Jim Long President – CEO Genesus Inc.
October 15, 2013
Mexican National Pork Conference ReportLast week we attended Mexico’s National Pork Confederation Conference which was held at Ixtapa Azul Resort on the Pacific coast.
- We were honoured to be one of the guest speakers at the conference. We are well known in Mexico as this commentary has been translated for over a decade into Spanish weekly and featured on Mexico’s and Latin America’s major swine website Porcicultura.com
- The conference was excellent, well organized with tremendous facilities for meetings and dinners. An event that covers four days at all inclusive resort with a convention center allows participants to have an enormous amount of interaction in a comfortable environment.
- Mexican producers like their counter parts in the United States and Canada have been challenged by high feed prices compared to swine prices. Despite this Mexico’s Swine production has increased over the last five years.
- Historically Mexico’s hog prices run about 10-15% above US Midwest prices. It appears this is because the cost of transportation to bring pork to Mexico. Mexico is the United States largest global market for hams. Mexico is a net importer of pork. The farther you get from the US border in Mexico the higher the price for hogs in Mexico. Currently Mexico’s average hog price is about 23.20 Pesos/kg or about 81.29¢ USD/lb.
- Mexican producers have higher hog prices that the US but they also have higher feed prices as Mexico is a net importer of corn and Soybean meal. We would estimate the higher feed prices negate the higher hog prices.
- One presentation at the conference indicated that Mexico averages approximately 15.5 market hogs per sow per year at significantly lower number than Canada or the USA. We believe the main reasons for this is disease challenges and lack of genetic progress.
- Disease challenges are magnified by the warm and mostly humid climate that keeps disease organisms alive. PRRS, mycoplasma etc. are quite prevalent. Also a large amount of the pig production are in close proximity to each other, which always leads to problems no matter what country you are in.
- When we speak of Genetic lag it’s not because of lack of Genetics available. All the major player are in Mexico – PIC, (Genetiporc not any more), Topigs, Hypor, Genesus etc. The main problem we see is the fixation on closed herds and the fixation on only using AI. Due to health reasons many decided to close their herds. Our experience tells us closed herds only using A.I. is a recipe for Genetic lag and the subsequent lower production and profitability. Proper Quarantines and purchasing from High Health sources minimize any risk, the lower productivity of up to 5 pigs per sow per year is economic suicide. One swine producer with a closed herd was explaining the virtues of his plan, he was also a chicken producer. We asked him does he raise his own chickens for genetics. He looked at us like we were crazy, (maybe we are) of course he didn’t. We asked him why he thought he knew how to run a swine genetic program but not a chicken one. Bottom-line, Swine genetics are much more complicated than chickens. It’s specialized and the leading producers globally recognize the need for aligning with a genetic leader. A-1 alone is a path to continued mediocrity in Mexico or any country.
- We did not pick up much sow herd expansion in Mexico. Producers are licking their wounds from the last couple of years and are needing to rebuild equity.
- We have been doing business in Mexico the last twenty years. Like Canada-USA there are less producers, but they are the same ones, only older. An industry of survivors.
- The Genetiporc purchase by PIC has big implications in Mexican Swine Genetic Industries. PIC is number one and Genetiporc is number two. Put together PIC has a virtual monopoly. The leader of Genetiporc Mexico who was instrumental in building from scratch over the last twenty years is gone. The 11 million dollars PIC says they will gain in synergy savings in the Genetiporc purchase has this human consequence and we expect many more coming.
- The virtual monopoly by PIC could be seen at the conference. Neither PIC nor Genetiporc had an exhibit, only Genesus. We have Genesus Mexico President Carlos Peralta (former Vice-President PIC Latin America) and Carlo’s Rodriguez (former PIC technical director) leading the Genesus Mexican Team. One’s adversity (Genetiporc employees) is another’s opportunity (Genesus).
SummaryMexico producers like producers in the rest of North America will benefit from lower feed prices over the coming months. This coupled with strong hog prices will lead to good profitability. Mexico will also benefit further with what we expect will be growth in US pork exports to China with the Chinese Smithfield purchase. Every extra pound of pork that goes to China can’t go to Mexico.
Categorised in: Pork Commentary
This post was written by Genesus