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USDA GAIN: Livestock and Products


23 August 2013

USDA GAIN: Mexico Livestock and Products Annual 2013USDA GAIN: Mexico Livestock and Products Annual 2013

Cattle inventories continue falling but new programs and a focus on improving genetics and management practices may help the industry rebound. Red meat prices remain the driving factor affecting consumption which has led to reduced beef and an upswing in pork demand. Mexico’s industry and the government are looking to expand their own exports while the United States was able to export over $1 billion in pork and $725 million in beef to Mexico in 2012 with growth expected in 2013 and 2014.

USDA GAIN: Livestock and Products

Commodities:

Animal Numbers, Swine
Meat, Swine

Production:

The Post 2014 Mexican pork production forecast is 1.29 MMT CWE and the revised 2013 production estimate is 1.265 MMT CWE. This is due to the continued incorporation of new breeding lines, better farm management techniques, and increased slaughter weights that have allowed production of more meat from fewer hogs. In addition, industry members are expanding production with the potential opening of the Chinese market. Mexican access to China has been discussed at the head of state level and received significant industry and media attention in the first half of 2013. Post’s 2012 production estimate has been revised upward based on the latest preliminary official data from SAGARPA to 1.239 MMT CWE. The data shows that the state of Jalisco was responsible for 19.2 percent of pork production, followed by Sonora (18.6 percent), Puebla (9.9 percent), Guanajuato (8.7 percent), and Veracruz (8.6 percent).

Genetics Continue Improving and Additional Feeding Options are Developing

Genetic improvements are allowing the pork sector to nudge the live pig crop higher in 2014. These hogs also have better genetics and are able to gain desired market weights faster with improved rates of gain. Recently, the government of Mexico (GOM) restricted the import of swine for breeding purposes from the United States as a response to the porcine epidemic diarrhea (PED) outbreak (see GAIN Report MX3051). However, live breeding animals from other countries (e.g., Canada) and genetic materials can still be imported into Mexico which should help the industry to make continued production improvements.

Industry sources report that swine continue to be slaughtered at around 115 kg live weight with a carcass weight of around 82 kg. These members report that swine are held in feed lot operations for around 50 days.

Pork feed is based on yellow corn as well as sorghum and represents approximately 64 percent of the production cost. Industry sources report that although these feed grains are a staple, northern Mexico producers are feeding hogs with Durum wheat, which is seasonally over supplied, as a special request from interested customers. Spokespersons for the Mexican pork sector report that pork producers in the states of Sonora and Sinaloa have been requested to supply specific Asian markets with pork meat from animals exclusively fed on wheat. Reportedly, the taste, color and tenderness of resulting pork cuts are an added-value asset which is appreciated by high-end consumers.

Consumption:

The Post 2014 total pork consumption forecast is 1.96 MMT CWE as purchasing power gains as well as pork’s attractiveness in comparison with beef and poultry will continue contributing towards increased demand. This could be tempered, however, if the Chinese market opens and pushes prices higher while other suppliers are not able to immediately put product into the domestic market. Post’s 2013 estimate of pork consumption remains unchanged while the 2012 estimate was revised upward based on official data.

Pork Consumption Is On the Upswing

Middle income consumers (a smaller portion of the population) continue shifting consumption habits from poultry and beef back to pork due to high beef prices and more recently due to concerns over the widespread highly pathogenic avian influenza (HPAI) outbreak and increased poultry product prices. Reportedly, as well, promotion and marketing campaigns launched by the industry have been successful. It appears that pork is slowly gaining acceptance among consumer groups and shoppers as part of a healthy diet.

Prices Shape Buying and Production Decisions, but Culture Important, Too

Industry sources reported unusual consumption patterns and prices for early 2013. Usually, pork consumption and prices drop during the 40 days prior to Holy Week (i.e. Easter) however, pork prices moved lower than traditionally witnessed. Some sources blame the high volume of imported pork for keeping prices depressed while other signs indicate that some producers slaughtered larger numbers of swine in the latter part of 2012 and early part of 2013.

Trade:

The Post 2014 import forecast is 790,000 MT CWE based on sustained strong demand and pork’s competitive prices. The trade forecast is based on higher demand from Mexican consumers who have greater purchasing power and a consumption preference for varied sources of animal protein. The Post 2013 pork import is also revised upwards slightly to 775,000 MT CWE as imports from the United States, Canada, Chile, and Spain are all growing. The majority of Mexico’s pork imports remain hams and picnic as well as mechanically deboned meat (MDM) for the preparation of sausages, deli hams, and other cold cuts. Post’s 2012 pork import figures were kept unchanged from official data.

Industry sources have indicated that the authorization of an export quota of 300,000 MT to China could lead to an increase of frozen pork meat imports as it would be used as export replacement in Mexico or, if allowed, possibly used in the preparation of exports for China.

Historically, trade data has indicated the United States is the main supplier to Mexico. Thus, no changes in this pattern are likely to occur in the short to medium term.

Mexican Pork Meat Exports: The Key to Open China’s Door for Other Products?

The Post pork export forecast for 2014 is 120,000 MT CWE as the country looks to open export markets in other Asian markets and has been able to steadily grow its exports in these markets. The Post forecast for 2013 is kept unchanged at 110,000 MT CWE as overall demand from Asian countries remains stable (although South Korea is not buying pork from Mexico right now, it appears that Japan’s purchases have stepped up). The sector has thus been able to continue supplying these markets with added-value products, with significant manual labor, at attractive prices. Post’s 2012 export estimate is unchanged and based on official data.

Jalisco is the main pork producing state but Sonora is the number one exporter. Industry sources report that out of every 10 MT exported, 9 MT comes from Sonora. Japan remains Mexico’s number one export market by volume and value. Pork meat exports are mostly loin to Japan, loin to the United States, and have traditionally been bone-in pork to South Korea.

Policy:

The United States’ recognition of Mexican States as free of classical swine fever (CSF) has been one of the key factors to opening foreign markets for Mexican pork and sources suggest that expanded Mexican access for raw pork to the United States will serve to increase access to other countries. As such, one of Mexico’s most important trade policy goals with the United States is expanded pork access.

NOTE: Mexico is a large market for pork offals and other non-skeletal muscle items. The trade volumes reflected below are based on CWE calculations for harmonized tariff system codes 020311, 020312, 020319, 020321, 020322, 020329, 021011, 021012, 021019, 160241,160242, and 160249.

August 2013

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