THE MEXICAN HOG INDUSTRY: MOVING BEYOND 2003

Table 2 -- Comparison of Feed Ingredient Costs
in Mexico and the United States

(2) Electricity. The Federal Electricity Commission (CFE - Comision
Federal de Electricidad) is a Mexican government monopoly that produces
and distributes all the electrical power in the country. Like almost all
government companies, the CFE lacks the resources to expand productive
capacity and thus is unable to satisfy the electricity needs of new farm
operations, including those in the hog sector. This forces producers to build
all the new electrical lines for their farms. Sometimes, the length of these
lines exceeds 3 miles.

(3) Oil and transportation costs. The Mexican government owns Petroleos
Mexicanos (PEMEX), the Mexican oil company, which is responsible for
the exploration, extraction, transformation and distribution of all Mexican
oil. Historically, PEMEX had been the most important source of
government revenue, and its prices for the internal market are more related
to government revenue needs, rather than international prices or any
competitive strategy. For this reason, the cost of gasoline and diesel fuel is
typically far higher in Mexico than in Canada and the United States.

In addition, Mexican highways are very expensive and insufficient. Table 3
provides two illustrative examples of transportation costs in Mexico and the
United States. As can be seen in the table, the distance from farms to
abattoirs, highway tolls, and the cost of fuel are all substantially higher in
Mexico than in the United States.

Table 3--Comparison of Transportation Costs,
United States and Mexico

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