VOL. 18, NO. 4 / FALL 2023 / URNER BARRY'S REPORTER • 59
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the reference indicates that the price per
pound is approximately 15% below the
forecast made at the beginning of the year.
End cuts, in general, can be considered
items that typically maintain higher export
prices compared to U.S. boxed beef
prices. However, this doesn't apply to
other cuts, as they show lower quotes and
wider spreads compared to U.S. market
prices. To illustrate, let's consider the
behavior of Mexican export short loin vs.
U.S. domestic boxed beef short loin. In
this comparison, the Mexican beef shows
a higher difference being priced lower.
However, if we calculate the current price
in dollars per pound using the Bank of
Mexico's projected exchange rate, the
price is 86.74 pesos per pound, which,
when compared to today's real exchange
rate, results in 71.61 pesos per pound.
That said, Mexican exporter earnings
are reduced roughly 18% just by the
exchange rate factor.
The challenge the market faces in
the upcoming weeks is maintaining
profitability in the cutout overall, as
historical seasonality would suggest
downward adjustments until the final
months of the year. On the other hand,
some contacts believe this situation might
be temporary and expect a weakening
of the peso in the coming months, as
indicated by the Bank of Mexico in its
June exchange rate forecast, estimating
an average of 18.37 pesos per dollar
for December 2023, equivalent to a
depreciation of approximately 9%.
As this unfolds, it is crucial to closely
monitor what will happen with the
material that hasn't been exported in
recent weeks, and how it may impact the
Mexican domestic market prices.
Article contributed by Jaime Almeida
jalmeida@urnerbarry.com
$2.65
$2.75
$2.85
$2.95
$3.05
$3.15
$3.25
$3.35
$3.45
$3.55
$3.65 Jan Feb Mar Apr May Jun Jul Aug
$/lb.
2023 MEX 2023 U.S.
Urner Barry 167A Rnd, Knuckle, Pld NR-(TL)
Source: Urner Barry
"...2023 has not
developed as expected."