A practical guide for exporting genetics south of the border.
This year when it comes time to sell your replacement heifers you may want to look farther down the road than you normally would.
Marketing specialist John Toaspern with the USDA Foreign Agricultural Service (FAS) says Mexico is one logical place to explore. Over the next three years, Toaspern predicts a huge opportunity for exporting beef replacement heifers to Mexico. It's an opportunity he says could equate to 500,000 head.
"The bull market is always there and will continue to be there, but right now there is a window of opportunity for exporting females," he says.
That opportunity stems from cattle numbers in northern Mexico being reduced by almost half from 1994 to 1996, due to drought and devaluation of the Mexican peso, Toaspern claims. But as the peso rebounds and climate improves, there is a need for improved genetics to restock the numbers that were lost.
During the first five months of 1997, beef female exports to Mexico were up 27% from that same period a year ago. In 1996, nearly $4 million in beef breeding stock - 8,600 head - were exported to Mexico.
Toaspern anticipates that number should remain at about 10,000 head or more the next few years. "If they really do intend to replace the numbers that have been lost and get the financing, that number could be 20,000 to 40,000 head per year," he says.
With the North American Free Trade Agreement (NAFTA) paving the way, it is now easier - and less expensive - to export livestock to Mexico. To turn exporting into an opportunity for your operation, Toaspern suggests following five steps:
1. CONTACT YOUR STATE DEPARTMENT OF AG AND BREED ASSOCIATION
Most states are involved in trade missions back and forth between other countries, says Toaspern.
"Producers need to participate in trade missions and host reverse trade missions from Mexico to make contacts with potential buyers," he says. Breed associations get funds from the FAS to sponsor such events.
The South Dakota Department of Agriculture and South Dakota Cattlemen's Association (SDCA) organize at least three trips each year to Mexico. The purpose is to participate in livestock shows and tour several ranches, according to Tonya Ness, executive secretary of the SDCA.
The South Dakota Department of Agriculture sends a letter to all purebred producers in the state and typically gets anywhere from 6-15 to participate. "They started this in 1992 and there are some families from South Dakota who have been represented on nearly every trip," Ness says.
In turn, South Dakota hosts an equal number of missions from Mexico for producers to tour South Dakota ranches.
2. BUILD PERSONAL RELATIONSHIPS
"An important consideration with this market is that personal relationships are very important to the Mexicans," Toaspern says. "It's not going to happen through phones and faxes. They are going to want to meet you."
He suggests attending livestock shows and inviting potential Mexican buyers to your operation. "Get the buyer out to the ranch so they can look at the cattle," he says.
"Once you make the contact, you continue that contact just like you would with a customer in North Dakota or Minnesota," says Ness. "We've found Mexican cattlemen are just like South Dakota cattlemen. They have the same concerns as our ranchers do."
Arnold Wienk, who raises purebred Charolais cattle near Lake Preston, SD, has participated in five of South Dakota's trips to Mexico. "You've got toget them to trust you," he says.Wienk got his start exporting to Mexico when h e met a Mexican producer while watching the Houston Stock Show eight years ago. Over the years they've become friends. And while Wienk believes some of his exports are because of his participation in the trade missions, he says a lot is due to meeting people through his friend.
Once you've established a friendship, Toaspern believes you've got a pretty good shot at striking a deal. "It just takes some time and money to get there," he says.
3. ARRANGE FOR FINANCING
"Most sales are probably 100 percent paid for up front," says Toaspern. But in the event they aren't, he recommends getting some portion in advance and the remainder at the border, typically the final point of sale.
"If you can get enough up front, you can at least cover transportation costs," Toaspern says.
Toaspern and Ness agree there are always some concerns with financing. "But there are often financing concerns with domestic sales as well," Ness points out.
To eliminate some of the risk, Toaspern suggests that producers apply to be qualified under the GSM-103 program, a government program that provides the U.S. exporter a credit guarantee. It covers 98% of the principal and interest on a sale.
Through the program, once an exporter and importer strike a deal, the importer must get a letter of credit from an approved bank in Mexico. This can be the most difficult part, says Toaspern, since some Mexican ranchers have trouble getting the letters of credit. The U.S. exporter then assigns the sale to a U.S. bank and will be paid 100% upon submission of the export documents. The credit guarantee then reverts to the exporter's bank.
While Toaspern believes it's a great program, he says it isn't effective for sales under $50,000. He suggests producers may want to merge their sales to meet the criteria - and to cut down on transportation costs.
Potential exporters can apply in advance for the GSM-103 program through the Commodity Credit Corporation (CCC).
4. SECURE HEALTH CERTIFICATES
Although there is a free trade agreement in place, this is still an international border. Health certificates will need to accompany all livestock crossing the border, Toaspern says.
"Typically, there aren't many things necessary outside what the rancher would have normally done, so there isn't a major cost involved," Toaspern says. "It's often a matter of having the vet out to look at the cattle and certify what's been done."
An Animal and Plant Health Inspection Service (APHIS)-certified veterinarian must oversee the inspection and testing of exported cattle to comply with regulations. (Each state has an APHIS office and can give you the name of a veterinarian in your area.)
Regulations change constantly so it's always a good idea to call and confirm exactly which certificates you'll need in Mexico.
A typed, U.S. Origin Health Certificate must accompany the animals. This states that the animals are free of ectoparasites and originate not only from areas not quarantined for fever ticks but brucellosis-free herds or states as well. Animals must also test negative for brucellosis and tuberculosis.
It's also recommended - but not required - that animals be vaccinated against IBR and leptospirosis.
All totalled, Wienk estimates an extra $25/hd. "It costs a little more, but it's not a big expense," he says.
Still, Wienk suggests, "Unless you know the people pretty well, get some money down before doing the health tests and putting in the extra expense. We've had some disappointment with getting bulls ready to go and then the deal falls through."
All cattle intended for export must also be identified by an eartag or tattoo. Registered cattle must have their registration number on the export health certificate.
5. PREVENT BORDER DELAYS
For most export transactions, the point of sale is at the border crossing. Here, the animals are unloaded, inspected, and usually the buyer has arranged the trucking into Mexico. "Therefore, it's basically a domestic sale," says Toaspern.
"But the cattle do need to cross the border, and border delays can be very costly," he says.
Toaspern suggests contacting the border point where the crossing will take place in advance to confirm what hours the border is open and that it's a port approved to export livestock. The Texas, New Mexico, California and Arizona departments of agriculture have that information.
Prior to reaching the border, Toaspern recommends confirming with the importer that he's gone through the Union (Ganadera) and has his paperwork in order.
The importer must obtain a sanitary permit to be submitted at the port of entry. The importer should also alert the Mexican inspectors of the need for an inspection 24 hours before the cattle arrive at the border.
Toaspern suggests getting to the border in the morning to ensure plenty of time for the inspection.
"People need to be aware that even though we've tried to make the border free and fair, this is still an international border and delays can happen," he says. There can also be some processing fees at the border.
Following those basic guidelines, Toaspern says, "I don't think anyone should feel they can't get involved with exports to Mexico. I see exports to Mexico from Canada all the time, and many states are closer than that."
Breed popularity varies by region in Mexico. But, due to the heat, white and red cattle (like Charolais, Simmental and Red Angus) draw the most interest. Black cattle, however, are found there as well, Toaspern says.
Don't worry about the language, Toaspern adds. "Language isn't a big barrier. Most Mexicans speak English. If a translator is needed for details, they're easy to find."
Toaspern also highly recommends producing materials in Spanish to promote your ranch and cattle. A background of the operation, description of the location and conditions the cattle are raised under should be included.
"Fancy numbers of show results and bull tests aren't as important to the Mexicans as history and track record," says Toaspern.
In the future, he sees potential in semen and embryo exports. "There are fewer transportation costs, and the Mexicans like it because they're able to bring in improved genetics without the physical upkeep."
Dairy and beef semen exports to Mexico were valued at nearly $2.3 million in 1996. As of September 1997, those sales had already reached $2.4 million. Dairy and beef embryos accounted for $17 million dollars in sales to Mexico in 1996 and had jumped to $36 million by September of 1997.
"Exporting U.S beef genetics to Mexico can also help us open the door to exporting in Argentina, Brazil and other countries," Toaspern says.
"Exporting must be a team effort," says Tom Poerstel, marketing specialist with USDA's Shipper and Exporter Assistance Program.
"You can't do it all by yourself," says Poerstel, who helped produce a video that follows an export shipment of cattle from the time it leaves the farm until the animals are ready to be shipped overseas.
The video, "Every Link in the Chain," includes interviews with exporters, veterinarians, freight forwarders, truckers and aircraft handlers. USDA also offers a reference manual, A Guide for Livestock Exporters, which includes trucking guidelines and a list of carriers and export inspection facilities.
"There are numerous export opportunities, but planning ahead is critical for exporting to be successful," says Poerstel. "Transportation and handling must be done properly or animals will be stressed."
For a free copy of the 20-minute video or the comprehensive guidebook, contact Tom Poerstel, Shipper and Exporter Assistance Program, 1217 South Building, Washington, DC 20250, 202/690-1323 or e-mail at [email protected]