Mxico-New rules for US beef imports.

UNITED STATES. MEXICO AND NEW PACKAGING RULES.

A proposed change in meat import packaging

requirements by Mexico, if implemented later this month as scheduled, could be

a major blow to U.S. meat exports, according to U.S. meat industry

organizations.

The proposed change in packaging specifications made by Mexican officials

would eliminate the use of combo bins and require that all meat products be in

boxes. Combo bins are large cardboard containers that hold approximately 2,000

pounds of fresh meat products for further processing.

The use of combos for transporting fresh meats and poultry to be used in

further processing is a common practice in the U.S and has been for shipping to

Mexico over the past 15 year as well.

The majority of the fresh pork cuts such as hams, shoulder butts, picnics and

trimmings have been shipped to Mexico in combo bins.

According to meat and poultry industry representatives, combo bins account

for about 80% of the U.S. pork, 70% of the poultry and about 10% of the beef

exported to Mexico. They said boxing the meat instead is neither cost-effective

nor practical because many of the U.S. meat plants are not designed in such a

way to allow for on-line boxing of these materials. Also, many of the Mexican

customers’ production lines are configured to work only with combos.

Market analysts and industry representatives estimate the additional cost of

boxing these products versus shipping in combo bins from 10 cents to as much as

20 cents per pound. The added costs will vary by plant or the product being

prepared for shipment.

Should the change in the Mexican packaging requirements be finalized and

implemented, it could result in a sharp decline in exports of U.S. meat and

poultry to that country and would raise the cost of the goods to Mexican meat

processors and consumers.

U.S. meat industry officials contend the proposed change in packaging

requirements by Mexico is to protest the U.S.’ mandatory Country of Origin

Labeling law implemented in late September.

"According to industry sources in Mexico, the combo policy is a tit-for-tat

response by the Mexican government to the new mandatory country of origin meat

labeling law in the U.S.," said the National Pork Producers Council.

"If implemented, this ban (on the use of combo bins) would result in

dramatically higher prices for pork and pork products and, to a lesser extent,

for beef and beef products" shipped to Mexico, said Jim Herlihy, vice

president, Information Services with the U.S. Meat Export Federation in an

emailed reply.

The proposed change in Mexico’s packaging requirements "would have a very

significant impact on shipments of U.S. pork and beef to Mexico," Herlihy said.

The 80% of the U.S. pork shipped to Mexico in combo bins during the first 10

months of 2008 represents approximately 160,000 metric tons, he said. The

combos portion of the U.S. beef, or about 10%, of exports to Mexico during that

period represent about 18,000 tons. The beef shipped in combo bins is mainly

trimmings to be used in the production of hamburger.

Herlihy said higher prices required through the use of boxes versus combo

bins "would contribute to increased inflation and could negatively impact

employment in those companies using U.S. pork and beef. He said this is

especially true for those companies that produce further-processed meat

products."

USMEF estimates that the volume of exports of ham and other pork products for

further processing in Mexico could plummet by 80%, Herlihy said. The resulting

shortage of the affected pork and beef items would push up prices for Mexican

consumers as well as meat processing companies.

Mexican pork producers could also be negatively affected because the increase

in meat prices could affect the confidence and spending of price-sensitive

Mexican consumers. These consumers likely would shift purchases to less

expensive protein options, USMEF said. "This would come at a time when the

Mexican government is struggling to keep inflation under control and minimize

the impact of the global economic downturn on employment."

The loss of the Mexican market for these products would also weigh on

domestic prices by triggering a short-term glut of the items in the U.S.

market, Herlihy said. The result would be a widening gap between pork product

prices in the U.S. and Mexico.

Implementation of the proposed packaging changes by Mexico "would drastically

reduce U.S. pork exports to Mexico and have devastating financial implications

for the U.S. pork industry," said the National Pork Producers Council in

comments received via email Friday. "This policy must not be implemented

because there is no scientific or legal justification for the new policy," said

Nick Giordano, vice president and counsel, International Trade Policy, with the

NPPC.

NPPC said "the impact on live hog prices according to Iowa State economist

Dermot Hayes could be a drop of as much as $5.96 per animal.

"The new Mexican policy does NOT improve food safety, bio-security, or

efficiency at the border," NPPC said. "The policy would drastically increase

the burden on inspectors. A single truck trailer carries 22 combo bins on

average. If the same volume of product were boxed, each truck would carry

between 1,000 and 1,400 boxes. This would not only increase the difficulty of

inspection, it would add to the cost of packing disposal once the product

arrives at its destination in Mexico."

The NPPC also said the U.S.. pork industry does not have adequate packaging

capacity to maintain its export sales volumes to Mexico if the combo policy is

implemented. "Adding new capacity would cost the U.S. industry millions of

dollars. U.S. pork exports will decline and U.S. live pig prices will fall

significantly," NPPC said.