Fernando Ortiz-H , Ibero-America Business Development Manager, Genesus Inc.
Apparently, the 2019-2020 expansionary acceleration of the Mexican pork industry has hit the brakes this year. While states as important in pork production as Jalisco saw their number of pigs on the market increase by around 20% in 2020, a drop has been seen for the last three past months. There are several causes: among them,
- a decrease in pig prices (liveweight) in the market,
- strong increases in grain prices (mostly imported),
- potential liquidation of sows (because of low prices), and obviously no new sow barns have been built.
On the other hand, in January pork imports for the packaging and processing industry trigger purchases from abroad by 28.3% more compared to January 2021, allowing the supply of more accessible protein to the Mexican consumer.
An extra factor that has been added is the high volatility in the international prices of corn and wheat in the face of uncertainty in the midst of the conflict crisis between Russia and Ukraine, large grain producers, will cause greater increases in their import.
Mexico is 39% dependent on corn imports and almost 60 percent on wheat imports. Last year, corn purchases reached almost 18 million tons and wheat purchases reached 5.4 million tons, volumes higher by 11.9 percent and 21.3 percent respectively, compared to the previous year. It should be noted that the country does not depend on grain purchases made from these two countries, since they barely account for 4 percent of total grain imports. But it does largely depend on the United States, where, as of March 7, the Chicago and Kansas Stock Exchanges quoted durum wheat futures prices at $459.9 per ton, the second-highest since February 2008, while corn reached 295.6 dollars per ton, the third-highest in 14 years. In Mexico this week soybean price is $620.50/ton and corn $353/ton.
Having said that, we can currently see production costs hovering between 32 and 37 pesos per kilo ($0.70 – 0.80 USD/lb liveweight) while the national mean selling price is around 33.72 pesos ($0.73 USD/lb liveweight). It is estimated that, at today’s margins, the average producer may be losing about $40 per head at market.
|Current Pork Price Liveweight in Mexico|
Another phenomenon that has been seen lately, is a gradual disappearance of small producers at the expense of more corporate consolidation, with 20 companies accounting for over 50% of the national production. This has created a vacuum effect in which these small producers find it very difficult to market their product to packers and butchers. Meat processors now prefer to buy carcasses directly from large producers, with greater availability and consistency in the offer.
This week and as a clear reflection of: #1 – the best pork prices that have been presented lately in the United States, and #2 – the depletion in the stocks of cheap cuts, the price in Mexico has begun to take off in Mexico as well, and it has done so in an atypical way. Since seasonally at this time of year the price has historically gone down, to recover again at the beginning of Easter. Now, again, for the first time, we are seeing, fortunately for producers, a positive reaction of upward pork prices.
With so many variables on the table now, it is a bit unpredictable what the future of the market could be, as there are many “it depends on” or “what if”. However, the producers, as always, will continue to do their best to produce a high-quality protein, the one with the highest demand in the world.
Categorised in: Featured News, Global Markets
This post was written by Genesus