Mexican cattle herd liquidation began in a big way, reaching 30 percent in some areas. Second, the Mexican peso devaluation of late 1994 made Mexican cattle cheaper in terms of U.S. dollars and stimulated demand for Mexican cattle. Third, many Mexican ranchers found themselves in a cash flow crisis due to lower purchasing power because of a weaker peso, higher inflation which exceeded 52 percent, and interest rates of over 75 percent. The quick sale of cattle was the only option in many cases. These events occurring together were the primary causes behind the record cattle imports from Mexico during 1995.
Several factors seem more important than others in explaining what has occurred.
U.S. beef production has increased nearly nine percent since 1993 and is forecast to reach a record 25.75 billion pounds in 1996. Beef stocks were up 52 percent from 1993, reaching 548 million pounds in 1995. Total U.S. beef supply was up 10 percent from 1993 and is forecast to reach 28.4 billion pounds in 1996. Production of beef per cow continues to rise, reaching 561 pounds in 1995, even though feedlot placements have fallen in recent months from 2.2 million head in October to 1.4 million head in December. Production of competing meats has also increased.