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Pork Commentary: Mexican Wave

by 5m Editor
21 December 2007, at 8:06am

Last week, we traveled to Mexico and visited several swine producers.

Our observations:

  • Market hogs, depending on where you are geographically located in Mexico range from 11 to 13 pesos per kilogram or about 50¢ to 55¢ US liveweight per lb.
  • Producers that we talked to ranged from being at break even to losing $20.00 per head marketed.
  • There were observations made to us that there were more hogs than the packers could or would kill. This is putting downward pressure on the market hog price.
  • Feed, we understand, is about $250.00 US per metric tonne.
  • Workers on swine farms are being paid approximately $8.00 per day.
  • Managers of swine farms (many are veterinarians) are being paid between $24,000 to $40,000 US per year.
  • Several farms have methane digesters put in free by companies that sell the carbon credits in countries that are part of the Kyoto Accord. Producers get the electricity that is produced free plus treated manure.

Enthusiastic

In Mexico, they are currently planting wheat. A very enthusiastic enterprise with $10.00 plus per bushel wheat. One area we were at with irrigation usually averages 100 plus bushels an acre (7 tonne per hectare). There will be as much wheat planted as possible. This is a two crop per year area and the second crop will be mostly corn. They normally get about 200 bushels per acre (10-12 tonne per hectare). Lots of revenue per acre of hectare per year.

The hog industry is under financial pressure in Mexico but the producer with grain, tomatoes and eggs are receiving positive whole farm income to offset their swine facilities downslide. This is similar to producers who have grain in Canada and USA.

There has been some liquidation of the sow herd but at this time, mostly small producers in the central part of the country.

Universally, Mexican hog producers would like all imports of pork to stop coming into their country, as this would dramatically increase pork prices, as they are a pork import nation. The Mexican government has the consideration of the Canada USA Mexico Free Trade Agreement to balance with the will of the producers. Also, when you have workers making $8.00 per day in many industries, the overall cost of food has to be factored by any decision by the Mexican government. Food costs have political, economic and social ramifications.

Producers in Mexico are having to deal with addressing cost of production. The industry, by and large, has been reasonably profitable the last few years. Consequently producers have not had the economic pressures to push productivity. Many producers are marketing 15-17 hogs per sow per year. My father used to say that farmers, by and large, produced enough pigs to pay their bills. Productivity is pushed by need. Its one of the reasons Canada’s productivity per sow is higher than the US. It has to be. The economic pressure in Mexico on the hog industry is now creating an atmosphere where technological advances and overall intensity is being magnified.

Mexico, like the rest of North America, has been hit hard by Circovirus and PRRS. Circovirus vaccine is now being used and cutting mortality. PRRS, there is no panacea.

Summary

Mexico is holding steady in sow numbers. A few new sow units, but any enthusiasm for expansion is limited. High feed prices are scaring many (except if you are growing grain and then there are mixed feelings). We currently expect Mexico’s production will hold steady and continue to import mostly US pork.

This week, we are heading from Mexico to Iowa and Nebraska. We will give some thoughts on what we observe next week.

5m Editor