Mexico road trip

Last week we were in the state of Sonora in northwestern Mexico.

Our observations

• Sonora is a very dry and hot region with about 10 inches of rain per year.

• The crops in the region depend on irrigation.

• After 4 years of almost no rain (it’s a real drought) this year there was significant rainfall which replenished the water levels in the reservoirs.

• Sonora also has significant livestock and poultry production. Over the past 20 years, Sonoran pork packers have developed a significant pork export market to Asia and have been the region that has dominated Mexican exports.

• Currently, Sonora Packers is going through a tough time in the Asian markets. The price of pork in Mexico is 46.46 pesos/kg or US$1.08 live weight/lb. US equivalent 66.76¢, Canada 59.08¢, Spain 75.27¢, Brazil 58.28¢. You can see the challenge. The price of Mexican pork is significantly higher than that of other major exporting countries. Asian buyers may be loyal to a supplier for a long time, but this huge price gap is difficult to overcome. This is a real challenge for Mexican pork exporters.

• On the other hand, the Mexican market price for pork is very high. The price differential over the US hog price is normally 8 to 10¢ US/lb. Now it’s 40¢. This in itself reflects strong domestic demand for pork and helps export packers get product to their home market. The price gap between the United States and Mexico also attracts large quantities of pork from the United States to Mexico. More than 40% of US pork exports go to Mexico. A Mexican slaughterhouse asked us how soon the price of pork in the United States would increase. They want high American pork prices, just like American producers.

• In Mexico, there is consolidation of production as in all other parts of the world. Bachoco, a major poultry and egg producer, acquires hog production and packing in a major way. One thing unique to Mexico is that packer groups have their own outlets to sell the product. These include the Yoreme, Ojai and Kowi groups in Sonora. Something we see not only in Mexico but in other parts of the world. We are not aware of any major retail stores by US or Canadian integrators.

• We understand that Mexico has between 1 and 1.2 million sows. Similar to Canadian production. The population of Mexico is approximately 130 million people. Consolidation of the new sow herd as old sow barns are closed and new sow barns supply existing nurseries. With 130 million people, any increase in per capita consumption requires a lot of extra pork.

• In Sonora, we had the pleasure of speaking at the XXIX Congress held in Álamos.

Álamos is a colonial town built in the 1600s next to an important gold mining site. A city today of about 25,000 inhabitants whose buildings reflect the construction 300 years ago. It is quite a pleasant place to visit and observe.

The pig congress was well organized and well attended. There were speakers on many swine topics from 9:00 a.m. to 8:00 p.m. for two days. The speaker sessions were well attended.

In our conversation, we made a few points:

• Mexican producers should be happy to be a pork exporting country. Hog prices in importing countries are all significantly higher than in exporting countries, i.e. US live weight/pound. Mexico $1.08, China $1.69, Korea $1.76, Philippines $1.27 versus Brazil 58.28¢, US 66.76¢, Canada 59.08¢. Beware – if you want to become self-sufficient in pork and export – expect lower prices – i.e. be careful what you wish for.

• Global pork production led by China, the EU and the US has declined and will remain there for at least the next 12 months, which is positive for Mexican producers.

• The Mexican government has declared that in 2024 there will be no GMO – Corn imported into Mexico. We asked the approximately 150 attendees at our conference to raise their hands if they thought GMO – Genetically Modified Pork should or will be allowed to be imported and sold in Mexico. A person raised their hand. What was quite interesting were the many PIC representatives in the room, but none of them raised their hands. More than 40% of US pork exports go to Mexico. Might be a good idea to see if there is a market for GMO – Gene Edited Pork before we rush headlong into a pork demand destruction scenario.

• We also talked about the quality of the pork, meaning the best tasting pork. Our premise to drive demand for pork, we must put the “The Other White Meat” program to the graveyard. Pork is red meat. Beef costs 2.5 times the price of pork. Producing pork that has more marbling, darker red with better water holding capacity, in our opinion, improves taste – flavor and the possibility of increasing pork prices.

We told the story of the Dutch Genetic company that held a customer appreciation dinner a week ago in Canada. Unfortunately they served roast beef. Perhaps a testament to the pork eating attributes of their pig genetics? Truly a sad story for our industry. Why would we produce genetics that we don’t want to eat and then expect consumers to eat the same sad product? No wonder the per capita demand for pork has stagnated. We have to meet consumer demand – better taste is what they want – no other reason why briskets and ribs are at the top of pork cut values. Marbled – better taste.

After our conversation, a Mexican producer told us that there was an annual pork industry meeting in Sonora. He said they serve beef. It is a global problem that we need to improve our product into a product that we want to consume ourselves. It’s so obvious but we continue to ignore the reality of a demand dictated by taste.

Summary

The hospitality of the Mexican producers was excellent. They have good pork prices, but the feed prices are high. It is a dynamic industry that is committed to having its place in the global pork industry.