MEXICO - Happiness is not forever… Last report, we talked about the Mexican Pig Industry’s positive expectations due to the feed price reduction and the positive slaughter price increase, but… during the last few weeks, the president of México sent to the Congress many legal initiatives to modify some articles to the Mexican Constitution that are really important and needed to improve the Mexican GDP.
Mexican Constitution Reforms:
- Energetic Reform: Propose to authorize private investment (national and international) to explore and exploit oil well or gas wells.
- Telecommunications Reform: already authorized.
- Educational Reform: Already authorized but some groups from the National Teacher’s Union are against these changes and are having large demonstrations in Mexico City and also 20 other cities around the Country. The Federal Police department could dissolve these meetings.
- Tax Reform: Propose to establish unemployment insurance, charge VAT in stock market profits, repeal cash deposit tax (IDE), increase profit taxes from 30 to 32%, VAT increase in many other products.
These tax changes will affect basically middle class people and the number of people who pay taxes in Mexico will be the same as it has been until now. The government intention is to increase the number of people and businesses who pay taxes due to the actual number of people and businesses who didn´t pay taxes.
Due to these changes, the actual situation in the Country is really tense and the political opposition parties are in favor in some points and against in other points.
Also IRS changed the GDP budgeted for the year 2013, this change will be from 3.1 to 1.8 (43% reduction).
All of these turbulent moments have caused volatility in the Mexican Peso exchange rate with strong currencies.
Mexican Swine Health Situation:
The health and digestive problems with pigs presented in the Country, basically in Central Mexico, where around 100,000 piglets have died, this will create low slaughter pig availability during the end of this year and the beginning of 2014. Due to this situation we expect the slaughter price will increase above our expectations during this season or, USA exports to Mexico.
Due to the health issue, the pig producers in the region are really scared because of the high mortality in the farrowing barns. They have implemented immediate auto vaccines to diminish the damage.
Pork meat Imports Trend:
As we can appreciate in the previous graphics, the pork meat imports trend is still growing, where “Ham” is the main imported product, representing 71.75% of the total pork meat imported during 2013.
If we compared these figures during the last years, we can observe that “Ham” represented 67.4% in 2007, 66.6% in 2008, 70.36 in 2010, 72.42% in 2011 and 72.5% in 2012, with a light increase trend.
The Mexican annual pig meat production is 1,200,000 metric tons and we will import in 2013 around 550,000 metric tons (31%), so the estimated per capita pork meat consumption in Mexico will be 15.2 Kg (33.7 pounds)
The total pig inventory in Mexico has not seen growth basically due the following factors:
- The pork meat imports trend, basically “Ham” coming from the USA.
- High money cost: Interest rate above 12%/year.
- Social insecurity in some regions of the Country.
“Ham” Price difference between USA and Mexico:
In the USA, with few cuts, the packers recover close to 80% of the animal value and inside these cuts; “Ham” is not included. If we analyzed Mexico´s evaluation, “Ham” is one of the premium and much valuable cuts.
In the following graphic, we can see the “Ham” sales Price in the USA vs. the “Ham” sales Price in Mexico. With this huge difference will be almost impossible to compete against de USA “Ham” prices.
Analyzing the previous graphic, you can observe during January 2009 the “Ham” Mexican Price was 186% higher than in the USA. The Price difference trend has been diminished during the last years, ending with 56% difference plus import taxes and freight costs in July 2013.
The Mexican Pig Production Council President, denounced the introduction of USA pork at dumping prices and also this meat has been frozen during 3 to 4 years originating low nutritive quality.
Also he asked to the Mexican Federal support to discuss with the USA Government COOL. This law consists in charge to the exporter (Mexico) one USD per each pig meat kilogram introduced to the USA to sell in their market.
On the other hand, he asked to the Economy Secretary to put in place the “Talion Law” (eye by eye) because the imported pork meat didn´t pay that fee.
The MPPC President commented that Canada suffered the same situation like Mexico with the meat that Canada sends to the USA.
The WTO declared in favor of Mexico and Canada two years ago, but the US Government is still applying this tax.
For September 13th the kilogram grain prices for the Centre of Mexico were as follow:
Sorghum: $3.85 Mx ($0.29 USD)
Corn: $4.10 Mx ($0.30 USD)
Soya: $7.10 Mx ($0.54 USD)
With this grain prices, the kilogram production cost will be between $20.00 to $21.00 Mx ($1.51 to $1.58 USD). The other important part of the equation is the slaughter price; the actual slaughter price in the Centre of Mexico is at $22.80 Mx ($1.72 USD).
Considering these factors, the profits will be $1.80 to $2.80 per kilogram ($0.14 to $0.21 USD).
The slaughter price trend is going down until the end of November and this trend will change during December.
Mexican Pig Production Council (CPM):
Start up the Gastronomic Campaign in Mexico named “Mexico´s Taste”.
The objective is to promote the Mexican pork meat consumption increase, showing the high quality and production processes.
We have been living difficult moments in the Mexican pig industry but all those circumstances have not lessened out love for the pig industry in the Country.
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