Exchange rate dynamics may create headwinds for trade with Mexico

Value of peso in early January fell almost 20% compared to prior year.

Recent depreciation of the Mexican peso could create a drag on U.S. animal product exports in 2017, according to the U.S. Department of Agriculture’s January “Livestock, Dairy & Poultry Outlook.”

According to USDA, the value of the peso in early January fell almost 20% compared with its value in January 2016.

Most recent U.S. export data show that, on a volume basis, Mexico is the largest foreign destination for U.S. exports of pork, poultry (broilers, other chicken and turkey) and dairy products (skim milk powder and cheese). Mexico is also the third-largest export market for U.S. beef, after Japan and South Korea.

USDA said lower U.S. prices resulting from larger product supplies could offset some of the negative exchange rate effects as the year unfolds.

Prices of livestock and poultry are expected to be lower in 2017 compared with last year, with cattle prices to be down 10%, hogs down 15% and poultry down 2% for broilers and down 7% for turkey.

USDA said lower livestock and poultry prices are likely to result in lower prices for both domestic and foreign consumers of beef, pork and poultry.

Higher U.S. prices of eggs (up 10%) and milk (up 11%) over last year, on the other hand, could weigh on exports to Mexico, USDA noted.


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