Roberto Zambrano, owner of Rancho El 17, an 8,000-head feedyard in Hermosillo, Sonora, Mexico, has watched his country's domestic cattle feeding industry develop from three vantage points: as a veterinarian and consulting nutritionist, as a feedyard owner and as developer of Mexico's first branded fresh beef products. Here, Zambrano provides an incisive glimpse into the structure and potential of the struggling Mexican grain-feeding industry.

BEEF Feeder: How did you personally become involved in feeding cattle in Mexico?

Zambrano: In 1991, I entered the feeding business because there were great opportunities. I am a veterinarian with a master's degree in nutrition from the University of Arizona, and used to work as a consulting nutritionist for many feedyards in Mexico. I supplied implants, vaccines, vitamins, premix and equipment to many feedlots.

In the 1980s, the dynamics of Mexico's economy were accelerated. Agribusiness faced new risks and opportunities and soon cattlemen all over Mexico saw a way to capitalize on their cattle by finishing them at feedyards. Feedlots rose near urban areas, close to slaughter plants and grain storage.

By the end of the decade, the government imposed a price control for the consumer's benefit. Only feeders who were efficient stayed in business. At that time, we had four or five feedlots between 15,000 and 25,000 head that were forced out of business.

So I took the opportunity to get in when they got out. I invested all my money and I borrowed some money to start with about 300 head. We've grown to about 8,000 head.

BEEF Feeder: Describe the Mexican cattle feeding process?

Zambrano: In most feedlots here, you start with a 20-30% grain ration and finish with about 80% grain. In Sonora the grain we use is wheat and corn. The feeding period is about 140-160 days, and the cattle finish at about 1,050 lbs.

In Mexico, people do not like carcasses that are too big and too fat. They want a carcass that weighs about 600 lbs. (the lower end of the U.S. carcass preferences). Most of what we feed here and in the northern states of Mexico are heifers, since Mexican cattlemen send most steers to the U.S. Mexican feeders cannot buy steers because the price is too high.

Most heifers come in at 450-500 lbs., depending on time of the year. It hasn't rained in Sonora in a year, and cattlemen are weaning very light calves. That has dropped the weaning weights to about 350-400 lbs.

BEEF Feeder: How would you characterize the health of the Mexican industry?

Zambrano: We have problems we can't control like expensive electricity and gasoline prices that increase constantly. Plus, Mexican interest rates are really high - 22-26%.

U.S imported beef is a great competitor that we also have to deal with. But I think there is a good opportunity in Mexico if a feeder does a good job as an integrated enterprise, producing excellent fed beef and reaching the consumer directly. That's our objective at Rancho El 17.

BEEF Feeder: What changes would make the Mexican feeding industry more competitive?

Zambrano: Some of the actions the Mexican cattle feeders may choose to take in order to assure their competitiveness are:

* To develop branded products supported by enterprise-organized feedyards that are integrated to reach consumers.

* To improve the cattle feeders' organizations so that they share information and work with the government to gain support for the industry.

In order to compete on more equal terms, Mexican feedyards must invest a period of time to consolidate their industry. In that time we need to grow by reinvesting our earnings or by partnering with new investors.

BEEF Feeder: Some Mexican cattlemen are blaming imported beef from the U.S. for their problems. What do you think?

Zambrano: I don't agree with it totally. I don't know how much, but it does affect us. We know costs in the U.S. are lower than here, especially the cost of the money. We wonder how the U.S. can price beef so inexpensively in Mexican supermarkets. Imported beef is priced so low that is hard to compete.

BEEF Feeder: What is your opinion of the dumping suit against the U.S.?

Zambrano: I don't know if the U.S. is dumping. But I know it is selling beef at 30-60% below our costs, and that the difference in U.S production costs is not that wide. I also know that an importer has to add freight, permits and broker fees to the cost of beef. So I don't know if the U.S feeders or packers are making money on beef that they export at those prices. But if they are not, how long can it last?

BEEF Feeder: Don't you think U.S. beef promotions are building demand in Mexico for grain-fed beef and this helps the Mexican feeding industry as well?

Zambrano: Yes, in some ways. The southern states like Tabasco and Yucatan are beginning to change part of their production from grass-fed to grain-fed. However, we have been producing grain-fed beef in the northern states for more than 30 years.

In 1969 Sonora started a meat and cattle grading system, similar to the one in the U.S. Since that time, the northern states have supplied their needs as well as markets in the south of Mexico with carcass fed-beef. What U.S beef promotions are doing is building demand for boxed beef. Before NAFTA, the supermarkets were buying carcasses from the feeders. Now they are demanding boxed beef.

BEEF Feeder: Is there room in Mexico for U.S. and Mexican products?

Zambrano: I believe so. With Mexican cattle supplies down, U.S. beef makes an important contribution to the meat supply here. But we cannot put ourselves in a position to depend on imports.

For the Mexican economy, we have to produce most of our own demand. I don't know what the most beneficial balance is between Mexican-produced and U.S.-imported beef, but we have to find that balance, and make it work.

BEEF Feeder: Where will the Mexican feeding industry be at the end of the next decade?

Zambrano: If we can overcome some of these problems, and integrate the whole chain of beef production from calf to boxed beef, the Mexican feeding industry will be strong. At Rancho El 17, we have a fully integrated enterprise: We buy the yearlings, we finish them at our feedlot, we cut and pack the beef in our own facility and we deliver the finished product to the supermarkets or directly to the consumers in our own meat markets. I believe this is one of the ways in which the Mexican feeding industry can prevail in the future.

BEEF Feeder: Do you see any joint ventures taking place between the U.S. and Mexico in feeding cattle?

Zambrano: We are looking for that. We have working relationships with producers in Arizona. I import U.S. cattle for feeding in my feedlot. I believe there are opportunities still available in the Mexican beef industry that are different than those in the U.S.