of U.S production headed for Mexico, which means live hog prices would have been about 3.5 percent lower without those sales. Exports south of the border added about $1.50 per hundredweight to the U.S. hog market in 2000, he says.

There are two main reasons for rapid increases in U.S. pork exports to Mexico. One is the country's strong economy of recent years.

"In 1994 and 1995 the Mexican economy went into a recession and there was a huge drop in pork shipments to Mexico. The economy recovered in 1997 and U.S. pork sales have been growing rapidly ever since," points out Plain. "Now the value of the peso is holding strong, the government is providing stability and the economic growth rate is encouraging."

A Bank of Mexico survey of analysts and economists forecasted a 2.5 percent decline in the Mexican Gross Domestic Product, but also a 1.3 percent decline in inflation. The peso is expected to stay relatively steady.

The other major factor affecting pork exports to Mexico has been the North American Free Trade Agreement. When NAFTA began in 1994, the tariff rate on U.S. pork was about 22 percent, says Plain. Now that number is below 2 percent.

"Mexico has been the exclamation point on the importance of NAFTA to American agriculture," says Giordano, "In 2003 the duties will drop to zero and the opportunities to increase exports to Mexico will be tremendous, with no tariffs or duties."

All signs seem to point to long-term growth of U.S. pork exports to Mexico. A lack of feed grains makes it economically impractical for Mexican pork production to increase significantly. Lower labor costs are the only advantages Mexico has over the United States, but that is expected to shrink with time.
Mexico is expected to produce 3 percent more pork this year than last year, but also is expected to consume about 16 percent more pork, says Plain. So, while production is increasing slightly, Mexico is producing a smaller amount of the pork consumed. Therefore exports will likely increase, says Plain.

Because of NAFTA, and geographical advantages, the United States has been the dominant pork supplier to Mexico. Plain estimates the United States provides about 90 percent of the imports. Canada is believed to have the next largest market share, but it is not a significant threat to the United States' dominance in the Mexican market.

To maintain that position, U.S. producers will have to cater to the market's needs. "The Mexican market is price sensitive," says Steve Meyer, National Pork Producers Council director of economics . "Consumers there tend to buy the lower-value cuts, which gives us an opportunity to export the high-value cuts to Japan or other markets."

Meyer also points out that the United States sometimes hurts itself in export markets by production fluctuations. When production drops, not only is pork scarce to export, it also drives up prices, which can hurt exports. Meyer believes becoming a more dependable supplier to export markets will help the U.S. pork industry in the long run.

Plain adds that continued work by the U.S. pork industry with organizations like the U.S. Meat Export Federation have been vital to export growth. Advances in packaging that give products longer shelf life also make it easier to export over greater distances.

"U.S. producers and the U.S. pork industry have done a great job. Exports to Mexico and other countries are a strong indication of the quality of U.S. pork," says Giordano.