Assessing the farm-level competitiveness of milk production in Mexico and the United States

The freer trade environment between Mexico and the United States has prompted debate over the economic viability of various agricultural production sectors. With NAFTA now in its fourth year, the long term impacts of trade liberalization between the United States and Mexico are becoming apparent. As the trade relationship between these two countries continues to evolve and as preparations for the next round of trade negotiations begin, there is a need to assess the impacts of freer trade on businesses that desire to position themselves for future opportunities or possible problems. This dissertation assesses the competitiveness of dairy farms in Mexico and the United States to enhance the ability to anticipate milk production trends and the trade potential of milk and milk products.;Conducting a competitive analysis of the Mexican dairy industry required an understanding of its diversity. Because of Mexico's varied climates, milk marketing infrastructure, technology, and the financial constraints faced by farmers, milk producers employ a wider range of production systems than found in the United States. In addition, recent economic adversity and government policy changes have created greater economic uncertainty than faced by U.S. milk producers.;This study supports the view that assessing the sustainability of competitiveness is a much more important concept for business managers relative to individual year data. With the ability to use simulation modeling for whole-farm analyses, methods are available for assessing the future competitiveness of dairy farms at the farm level across national borders. The success of this methodology, however, relies on consistent data collection, meaningful economic assumptions, and reliable forecast of key macroeconomic variables.;This study has ranked seven Mexican and six U.S. specialized dairy farms, as well as three semi-specialized and one non-specialized farm from Mexico's tropics. Using simulation modeling to assess competitiveness over the 1996 to 2000 period has demonstrated that the specialized Mexican dairies are competitive with their counterparts in the United States based on cash receipts, cash expenses, net cash income and profitability. Uncertainty about changing government policies and economic conditions surface as a limiting factor for the Mexican farms, however.