Genesus report: Mexico's pork expansion could be greater than the US's
Despite the fact that the pork herd is expanding at a fast pace, businesses in the sector are affected by an outbreak of Pork Epidemic Diarrhea (PED), as observed by Jim Long, CEO-President of Genesus Inc. in a business travel to Mexico.
Nevertheless, Long considers that Mexico could rise in short-term from a consumer market for US pork to a competitor in the region. "Herd expansion in ongoing with many new sow barns under construction. We wouldn't be surprised if expansion in Mexico in 2018 is same or greater then the US. Continual profitability has made the industry very bullish. Mexico is the USA's number one export market for pork exports volume; obviously, a very important market and increased Mexican production could cut US exports", commented Genesus CEO.
For the moment, PED is affecting more than 90% of pork population in Mexico but the disease has a strange effect on prices, as it did in 2014 in the US. "We all know that 2014 was the most profitable year ever in the United States; 2014 - the year of PED and lower hog numbers. Strange testament that PED was and still is maybe, the roadway to greater profitability. Cut supply and pork with its non-elastic demand curve and hog prices increase dramatically", mentioned Long in his report.
Mexico per capita consumption of pork has increased gradually in the last five years. The big driver of demand in the country of 130 million people is a population increase of about 1.5 million people per year, which adds to total pork consumption and demand. Still, the prices are higher compared to the US market which leaves only a niche for Mexico pork exports to the USA. "Not sure that much will be exported, as hog price is significantly higher in Mexico than the US. One product exported could be bellies as Mexico are not aggressive consumers of bellies and bellies have a high value in the USA", concluded Long.
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