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Agricultura, sociedad y desarrollo
Print version ISSN 1870-5472
agric. soc. desarro vol.16 n.1 Texcoco Jan./Mar. 2019
Articles
Beef market in Mexico, considering external factors
1 Colegio de Postgraduados, Campus Montecillo (aurora_castro14@hotmail.com, rory@colpos.mx, rcgarcia@colpos.mx).
2 Colegio de Postgraduados, Campus Puebla (fparra@colpos.mx).
3 Universidad Autónoma Chapingo (mportillo68@yahoo.com.mx).
4 Asociación Mexicana de Engordadores de Ganado Bovino, AMEG A.C. (isaac_aegbn@prodigy.net.mx)
Mexico lacks sufficient beef supply to satisfy the consumption of this food, and significant volumes are imported. This meat industry has suffered an important market loss with substitutes. For the period of 1980-1993 to 1994-2014, the production of this meat increased 35.6 % in average; the domestic demand, 47.2 %; and the imports, 496.1 %. An important input for fattening cattle is balanced meals; for this purpose, in the same periods, the imports of yellow maize and sorghum increased 151.9 % y 11.6 %. Therefore, the effect of maize and sorghum imports to Mexico were analyzed, from 1980-2014, as part of the diet in the fattening process, and of beef on the market of this food through an econometric model of simultaneous equations, estimated by least squares in two stages with the SAS SYSLIN procedure. In the period of 1994-2014, the increase in the real price of annual average beef imports of 0.8 % is transmitted through the wholesale price, producer price and consumer price, which increased the amount offered in 0.04 % and decreased the amount demanded in 0.05 % and the commercial balance in 0.81 %.
Key words: elasticities; econometric model; offer; demand; beef
México carece de abasto suficiente de carne de bovino para satisfacer el consumo de este alimento se importan volúmenes significativos. Esta industria cárnica ha sufrido importante pérdida de mercado ante sus sustitutos. Para el periodo de 1980-1993 a 1994-2014, la producción de esta carne aumentó 35.6 % en promedio; la demanda doméstica, 47.2 %; y las importaciones, 496.1 %. Un insumo importante en la engorda de bovinos es el alimento balanceado; para ello, en estos mismos periodos las importaciones de maíz amarillo y sorgo se incrementaron 151.9 % y 11.6 %. Por tanto, de 1980-2014 se analizó para México el efecto de las importaciones de maíz y sorgo, como parte de la dieta en el proceso de engorda y de la carne de bovino sobre el mercado de este alimento mediante un modelo econométrico de ecuaciones simultáneas, estimado por mínimos cuadrados en dos etapas con el procedimiento SYSLIN de SAS. En el período de 1994-2014 el aumento del precio real de importación de la carne de bovino promedio anual de 0.8 % se transmite a través del precio al mayoreo, al productor y consumidor, lo que incrementó la cantidad ofrecida en 0.04 % y disminuyó la cantidad demanda en 0.05 % y el saldo de comercio en 0.81 %.
Palabras clave: elasticidades; modelo econométrico; oferta; demanda; carne de bovino
Introduction
Protein of animal origin is essential, although scarce in the diet of Mexican people (Cruz and García, 2014). The protein sources consumed in Mexico are chicken, pork and beef, mainly. In 2014 an apparent national consumption of 3.18, 1.88 and 1.80 million tons of chicken, pork and beef, respectively, was recorded. The annual per capita consumption of these three foods in the same order was 25.37 kg, 15.05 kg and 14.34 kg, respectively (SIAP, 2015; AMEG, 2016).
The total meat production for Mexico from 1980 to 2014 developed at an average annual growth rate (AAGR) of 2.4 %, going from 2.76 to 6.11 million tons, where the most important were chicken, beef and pork meat, which showed an AAGR of 6.0 %, 1.6 %, 0.1 %, respectively. In 2014, 6.11 million tons of meat were produced, of which 47.1 %, 29.9 % and 21.1 % correspond to chicken, beef and pork. Beef occupied the second place at the national level (SIAP, 2015) and the eighth place internationally (FAO, 2015). Although bovine livestock production is located throughout the country, the main producing studies in Mexico are Veracruz, Jalisco, Chiapas, Sinaloa, Baja California, San Luis Potosí, Michoacán, Sonora, Chihuahua and Tabasco, which contribute 62.8 % of the domestic production (SIAP, 2015).
In the negotiations of the commercial agreement between Mexico, the United States and Canada (North American Free Trade Agreement, NAFTA), the production of bovine, ovine and caprine livestock obtained lower protection; the beef imports were left tariff-free and the edible residues of bovine livestock obtained a tax exception for 10 years (Márquez et al., 2004).
Since the beginning of operations under NAFTA, the volumes of meat and edible residues imports increased, and it was not until 2002 that the highest imports were found since 1980, with an AAGR of 14.7 %. After that year, the imports to the country decreased due to the cases of Spongiform Encephalopathy (BSE) or mad-cow disease in Canada, which caused a reconfiguration of the commercial flow in the United States, main origin of the Mexican imports of beef (Gallardo and Villamar, 2014), and in 2012 an AAGR of -8.2 % was recorded, the lowest in the last nineteen years (SIAP, 2015). A possible explanation of this decrease is that the peso-dollar exchange rate was undervalued, which discouraged imports in 2012. In 2014 the imports were 203 thousand tons and the exports 144 thousand tons; this means a negative commercial balance of this product.
The prices of bovine products have had a growing trend in recent years both at the national level and at the international, due largely to the increase in the price of grains, which are used as an input to produce balanced meals. Likewise, the drought that took place in the country caused the decrease of the herd and contributed to the rise in prices (FND, 2014).
The production of beef with fattening in confinement is a sector with high consumption of grains; the diet plays a fundamental role in the production costs, given that it represents 75 % to 80 % of them (Koeslag and Orozco, 2010). This diet leads to the consumption of fodder grains, concentrates, mineral salts, complements and fodders. This type of diet is one of the factors that affects most the profitability of an exploitation of bovine for meat and, certainly, of the product offer.
The production of balanced meals in Mexico for 2014 was around 30.5 million annual tons and it occupied the fourth place at the global level; of this total, 50 % was destined to the poultry sector, 15.9 % to pork, 15.7 % to dairy cattle, 11.5 % to fattening cattle, and 3 % to pets; the rest is distributed in aquaculture and others (SIAP, 2015), being self-sufficient in the production of balanced meals, but not in the inputs used for their production.
Mexico is one of the main maize consumers globally, since it is the basis of the diet of Mexicans. Grain maize represents 85 % of the national volume of cereals and 2.8 % of the world production, occupying the fourth place as producer in the world (González and Ávila, 2014). Since the enforcement of NAFTA, the imports of this grain have increased in up to 238 %, with 10 million tons in 2014 (SIAP, 2015) with a negative commercial balance.
Sorghum, similar to maize in chemical composition, has a great amount of carbohydrates and has other important nutrients like the amino acid lysine. Based on this, maize and sorghum are fodder grains that compete as substitutes, particularly in the elaboration of meals for animals. However, maize has advantages in quality, which in conditions of equal price, makes it preferable over sorghum; however, since the industry is quite competitive, and therefore of low utility margins, the trend is to minimize the costs of dietary formulas and to use the raw materials that optimize the production cost.
The prices of both grains are fundamental for the determination of their use (CEDRSSA, 2014). Mexico imports sorghum for fodder consumption, which increased 11.6 % with the implementation of NAFTA, which is why there are import requirements of 0.3 million tons annually.
As consequence of signing NAFTA, the tariff on beef was eliminated, favoring the imports of this food, primarily from the United States. This increased the consumption of meat and edible residues at a lower price, which have had a negative impact on the beef market in Mexico, affecting the national industry of this food.
It is expected that the negative impact of beef imports have a greater effect than those of yellow maize and sorghum on the beef market in Mexico.
Therefore, for this study we set out the main objectives of measuring the effect of; a) the beef import prices on the offer, the demand and the foreign trade balance; and b) the impact of the import price of maize and sorghum on the balanced meal for fattening of beef cattle and on the offer of this food.
Materials and methods
To estimate the effect of imports of beef and fodder grains on the beef market in Mexico, an econometric model of simultaneous equations was established with data from 1980 to 2014, to determine the functions of offer, demand, transmission of prices of beef, maize and sorghum imports on wholesale, producer, and meat consumer prices, as well as the wholesale prices of maize and sorghum, price of balanced meal, and an identity function defined by the foreign trade balance. To estimate the econometric and statistical parameters that validate the data, the method of least squares in two stages (MC2E) from SAS (Statistical Analysis System V. 0.9) was used. The statistical coherence of the model was validated through the coefficient of determination (R2), which indicates the goodness of fit of each one of the equations estimated; the global significance of the coefficients from each equation was observed with the F test and from each coefficient with the t Student or t rate (Gujarati and Porter, 2010). The Dickey Fuller test was used, increased to test if the data are stationary, and it was proven that the variables used in the model are not stationary, which results in estimations of false parameters about the relationships between variables. The estimations of regressions with non-stationary variables are spurious, unless they are co-integrated. Two non-stationary co-integrated variables are those whose residues are stationary, which implies that the regression is not spurious. To prove that the non-stationary data used in the model are not spurious, the Johansen co-integration test was applied (Montero, 2013). The model was validated based on the economic theory, according to the signs of the coefficients from each equation and with the magnitude of the elasticities.
Time series from 1980 to 2014 were used; the data for the explicative variables of the offer of beef on carcass, such as the producer price of this meat, pork meat, and dairy milk were obtained from the Consult System of Agrifood Information (Sistema de Información Agroalimentario de Consulta, SIAP, 2015). The internal price of the fattening calf was taken from Cruz and García (2014), Márquez et al. (2004) and the National System of Market Information and Integration (Sistema Nacional de Información e Integración de Mercados, SNIIM, 2015); the wholesale prices of beef, sorghum and maize were obtained from the SNIIM (2015); the amount and the import price of beef, yellow maize and sorghum were obtained from the United States Department of Agriculture, Global Agricultural Trade System, GATS (USDA, 2015); the consumer price of beef, chicken, egg and rice, and the gross national income were obtained from Cruz and García (2014) and from the Economic Information Bank of the National Institute of Statistics, Geography and Information (Instituto Nacional de Estadística, Geografía e Informática, INEGI-BIE, 2014).
In the statistical form of the econometric model, eight equations and one identity were established:
OCBt = β11 + β12PPCBRt + β13PPCCRt + β14PPLBRt + β15PALBARt + β16PBENRt-1 + β17OCBt-1 + β18Dt + ε1t
PALBARt β21 + β22PMMRt + β23PMSRt + ε2t
PMMRt = β31 + β32PIMMRt + β32PMMRt-1 + β33Dt + ε3t
PMSRt = β41 + β42PIMSRt + β43PMSRt-1 + β44Dt + ε4t
PPCBRt = β51 + β52PMCBRt + β53PPCBRt-1 + β54Dt + ε5t
PMCBRt = β61 + β62PICBRt + β63Dt + ε6t
PCCBRt = β71 + β72PMCBRt + β73PCCBRt-1 + ε7t
DCBt = β81 + β82PCCBRt + β83YPERRt + β84PCCPRt + β85PCHVRt + β86PCARRt + ε8t
SCEBt = 1.3237 x DCBt - OCBt
εit: random error term. The term of disturbance or error represents all the factors that affect the endogenous variable, but it was not considered in the model (Gujarati and Porter, 2010).
The offer of beef on carcass (OCBt) is determined by the production of beef on carcass expressed in tons (t); it is defined directly by the real producer price of beef (PPCBRt) in ($/t); and an inverse relation with the real producer price of pork meat (PPCCRt) in ($/t); real producer price of cow milk (PPLBRt) in ($/1000 l); real cattle producer price for the balanced meal (PALBARt) in ($/t); real internal price of the fattening calf with one year of delay (PBENRt-1) in ($/t); the producer of cattle understands the behavior of the amount offered in past periods and elaborates expectations of the production expected, defined by the offer of beef on carcass delayed for a period (OCBt-1) in (t) in direct relation and the classification variable or dummy (Dt), which expresses the commercial openness with the United States and Canada through the North American Free Trade Agreement (NAFTA), dividing this analysis in two periods: from 1980 to 1993, before the implementation of NAFTA, and from 1994 to 2014, period when this Treaty was enforced, expressing a direct relation.
The real price of the balanced meal (PALBARt) in ($/t) is determined by the real wholesale prices of yellow maize (PMMRt) in ($/t) and sorghum (PMSRt) in ($/t) with a direct relation; in turn, the real wholesale price of yellow maize (PMMRt) in ($/t) is determined by the real price of yellow maize imports (PIMMRt) in ($/t). The wholesale sellers of yellow maize understand the behavior of the price in the market for the past periods and elaborate expectations of the price expected, defined as the current price of the previous period; this is known as naïve expectation (Caldentey and Gómez, 1993), expressed by the real wholesale price delayed for a period PMMRt-1, ($/t) with a direct relation, and an inverse relation with the classification variable or dummy (Dt). The real wholesale price of sorghum (PMSRt) has a direct relation with the real import price of sorghum (PIMSRt) in ($/t); the real wholesale price of sorghum delayed for a year (PMSRt-1) as a naïve expectation. If last year the price was high, they expect it to be high this year as well; and an inverse relation with the classification variable Dt that expresses commercial openness (NAFTA).
The wholesale beef price in Mexico (PMCBRt) in ($/t) is determined by the real import price of this food (PICBRt) in ($/t), which a direct and inverse relation with the classification variable (Dt). The real producer price (PPCBRt) in ($/t) is determined by the real wholesale price (PMCBRt) ($/t) together with the real producer price delayed for a year (PPCBRt-1) in ($/t) as an expectation of prices; and the dichotomous variable (Dt), all with a direct relation. Likewise, the consumer price of this meat (PCCBRt) in ($/t) is determined directly by the real wholesale price (PMCBRt) in ($/t); and the real consumer price of beef delayed for a year (PCCBRt-1) in ($/t) as expectation.
Based on the theory of demand by Tomek and Kaiser (2014), the domestic beef demand (DCBt) is defined by the apparent national consumption obtained from the beef production plus imports minus exports, multiplied by the coefficient of transformation (Table 1) of meat on carcass to cuts (q=0.7554), calculated by Cruz and García (2014), and Salazar (2009). The coefficient calculated varies with the years; however, the absence of data for each year forced to consider this coefficient as a constant and the per capita income was obtained by dividing the domestic gross income ($) by the total population of Mexico. The demand function (DCBt) is determined by an inverse relation of the real consumer price of beef (PCCBRt) in ($/t) and the real consumer price of rice (PCARRt) in ($/t) as complementary, with a direct relation to the per capita income (YPERRt) in ($); and as substitutes of beef at the real consumer price of chicken meat (PCCPRt) in ($/t) and plate egg (PCHVRt) in ($/t).
Table 1 Transformation coefficient of beef on carcass to cuts equivalent to the consumer.
| Autor | (Salazar, 2009) | (Gardea, 2008) | (Arvizu, 2007) | (Bravo et al., 2002) | (Ramírez, 1988) | Ponderación | ||||
| (Período) | (2009) | (2000-2005) | (2000-2005) | (2002) | (1970-1985) | |||||
| Tipo | Hembras | Machos | Tradicional | Moderno | Tradicional | Tradicional | Integrado | Bajo | Alto | |
| Peso Pie (kg) | 399.76 | 427.85 | 493.26 | 449.41 | 505.00 | 458.70 | 458.70 | 313.21 | 366.04 | 430.21 |
| Peso Canal (kg) | 221.49 | 225.57 | 244.36 | 243.84 | 258.28 | 231.14 | 248.90 | 166.00 | 194.00 | 225.95 |
| Rend. Pie.-canal (%) | 55.41 | 52.72 | 49.54 | 54.26 | 51.14 | 50.39 | 54.26 | 53.00 | 53.00 | 52.64 |
| Peso Cortes (kg) | 153.00 | 161.00 | 182.43 | 181.34 | 212.90 | 172.56 | 185.10 | 132.02 | 154.28 | 170.49 |
| Rend. Canal - Cortes (%) | 69.03 | 71.32 | 74.66 | 74.37 | 82.43 | 74.66 | 74.37 | 79.53 | 79.53 | 75.54 |
| Rend. Pie .- Cortes (%) | 38.25 | 37.60 | 36.98 | 40.35 | 42.16 | 37.62 | 40.35 | 42.15 | 42.15 | 39.74 |
Source: authors’ elaboration with data from Cruz and García (2014) and Salazar (2009).
The foreign trade balance of the beef market (SCEBt) is defined as the multiplication of the inverse of the transformation coefficient (k=1/θ=1.3237) by the demand, minus the offer; that is, it is determined by the factors that influence these functions and constitute the closing equation of this model that specifies the balance of this food’s market (Cruz and García, 2014). The explicative variables in monetary terms were deflated with the corresponding price indexes to express the value in real terms, base 2014=100 (INEGI, 2015). In this analysis the average annual growth rates (AAGR) were considered from the period before the implementation of the North American Free Trade Agreement (NAFTA) 1980-1993, the enforcement of the Treaty 1994-2014, and the complete study period 1980-2014.
Results and discussion
Statistical analysis of results
The statistical results obtained in the structural form are presented in Table 2. Regarding the function of offer (OCB) and demand (DCB) estimated for beef in Mexico, the coefficient of determination (R2) was higher than 0.9 in both cases, indicating that the exogenous variables included in each function explain the endogenous variables in more than 90 %. The rest is explained by other variables included in the term of disturbance (
Table 2 Mexico: Coefficients of the structural form estimated for the beef market, 1980-2014.
| Var. Dep. | Intercepto | Variables Exógenas | R2 | Prob > F | ||||||
| PPCBR | PPCCR | PPLBR | PALBAR | PBENRL | OCBL | D | ||||
| OCB | 558 215.9 | 10.33206 | -3.9073 | -69.9251 | -52.5122 | -2.51891 | 0.856632 | 46865.05 | 0.95961 | <.0001 |
| Razón de t | 3.06 | 3.4 | -1.48 | -2.89 | -2.61 | -1.89 | 12.32 | 1.32 | ||
| Error Estándar | 182 267.3 | 3.03531 | 2.636104 | 24.16951 | 20.09247 | 1.330403 | 0.069538 | 35603.54 | ||
| PMMR | PMSR | |||||||||
| PALBAR | 1884.395 | 0.128901 | 0.457809 | 0.46754 | <.0001 | |||||
| Razón de t | 2.98 | 1.85 | 1.89 | |||||||
| Error Estándar | 631.653 | 0.06953 | 0.242242 | |||||||
| PIMMR | PMMRL | D | ||||||||
| PMMR | 2716.047 | 0.716483 | 0.218171 | -1354.62 | 0.81773 | <.0001 | ||||
| Razón de t | 2.62 | 4.44 | 1.62 | -2.65 | ||||||
| Error Estándar | 1038.076 | 0.16121 | 0.13451 | 511.2656 | ||||||
| PIMSR | PMSRL | D | ||||||||
| PMSR | 1075.413 | 0.250003 | 0.494901 | -169.082 | 0.68279 | <.0001 | ||||
| Razón de t | 2.34 | 3.33 | 3.76 | -1.23 | ||||||
| Error Estándar | 459.3236 | 0.075057 | 0.131591 | 137.814 | ||||||
| PMCBR | PPCBRL | D | ||||||||
| PPCBR | 7265.777 | 0.337368 | 0.368043 | 8479.86 | 0.29688 | 0.0132 | ||||
| Razón de t | 13 468.66 | 2.86 | 2.36 | 2.16 | ||||||
| Error Estándar | 13 468.66 | 0.117956 | 0.155864 | 3922.475 | ||||||
| PICBR | D | |||||||||
| PMCBR | 51 777.27 | 0.319769 | -24155.8 | 0.7210 | <.0001 | |||||
| Razón de t | 3.66 | 1.74 | -6.19 | |||||||
| Error Estándar | 14127.5 | 0.183348 | 3904.743 | |||||||
| PMCBR | PCCBRL | |||||||||
| PCCBR | 15 203.89 | 0.539955 | 0.565232 | 0.79291 | <.0001 | |||||
| Razón de t | 1.62 | 2.93 | 6.31 | |||||||
| Error Estándar | 9390.444 | 0.18419 | 0.089541 | |||||||
| PCCBR | YPERR | PCHVR | PCCPR | PCARR | ||||||
| DCB | 138 9882 | -7.88093 | 4.940005 | 4.601319 | 11.16963 | -19.1897 | 0.90435 | <.0001 | ||
| Razón de t | 7.73 | -4.6 | 6.79 | 1.39 | 1.79 | -2.28 | ||||
| Error Estándar | 179 762.4 | 1.712631 | 0.727162 | 3.305827 | 6.23099 | 8.415973 | ||||
Source: authors’ elaboration with results obtained from the estimation of the econometric model.
Concerning the global significance test of the coefficients or F Test (Table 2), for each function defined, with a level of significance of 5 %, a value of p<0.0001 was obtained, with the exception of the transmission function of the real producer price of beef (PPCBRt) which presented a p value <0.013, but it was still significant, so it is concluded that the global coefficients are significantly different from zero and, therefore, as a whole, the exogenous variables explain satisfactorily the endogenous variables established in the model.
Applying the individual significance test of the coefficients or t Rate (Table 2), the null hypothesis is rejected, with a level of significance of 5 %, presenting a t>|1|, which is why for each equation all parameters were significant.
With the augmented Dickey Fuller test and the Johansen co-integration, it was proven that the variables used in the model are not stationary, but they are co-integrated, obtaining a critical value at 5 %>5.34 for each functional relation, so it is concluded that the regressions carried out are not spurious and there is the certainty of having obtained consistent parameters. Considering all the prior tests, the model is validated statistically.
Economic analysis of the results
The analysis was carried out in the structural form with the aim of estimating the elasticities related to the endogenous variables that also appear as explicative in other equations and in restricted reduced form (Table 3) to appreciate the chaining of the effects of the exogenous variables over the endogenous variables due to the simultaneity of the model.
Table 3 Mexico: Coefficients in the reduced form estimated for the beef market, 1980-2014.
| Variables Exógenas | Variables Endógenas | ||||||||
| OCB | PALBAR | PMMR | PMSR | PPCBR | PMCBR | PCCBR | DCB | SCEB | |
| PPCCR | -3.907 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 3.907 |
| PPLBR | -69.925 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 69.925 |
| PBENRL | -2.519 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2.519 |
| OCBL | 0.857 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -0.857 |
| D | 63 513.540 | -252.019 | -1354.620 | -169.082 | 330.467 | -24 155.80 | -13 043.00 | 102 791.30 | 72 551.340 |
| PIMMR | -4.850 | 0.092 | 0.716 | 0 | 0 | 0 | 0 | 0 | 4.850 |
| PMMRL | -1.477 | 0.028 | 0.218 | 0 | 0 | 0 | 0 | 0 | 1.477 |
| PIMSR | -6.010 | 0.114 | 0 | 0.250 | 0 | 0 | 0 | 0 | 6.010 |
| PMSRL | -11.898 | 0.227 | 0 | 0.495 | 0 | 0 | 0 | 0 | 11.898 |
| PPCBRL | 3.803 | 0 | 0 | 0 | 0.368 | 0 | 0 | 0 | -3.803 |
| PICBR | 1.115 | 0 | 0 | 0 | 0.108 | 0.32 | 0.173 | -1.361 | -2.916 |
| PCCBRL | 0 | 0 | 0 | 0 | 0 | 0 | 0.565 | -4.455 | -5.897 |
| YPERR | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 4.940 | 6.539 |
| PCCPR | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 11.170 | 14.785 |
| PCHVR | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 4.601 | 6.091 |
| PCARR | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -19.190 | -25.401 |
Source: authors’ elaboration with results obtained from the estimation of the econometric model.
Elasticities in the structural form of the offer and demand of beef
The price elasticity of the beef offer in the short term was inelastic (0.3823) in the average of the study period 1980-2014; less inelastic (0.4791) before the enforcement of NAFTA (1980-1993) and more inelastic (0.3348) in the operation period of the treaty (1994-2014), because cattle need a longer production period to be released to the market; therefore, a long period is required for the producer to be able to react to the price changes. In this regard, the order of magnitude of the elasticity coefficient in the short term estimated in this study agrees with the theory of the offer. According to Tomek and Robinson (1991), the price elasticity of the products that require long periods for their production, such as cattle, is inelastic. In addition, Plate (1969) indicates that the less agricultural products produced, with needs similar to the production means of common use (land, work, balanced meals, medicines), it is likely that the offer function is price-inelastic for a particular good. With regards to other studies carried out for the beef market in Mexico, with data from 1970 to 2001, Márquez et al. (2004) obtained price elasticities of the beef offer in the short and long term of (0.2481) (0.9823), respectively; in turn, for the period 1995-2003, Benítez et al. (2010) reported an elasticity of (0.1246) for the short term and (0.2734) for the long term, and Cruz and García (2014) estimated an inelastic short term coefficient of (0.3491) as average from the period 1970 to 2011, similar to those of this study for the average of the series from 1980 to 2014 (0.3823) for the short term. Considering the operation period of NAFTA 1994-2014 and based on the price elasticity of the offer estimated for this period of 0.3348, the annual average decrease of 0.39 % of the producer price of beef, ceteris paribus, provoked a decrease in the amount offered of 0.13 % (2038 t).
The price elasticity of the demand in the short term was inelastic -0.7889, elastic -1.2642 and more inelastic -0.5734 for the periods (1980-2014, 1980-1993 and 1994-2014), respectively. The result is consistent with the theory of demand and its elasticities, indicating that the more numerous and better the substitutes of a given good are, technically and economically, the magnitude of its elasticity will tend to be higher. This implies that if in the scale of preferences of a consumer several products are equally preferred, any of them have many substitutes and therefore a higher price elasticity of the demand (Plate, 1969; Gould and Lazear, 2000). In this regard, Márquez et al., (2004) for the period 1972-2001, Benítez et al., (2010) for 1995-2003, and Cruz and García (2014) for 1970-2011 obtained elastic coefficients -1.4173, -1.6610 and -1.2138, respectively. In their turn, Huang (1985) and Huang (2013) report a price elasticity of the beef demand for the USA of -0.62, as average of the period 1956-1983. In this regard, Martínez et al. (2016) estimated a price elasticity of -0.2969 and for the period 1995-2008, Ramírez et al. (2011) obtained a coefficient of -0.74. According to Stammer (1969), the difference in the magnitude of the elasticities estimated is due to the different periods and variables included in the estimations. Considering the operation period of NAFTA 1994-2014 and based on the price elasticity of the demand estimated for this period -0.5734, there is an average annual decrease of 1.09 % of the consumer price of beef, ceteris paribus, provoked an increase in the amount demanded of 0.63 % (8300 t).
The elasticity of demand with regard to the per capita income for the average of the study period was 0.3898. For the period before the enforcement of NAFTA it was 0.3778 and for the operation of the Treaty it was 0.3952, elasticities that like that of 0.38, estimated by Cruz and García (2014), classify beef as a necessary normal good. With elasticity coefficients of 1.3583 and 1.3230, Márquez et al. (2004) and Benítez et al. (2010) classified this food as a luxury good. In this regard, OCDE-FAO (2014) indicates that for all types of meats, a measure that the per capita income increases and the foods represent increasingly less of the total expenditure, the income elasticity decreases significantly. This is consistent with the theory of demand that affirms that with a degree of growing saturation of necessities, the income elasticity decreases, and if the proportion of the expenditure in the consumption budget is large, this elasticity is low (Plate, 1969).
In this study, the products that were identified as related to the demand of beef were chicken, egg, and rice, whose elasticities for the periods 1980-2014, 1980-1993 and 1994-2014 were 0.6162, 0.8691 and 0.5017 for chicken, and 0.0942, 0.1412 and 0.073 for egg, which classify these two products as substitutes of beef. For rice, the elasticities were -0.2984, -0.3433 and -0.2780, which classify this food as complementary to beef. The theory of demand indicates that the elasticities of imperfect complements and substitutes, such as the products mentioned, must have small magnitudes and under one (Nicholson and Snyder, 2008).
Price transmission
Since the implementation of NAFTA (1994), beef imports increased (fresh meat, boneless, and edible residues), but it was not until 1997 when these were significant (147 738 t), which is why the real import price when transmitted on the domestic market prices is constituted into an important factor in the determination of real prices at wholesale, to the producer, to the consumer, and its effect is also transmitted on the offer and the demand. The transmission elasticity of the real import price of beef (PICBRt) on the real price at internal wholesale (PMCBRt) in the structural form was inelastic: 0.3682, 0.3159 and 0.4240 in the three periods of study (1980-2014; 1980-1993 and 1994-2014). In this regard, Márquez et al. (2004), Benítez et al. (2010), and Cruz and García (2014) estimated coefficients of 0.2499, 0.2390 and 0.3508, similar to those in this study. Considering the coefficient of transmission of the import price of beef on the internal wholesale price of this meat in the period of operation of NAFTA, of 0.424, we find that the average annual increase of 0.8 of this price that took place in this period must have made the wholesale price increase 0.34 % ($162/t).
Concerning the transmission of the real price at wholesale of beef on the producer price of this food (PPCBRt), the transmission elasticity was inelastic for the three periods analyzed: 0.3887, 0.4865 and 0.3199; these coefficients indicate the existence of a market structure at wholesale of imperfect competition. Similar results were obtained by Márquez et al., (2004), Benítez et al. (2010), and Cruz and García (2014), who reported coefficients of 0.2242, 0.4270 and 0.3459, respectively. Considering the coefficient of transmission of the internal wholesale price of beef on the producer during the period of operation of NAFTA of 0.3199, we find that the average annual decrease of 0.81 % of this price that took place in the period must have made the producer price decrease 0.26 % ($124/t).
For the transmission of the real price at wholesale of beef on the consumer price of this food (PCCBRt) in the structural form, it was inelastic for the three periods analyzed with coefficients of 0.2797, 0.2893 and 0.2701, respectively. In this regard, in their studies, Márquez et al. (2004), Benítez et al. (2010), and Cruz and García (2014) obtained elasticities of 0.3182, 1.9290 and 0.7294, respectively, higher than this study. Considering the coefficient of transmission of the internal price at wholesale of beef on the consumer price in the period of operation of NAFTA, of 0.2701, there is an average annual decrease of 0.81 % of that price that took place in the period which must have made the price to the consumer decrease 0.22 % ($105/t).
In the structural form, the transmission of real import prices of maize and sorghum on internal wholesale prices of both fodder inputs were inelastic for the three periods. They were 0.4317, 0.3999, 0.4682 for maize, and for sorghum 0.2271, 0.2127, 0.2382, respectively. In this regard, in the short term, Cruz and García (2014) obtained inelastic transmission elasticities of 0.7074 and 0.3825 for maize and sorghum, respectively.
In the three periods of analysis, the transmission elasticities of the real price at wholesale of yellow maize and sorghum on the real price that the producer of beef pays for the balanced meal were inelastic, with coefficients of 0.1691, 0.2035, 0.1415 for maize and 0.3800, 0.3727, 0.3859 for sorghum. In their study, Cruz and García (2014) obtained transmission elasticities of 0.1615 for maize and 0.7564 for sorghum.
Concerning maize, in the operation period of NAFTA (1994-2014) the real price of imports increased at an AAGR of 1.55 % (44 $/t), ceteris paribus. This caused for this price to be transmitted on the real internal price at wholesale, making it increase 0.73 % (31.64 $/t) and that of the balanced meal, 0.1 % (4.1 $/t), which caused an increase in the production costs; this discouraged the livestock production of this food, 0.013 % (209 t) in annual average. In the case of sorghum, for the same period, the real price of imports increased at an AAGR of 1.85 % (59 $/t), ceteris paribus; this caused for this price to be transmitted on the real internal price at wholesale, making it increase 0.44 % (14.75 $/t) and that of balanced meal, 0.17 % (6.74 $/t). The increase of the price of balanced meal caused by the wholesale price of maize and sorghum discouraged the production of this food, 0.013 % (209 t) and 0.023 % (354.48 t) in annual average, which causes beef imports to increase.
From 1994 to 2014, the real import prices of beef (PICBRt) increased at an AAGR of 0.8 % (506 $/t), ceteris paribus, which caused an increase in the real price at wholesale (PMCBRt) of 0.34 % (163 $/t); this generated an increase in the real producer price of this food (PPCBRt) of 0.10 % (52 $/t) and in the amount offered (OCBt) of 0.03 % (523 t). The increase in PICBRt caused the imports to decrease in 0.8 % (1484 t). The same increase in the PICBRt caused the consumer price of beef (PCCBRt) to increase 0.09 % (44 $/t), which provoked a decrease of 0.05 % (680 t) in the amount demanded. In this case the increase in the PICBRt originated for imports to decrease 0.81 % (1500 t).
Effect of the exogenous variables on the foreign trade balance
The reduced form of the model makes it possible to understand the effects of the exogenous variables on the beef imports. Those that have most influence on the foreign trade balance of beef (SCEBt) compared to the offer of this meat (OCBt) are inverse and elastic, the amount offered of beef delayed one year, for which a coefficient of elasticity SCEBt of -7.1632 was obtained (Table 4); compared to the real producer price of cow milk, this coefficient was direct and elastic: 2.2722; those corresponding to the real prices to the pork meat producer: 0.9484; and to the fattening calf delayed one year: 0.4433, they were direct and inelastic, respectively.
Table 4 Mexico: Annual elasticities in the structural and reduced form of the offer, demand, price transmission and SCE for the beef market, 1994-2014.
| Variables | Variables Endógenas | ||||||||
| OCB | PALBAR | PMMR | PMSR | PPCBR | PMCBR | PCCBR | DCB | SCEB | |
| PPCBR | 0.3348† | ||||||||
| PPCCR | -0.1115† | 0.9484 | |||||||
| PPLBR | -0.2670† | 2.2722 | |||||||
| PALBAR | -0.1336† | ||||||||
| PBENRL | -0.0521† | 0.4433 | |||||||
| OCBL | 0.8417† | -7.1623 | |||||||
| D | 0.0465† | 25.8856¶ | -0.3107† | -0.0505† | 0.1677† | -0.5037† | -0.1360¶ | 0.0780¶ | 0.3955 |
| PMMR | 0.1415† | ||||||||
| PMMRL | -0.0042¶ | 0.0311¶ | 0.2195† | 0.0353 | |||||
| PIMMR | -0.0089¶ | 0.0663¶ | 0.4682† | 0.0753 | |||||
| PMSR | 0.3859† | ||||||||
| PIMSR | -0.0123¶ | 0.0919¶ | 0.2382† | 0.1045 | |||||
| PMSRL | -0.0253¶ | 0.1895¶ | 0.4910† | 0.2154 | |||||
| PPCBRL | 0.1234¶ | 0.3687† | -1.0504 | ||||||
| PMCBR | 0.3199† | 0.2701† | |||||||
| PICBR | 0.0454¶ | 0.1357¶ | 0.4240† | 0.1145¶ | -0.0657¶ | -1.0110 | |||
| PCCBRL | 0.5652† | -0.3241¶ | -3.0816 | ||||||
| PCCBR | -0.5734† | ||||||||
| YPERR | 0.3952† | 3.7577 | |||||||
| PCCPR | 0.5017† | 4.7703 | |||||||
| PCHVR | 0.0730† | 0.6940 | |||||||
| PCARR | -0.2780† | -2.6436 | |||||||
†Annual elasticities in structural form. ¶Annual elasticities in reduced form.
The average annual increase of 1.8 % of the beef offer delayed one year caused for the imports of this food to decrease 12.89 % (23650 t).
The production of cow milk and the production of pork meat are activities that compete over the use of the same resources. From 1994 to 2014 the real prices of these competitive products decreased at an AAGR of 0.49 % (7.79 $/1000 l) and 0.68 % (33.4 $/t), respectively. This decrease, ceteris paribus, made the offer of beef move to the right, with which the amount offered increased 0.2 % (3225 t), causing imports to decrease 1.75 % (3225 t) in annual average.
From 1994 to 2014 the fattening calf was the most important input for this production system, so that an average annual decrease of its real internal price of 0.12 % (38.74 $/t), ceteris paribus, made the offer move to the right, and the amount offered increase 0.0063 % (98 t), causing a decrease in the foreign trade balance of beef (imports) of 0.05 % (97.57 t) in annual average.
From 1994 to 2014 the variables that influenced most on the Foreign Trade Balance (SCEBt) compared to the demand of beef (DCBt) were the real consumer price of chicken and the per capita income, whose elasticities were direct and elastic with values of 4.7703 and 3.7577, respectively, while the one corresponding to the real consumer price of rice was inverse and elastic with a coefficient of -2.6436 and that of the real consumer price of plate egg was direct and inelastic 0.6940 (Table 4).
In the period from 1994 to 2014 the per capita income increased at an AAGR of 3.95 % (4163 $/person), ceteris paribus, which moved the beef demand to the right, making the amount demanded increase at an annual average of 1.56 % (20 568 t) and the imports, 14.84 % (27 225 t).
During the period that is being analyzed, plate egg and chicken behaved as substitutes of beef. The real consumer prices of these two foods decreased at an AAGR of 0.16 % (33.44 $/t) and 0.75 % (592 $/t), respectively, ceteris paribus, originating as a whole for the consumption of beef to decrease 0.38 % (5112 t), displacing the demand function to the left, which caused the net imports of this meat to decrease at an AAGR of 3.68 % (6766 t).
In this study rice was a complementary good of beef, so that in the period that is being analyzed the real consumer price of rice increased at an AAGR of 0.68 % (130 $/t), moving the demand curve of beef to the left, making the consumption of this meat decrease 0.18 % (2898 t); this caused the foreign trade balance to decrease 1.8% (3297 t).
Conclusions
Derived from the statistical analysis performed and in accordance to the economic theory, the econometric model proposed for the beef market in Mexico describes adequately the evolution of real data observed in the study period; as consequence, it can be used to predict the behavior of the demand, the offer and the imports.
With the enforcement of the North American Free Trade Agreement (NAFTA), the imports of yellow maize increased at an AAGR of 4.78 % and those of sorghum decreased 4.75 %, causing a decrease in the real price of the balanced meal for fattening cattle of 0.45 %, which reduced the production costs, favoring the national beef industry with a similar growth of the offer and the demand of 1.8 %. In this period, the imports decreased 2.25 % in average annually; even so, they affect negatively the production of beef in Mexico and benefit the national consumer, since they reach the national market at a lower price than the internal.
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Received: May 2016; Accepted: August 2017
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