Fernando Ortiz-H., Genesus Ibero-America Business Development Manager
Although some ag economists predict a growth of 3% in the Mexican pork industry, we believe that, even if there is an increase in productivity, with the current rate of sow liquidation, it could even generate a shrinkage of the sector.
The arrival of Bachoco in the pork sector, which is known for its experience in the poultry industry, could increase competition in the Mexican pork market. This could lead to greater efficiency and possibly an improvement in the quality of pork products offered in the market, enhanced by improved genetic resources that provide added value to pork.
It can also positively generate the introduction of innovations and technologies, as well as have an impact on the supply chain and relationships between actors.
Market
Mexico only produces 52% of the pork it consumes domestically, making it an attractive market for exporting countries. Recently, Brazil and Chile have joined the USA in shipping pork to Mexico, causing alarm among local producers, due, they say, to a lack of strict sanitary standards for products imported into the country.
Pork prices on the market have remained relatively stable. Although the average price for the year 2023 ($1.10/lb) has been high compared to the current price of just $0.92/lb (seasonal effect), the trend points to an equidistant price in the near future.
In recent months there have been two disputes and an agreement in principle between Mexico and the United States regarding animal feed and meat international trade.
- Mexico is challenging the United States stance on the safety of genetically modified (GM) corn, awaiting evidence validating continuous human consumption, sparking a dispute under USMCA. With Mexico banning GM corn for human consumption, citing health risks, the clash over health concerns and trade ideologies intensifies, with a resolution expected this month. Despite increased corn imports from the US, Mexico emphasizes the need for scientific evidence supporting the safety of GM corn, while the dispute panel is set to announce its decision soon.
There is a Spanish idiom— “sin maíz no hay país”; meaning that “without corn, there is no country”— an ode to the legacy and treasure of this agricultural asset.
Mexico is home to the most genetically diverse repository of corn in the world, hosting more than 59 unique varieties.
To protect this legacy, Mexico is fighting to phase out genetically modified (GM) U.S.-grown corn this year, following a 2020 decree by Mexican President López Obrador that sparked tension between the two neighboring countries.
The Mexican government says this will protect its citizens’ health and the country’s native corn varieties.
Yet the announcement provoked strong objections from the U.S., whose largest annual customer for GM corn is often Mexico—between 2018 and 2020, Mexico bought nearly 30 percent of all U.S. corn exports.
While Mexico receives a hefty portion of U.S. corn, most of that corn is dedicated to animal feed or industrial use, which is not impacted by the ban. The corn prevalent in Mexican diet and cuisine is white corn, which makes up just one percent of American corn production.
- Mexico’s Ministry of Agriculture and Rural Development expresses disappointment over the US Department of Agriculture’s decision to restrict the “Product of USA” label claim to only domestic livestock products, citing concerns over the integrated nature of North America’s livestock industry. Mexico sees the ruling as potentially conflicting with WTO obligations and vows to support its agricultural sector amid regulatory changes.
- Mexico and the United States have signed a letter of intent to streamline electronic certification for meat products, aiming to enhance efficiency and authenticity in import and export processes while reducing paper usage. This will include pork and beef among other meats exports, the initiative underscores a shift toward modernizing certification procedures for a more secure trading environment. With a shared commitment to safeguarding agricultural and consumer health, both nations transition from competitors to complementary partners, emphasizing the importance of expediting and simplifying trade processes through electronic certification.
Current economic scenery of Mexico
Five main factors have influenced the Mexican macroeconomy to positively overcome the impact caused by covid-19, namely:
- The attraction of foreign direct investment (FDI) through nearshoring or relocation that has positioned Mexico as an attractive destination, especially for North American companies seeking to bring their production closer to the US market.
- The reactivation of the tourism and technological sector.
- Mexico’s position in international trade derived from the T-MEC. This treaty has not only facilitated an increase in trade and investment with the United States and Canada but has also established Mexico as a strategic trading partner in North America. Additionally, Mexico has sought to diversify its trade relations, expanding ties with countries in Europe, Asia, and Latin America.
- The Bank of Mexico managed to control inflation by increasing interest rates, which exceeded those applied in the United States. This differential generated a notable attraction of foreign currency, added to the historic remittances received by the country.
- The enormous strengthening of the Mexican peso by 70% of the exchange rate appreciation in the last year.
Sources
GCMA, porcicultura.com and others
Categorised in: Featured News, Global Markets
This post was written by Genesus