Drought cycles impact beef prices

The drought in Mexico not only impacts consumer beef prices, but also producers’ incomes, since cattle feed depends largely on the existence of pastures, reveals an analysis by the Bank of Mexico (BdeM).

According to the Regional Economies Report From April to June, 74.9 percent of bovine production depends to some extent on the free-grazing system, that is, on pastures, so given the risk of more frequent and prolonged periods of drought, it is necessary to adopt measures to reduce vulnerability.

The central bank’s analysis shows that exposure to the period when water is scarce causes a short-term reduction in beef supply.

However, in the medium term, the price paid to farmers increases temporarily and moderately.

Data from the BdeM show that the northern, central-northern and southern regions generate, on average, 88.5 percent of national production.

In particular, Jalisco and Veracruz stand out as the two main producing states, as they together provide a quarter of the national beef production.

Although 74.9 percent of cattle in the country are fed to some extent by the grazing system, 59.4 percent use free grazing, that is, cattle move freely to consume natural or induced grasses and other herbs.

Of the total, 11.1 percent use controlled grazing, in which the volume and frequency are regulated in order to have a better use and conservation of the pastures, while 4.4 percent use a combination of grazing with the use of stables and corrals where they are provided with forage.

The BdeM indicated that the above shows that cattle that are fed to some extent with the grazing system are potentially exposed to the adverse effects that drought could have on pasture availability.

The impact of drought on beef production and prices depends on the effects that this climatic phenomenon generates at a local level in the producing areas.the analysis notes.

Beef production and prices are susceptible to internal supply shocks such as droughthe indicated.

The effects of the drought are not only reflected in consumer prices, but also in the lower weight of animals, as they are slaughtered earlier to avoid economic losses in case the dry season is stronger and longer.

Beef production and prices are susceptible to internal supply shocks such as droughthe noted.

Given the risks of vulnerability, the BdeM indicated that measures need to be taken such as speeding up imports to restore the supply of beef and mitigate the upward pressure that the drought could create on its prices. It also suggested the promotion of controlled grazing, the acquisition of insurance for livestock, and the creation of programs that encourage the production of fodder.