Opportunities for Australian beef in Mexico

01 March 2018

Mexico will continue to present great opportunities for Australian red meat, particularly beef, with the extended reduction in imported beef tariffs and the countries positive underlying demand drivers.

Temporary tariff reductions extended

The Mexican government recently announced that the agreement establishing detailed provisions on unilateral tariff rate quotas (TRQ) has been extended to the end of 2019. This means Mexico will continue to allow up to 200,000 tonnes/year (tariff free) of beef from non-NAFTA countries. The quota is issued on a first-come-first-served basis, and will run through to December 2019.  Prior to the agreement, tariff rates for beef were 20% for chilled and 25% for frozen product. The government decision to extend the agreement can be attributed to reassuring supply to assist the stability of the national market and the continued increase on beef prices. According to Mexico’s federal register (Diario Oficial), beef prices have increased by 63% between December 2011 and October 2017.

Mexican Consumers – more pesos in their pockets

  • The long-term growth of the Mexican economy is primarily driven by the potential of the country’s demographics. The Mexican population currently compromises 130 million people, with a third of Mexicans below the age of 15 and no more than 10% older than 65. These attributes position Mexico well to enjoy an increasing working age demographic that will drive domestic consumption and economic growth.
  • A combination of a drop in the unemployment rate, a rise in real wages, and the increase in remittances from abroad are putting more pesos in people’s pockets, leading to a consumer-led recovery.
  • Young consumers with more money to spend are fuelling demand for high quality food and a more formal dining out experience. Mexican consumers are willing to experience new cuisines and are more interested in branding and convenience.  
  • Beef consumption is expected to reach approximately 1.86 million tonnes cwe in 2018 (up 2% year-on-year) and demand is projected to rise, as the peso strengthens and the middle class grows.

Mexico’s foodservice and retail sectors

  • Spending at foodservice in Mexico is forecast to reach more than $36.4 billion by 2021, up 60% from an estimated $22.8 billion in 2017. Full Service Restaurant, Quick Service Restaurant and accommodation dominate the demand for animal protein, with beef representing over a quarter of the total animal protein purchased (by value) in the foodservice sector.
  • Mexican consumers spent an average of US$626 (per capita) in 2016 in the foodservice channel, with more than 70% of that spend in FSR and QSR. Although the foodservice per capita expenditure in Mexico may seem low compared to its NAFTA neighbours, it is considerably higher when compared to some markets in SEA (see chart below).
  • In the highly Mexican fragmented retail sector, hypermarkets are the most prevalent outlet type in the country. Retailers will increasingly target the upper-middle class segment in the coming years, through premium formats that offer popular imported produce.

What is MLA Doing?

Because of the opportunities that Mexico is currently presenting, MLA has been working closely with the Australian Government to identify new market opportunities for Australian beef and lamb. MLA’s North American office (based in Washington DC), have been assisting visits by red meat industry delegates including sheep industry representatives and some of the main exporters. MLA also participated in and held functions around the visit by Trade Minister, Steve Ciobo MP to Mexico in October 2017.

Austrade has organised key meetings for MLA and Australian exporters with high-end food service and retailers, who are showing an increased willingness to source from countries other than the USA. For 2018, Austrade and MLA are planning a number of activities in the market to stimulate interest and uptake of Australian beef and lamb, especially amongst high-end consumers and food service operators.

Mexican beef imports are growing

Mexican beef imports increased 6% in 2017 (Jan-Oct 2017) to 113,497 tonnes swt, with more than 80% of imports from the US (majority fresh/chilled product).  Muscle cuts such as shoulder clods (also known as chuck) and rounds are the most popular US cuts exported to Mexico. 

Canada is the second major supplier to Mexico, with 11% volume market share. Nicaragua has increased its market share, representing 8% of total import in 2017*, up 70% year-on-year, to 8,959 tonnes swt.

Australia is a relatively small beef supplier to Mexico but has increased volumes in 2017, up 29%, to 124 tonnes swt. The main cut imported from Australia is thin flank, which is used in a variety of popular local dishes that require thin, leaner beef cuts used in fajitas, for grilling and milanesa-style cooking. The opportunity for Australian beef is more important when considering that currently, due to sanitary requirements, Argentina and Brazil, two of the largest beef producing nations in South America, do not have market access to Mexico.

Australia’s trade to Mexico will be benefit from the proposed CPTPP (Comprehensive and Progressive Trans-Pacific Partnership) outcome

For Australia’s trade to Mexico, the current 20-25% beef tariff will be eliminated within 10 years; the 10% sheepmeat and goat meat tariffs will be eliminated within 8 years; the majority of offal tariffs will be eliminated on entry into force (EIF); and the 10-15% tariffs on live animals will also be eliminated on EIF.

Australia and Mexico are also in trade discussions via the Pacific Alliance FTA negotiations launched on 30 June 2017.  A Pacific Alliance FTA (a regional trading bloc comprising Chile, Colombia, Mexico and Peru) would provide an opportunity to diversify exposure to Latin America, and support the goal of capturing the CPTPP's benefits.

More information

Rob Williams
MLA International Business Manager – North America
rwilliams@mla.com.au

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