Fernando Ortiz-H, Ibero-America Business Development Manager, Genesus Inc.
What is currently happening in the Mexican swine market is interesting and atypical. During the last days we have been in touch with pork producers and with pork producers associations leaders, who say they are surprised by the turn that the pork business has taken lately, especially regarding historical prices that have broken several records.
If we compare the liveweight pig market prices during the February-May quarter of this year, from February 26th (33 Mexican pesos / kg liveweight) related to the current price, March 26th (47 Mexican pesos / kg liveweight), we observe an increase in the producer’s sales price of 42.42% in the last quarter.
Now, if we did the calculation comparing the exchange rate of the Mexican peso vs the US dollar on the two dates, and putting everything in pounds, the variation is even greater, it shows us an increase of 50.70% in the last three months. Here the calculation:
Liveweight hog price February 26th = US $ 0.71 /lb.
Liveweight hog price March 26th = US $ 1.07 /lb
This calculation is interesting because it also tells us about a recovery of the Mexican peso against the US dollar, which favors to some extent the high costs of imported grains, further improving the profitability of the local Mexican producer by achieving a higher cost: benefit in feeding their animals.
The above prices are from the State of Jalisco, which produces 30% of the total pork in Mexico. The price in Mexico City is around 48 Mexican pesos (approx. US $ 1.10 / lb liveweight).
Current market prices have been driven by supply and demand, mainly due to the following factors:
- Losses caused by critical sanitary situations (PRRS, PED, etc.) which have produced significant losses of piglets and reproductive sows in the national herd, reducing the productive capacity to take animals to market
- Integration of large companies. Mexico has not been the exception for large pig production systems to be vertically integrated. This has also resulted in a lower supply of pork in the free market, since these companies are “acquiring” their own pork, slaughtering and processing it.
- Growth in exports. The international demand for Mexican pork meat has also taken a significant chunk out of the local supply with a 20% growth in its shipments abroad, especially to the Asian market.
- Market hog buyers must pay more in order to meet their commitments to their packers.
Pig production, however, has started to recover due to the isolation imposed by the government in the last year, reaching 3.3% in April, compared to the same period in 2020.
On the other hand, the COVID impact on the food and tourism industry has begun to slowly subside its effects, as it begins a progressive reopening of restaurants and hotels throughout the country, where the vaccination campaign is fervently advancing.
While domestic consumption of pork was at 19.5 kg per capita in 2019, in the last year it fell to 18.5 kg per capita. However, a recovery in consumption is expected from now on. In the first months of the year, there is already a 3.2% recovery in the consumption of pork and its by-products.
- Accumulated production as of April reached 3.3% in comparison to the accumulated in the same period of 2020.
- For the first time in the year, we see an increase in imports, mainly of raw materials for the processing industry that generates value.
Consumption of pork products is optimistic with many positive numbers compared to 2020, and a growth of 3.2%.
This post was written by Genesus