The increase in Mexican cattle imports thus far in the year is being offset by the decline in Canadian cattle imports. Through March, imports of Mexican cattle were 35 percent higher year-over-year, but imports of Canadian cattle were just over 35 percent below year-earlier levels for the quarter. The largest impediment to higher Canadian cattle imports, beside a lower Canadian cattle inventory, is a lower U.S.-Canadian slaughter cattle price differential, also a function of the higher exchange rate between the U.S. and Canadian dollars. The U.S.-Canadian slaughter steer price differential (5-Area, all grades vs. Alberta, mostly select 1-2) has remained well below the 5-year average thus far in the year and has yet even to match the price differential levels of 2010. Conversely, the spread between U.S. and Mexican feeder cattle prices (Las Cruces imported feeders vs. live grass-fed Mexico city steers) has continued to widen, a trend beginning in January 2010, but noticeably increasing since the Fall of 2010.

The North American Drought Monitor also classifies almost the entire region of Northern Mexico as experiencing extreme to severe drought as of March 31, 2011. Imported Mexican cattle are mainly entering U.S. feedlots directly, not surprising given the extension of drought conditions into Texas and surrounding States and U.S. feeder cattle demand.

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