UTRECHT, NETHERLANDS – The pork industry in Mexico is facing a sink-or-swim scenario after evolving over the past three decades from a disjointed, technology-challenged pork-producing country to one that has the potential to rise to the next level, according to a recent RaboResearch report from Rabobank. Mexico’s pork sector stakeholders have the opportunity to be a part of an emergence of the industry as a stable source of pork on the global market, according to the report, “Mexican Pork Industry at a Crossroads.” Financial commitments are needed for the country to successfully address a handful of formidable challenges, including investing more in biosecurity and its workforce; continuing its transition to a vertically integrated industry through consolidation; and increasing exports by developing more convenience-based and value-added products, which will bolster carcass values.
Since the 1990s, Mexico’s domestic pork production has expanded as investments have improved breeding rates and yields of hogs while consolidation has flourished. According to Rabobank, integration levels in the pork industry have increased substantially, representing just 30% of the sector in 2014 to about 55% in 2020, especially in the states of Jalisco, Sonora, Veracruz and Yucatán. Meanwhile, inventories of sows have grown from 730,000 head to over 1 million from 2014 to 2020.
Success among many production companies, however, has been limited by lackluster biosecurity practices, which has resulted in animal disease-induced losses of hogs. Recent outbreaks of African swine fever in the Dominican Republic pose the most immediate threat to producers in Mexico and other animal diseases including porcine epidemic diarrhea virus and porcine reproductive and respiratory syndrome are always looming.
The processing sector has benefited from transitioning to more government-inspected facilities as commodity-reliant operations have been able to deliver more value-added products and convenience options. This transition has resulted in increased production, from 1.2 million tonnes in 2014 to 1.6 million tonnes in 2020 and growth in export demand, especially from the United States, Japan, China and South Korea.
Headwinds to the industry still exist, however, including sporadic hog supplies that cause price hikes. The country is also hindered by factors that include an unstable cold supply chain, brand-development delays resulting in volatility in the processing sector that challenges meeting consumers’ expectations for consistent products that offer value beyond the raw material.
The future hinges largely on the level of investment in Mexico’s pork production and processing industries, according to Rabobank.
“If the appetite for further investment has been exhausted, the industry can pause on its modernization pathway,” the report said, “leaving itself exposed to the volatility that has been associated with herd health challenges and the tighter margins associated with inconsistent pork quality.”