THE MEXICAN HOG INDUSTRY: MOVING BEYOND 2003



(7) Social, political, and economic environment. Other inefficiencies of
Mexican producers are related to a general lack of competitive financing, as
interest rates in Mexico are by far larger than in the United States.
Moreover, the country’s social and economic conditions generate problems
such as robberies that are far less common in Canadian and U.S. farm
operations. In addition to resulting in direct economic losses, robberies
greatly complicate efforts to control the spread of animal diseases. In some
parts of Mexico, particularly in the South and Southeast, crime has an
extremely serious impact on the efficiency of hog producers.

Three conclusions can be drawn from the above discussion of the Mexican
hog sector’s production costs. First, the cost of labor is the main competitive
advantage of Mexican hog producers.

Second, feed costs offer Mexican producers perhaps the greatest opportunity
to reduce production costs and increase their competitiveness. Current
Mexican policy restricts the importation of corn, forcing producers to use the
less efficient and more expensive imported sorghum. As a result, the
Mexican hog sector must contend with feed costs that are the third most
expensive among the world’s 23 major hog producers (table 5). Although
Mexican producers face the fourth highest hog prices, they rank 14th in terms
of production costs.

Third, the eradication of Classical Swine Fever (CSF) and the improvement
of health-control measures are strong opportunities to reduce production
costs, since swine diseases have tremendously detrimental effects on hog
production. CSF is by far the most important limiting factor for pork trade
on both a global and a national basis. Although the direct cost of
vaccinations is not particularly high ($0.05 per market pig), one major
concern is the side effects of vaccines, especially with respect to herds
infected with PRRS.

11



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