Executive Summary

2010 and 2009 total swine production is expected to increase slightly. This increase will be restricted due to the effects of the international economic crisis and H1N1 outbreak. Ending inventories are expected to increase for both 2009 and 2010. Mexico’s imports of hogs are forecast to increase in 2010, reaching 15,000 heads. That was a healthy increase from 2009, when imports sharply declined by 88 per cent to 10,000 heads. Pork production for 2010 is forecast to recover (2 per cent) after a slight decline in 2009 (0.8 per cent). Growth in pork consumption is expected to slow in 2010 after increasing 3.8 per cent in 2009. Mexico’s pork exports are forecast to grow in 2010 compared to 2009.

Production

Swine production for 2010 is forecast to increase 0.3 per cent in 2010, the same rate of increase expected for 2009 (0.3 per cent). Lower prices, a media consumption campaign, and increased availability of pork products could stimulate demand (and therefore production) even considering the damage caused by the H1N1 outbreak.

In addition, the opportunity to access new markets (China and Korea), the declaration of Mexico as free of classical swine fever, and the Mexico hog industry trend towards vertical integration and industry consolidation give opportunities for hog production and slaughter levels to be maintained.

It is also estimated that swine inventories will increase because of stagnant demand (including pork exports). Swine production estimates were adjusted according to Mexican official data (INEGI census) and industry information.

Beginning stock is expected to increase 11.2 per cent for 2010 and 9.4 per cent in 2009 principally due to a lower slaughtering levels estimated for 2009 and lower loss. An increase of 3 per cent in slaughtering rate is expected in 2010 after a decline of 2 per cent in 2009 because of dampened consumption resulting from the H1N1 outbreak. Beginning stocks for 2008 were revised downward from the previous data reported based on the increase estimated from the 2007 INEGI data.

Pork meat production for 2010 is estimated to increase 2 per cent over 2009, a year in which a decrease of only 0.8 per cent is expected due to H1N1 outbreak effects. The decrease is minimal thanks to a successful GOM and industry consumption campaign strategy and lower pork prices. Pork production for 2008 was reviewed according to Mexican official data.

Consumption

The consumption of beef and pork meat will not increase at the same rate as the population growth for 2009 and 2010, in part because of reduced gross family income resulting in lower red meat consumption and because of a substitution effect by consumers who see poultry as a cheaper and “healthier” protein source that will thereby repress per capita growth of beef and pork meat consumption.

In spite of the international economic crisis, consumer perception of pork meat, and a greater tendency to eat less red meat for health reasons, pork consumption for 2009 and 2010 is estimated to increase 3.8 and 2 per cent, respectively, due to lower pork prices and as a response to the media consumption campaign.

Mexico’s meat processors continue to use imported US pork variety meats. Despite the political and domestic pressures raised by the Mexican pork producers, meat processors must continue to import meat products because domestic production in not sufficient to meet their demand requirements.

Trade

In 2010, Mexico will increase imports of hogs, although imports will only reach 19 per cent of the 2008 level. Due to the H1N1 outbreak and a decline in consumption that affects all pork sectors worldwide, a reduction of 88 per cent of hog imports is expected in 2009. Thus, a higher hog stock will occur and hog exports will remain at zero.

In 2010, pork exports will increase approximately 10 per cent, but if Mexico signs an animal sanitary agreement with China, a necessary requirement for entering the Chinese market, the per centage could be considerably higher.

2009 is shaping up to be a difficult year for Mexican pork exports. A decline of 5.5 per cent is estimated because of lower international demand for Mexican pork, which primarily results from the H1N1 outbreak that was associated with pork.

Despite the international economic crisis and the H1N1 outbreak, growth in Mexican pork imports is expected to slow in 2010. In 2009, imports are showing a 12 per cent growth as a result of lower prices and sufficient worldwide supply. Mexico will continue to be a strong market for US pork variety meats, lard, and greases.

Livestock Sector Policy

The animal production sector has experienced difficult times since 2008. It first faced higher grain prices, the effects of the international economic crisis, and the devaluation of the peso against the dollar, and finally reduced red meat consumption because of consumers’ lower gross income.

Additionally, H1N1 affected the consumption of pork. The Mexican Government’s strategies could dampen the effects; measures are to support meat production at a reasonable cost in order to provide sufficient supply to the consumers without a significant price increase.

Other strategies include a media campaign to stimulate pork consumption, restructuring producer’s loans, and a “Program for Productive Assets Acquisition for Producers.” With these strategies the government is hoping to stimulate a recovery within the livestock sector. In addition, the Mexican Government (GOM) is planning to increase livestock inventories with hopes of meeting more of the domestic demand for beef and pork. If these efforts are successful, it will address the current problem being expressed by exporters of live cattle, who feel their export prices for live cattle have been reduced due to the US COOL law.

Recently, COFEPRIS, an agency of the Health Secretariat (SALUD), has been trying to expand their role as it pertains to food safety within Mexico. This responsibility lies within SENASICA, an agency of SARGAPA (Department of Agriculture). However, given that a large amount of food imports are consumer-ready food products which enter the commercial retail channel, COFEPRIS has demanded more control over these imported foods. Lately, recalls of exported US food products to Mexico have fueled COFEPRIS’s actions to demand more control.

Despite the international economic crisis, future grain prices (CBOT) are at their lowest levels since 2007. However, given the peso devaluation, the GOM continues to subsidize the purchase of grain options to assist Mexican livestock producers.

The international economic crisis has affected the gross family income of Mexican consumers; thus, purchasing habits have been switching from beef cuts to lower priced hams, chicken, and offals.

Pork

Like in the past, Mexican pork producers continue to seek government support and assistance. Numerous times the pork sector has sought protectionist actions from the Congress and the GOM. Most recently, the pork sector sought an import ban of all pork to address domestic problems. After the H1N1 outbreak, pork producers undertook an effort to increase consumption of pork by providing free pork samples to consumers. In addition to trying to stimulate consumption these efforts assisted in reducing the level of pork stocks on hand after the initial outbreak.

SAGARPA is developing a program of modernizing import inspection procedures at the borders, which could be published or implemented in the fall of 2009. These new procedures are not only a part of a plan to modernise inspection procedures, but also an effort to harmonise import procedures with NAFTA partners.

Further Reading

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January 2010