THE MEXICAN HOG INDUSTRY: MOVING BEYOND 2003



(4) Labor costs. The cost of labor is probably the only competitive
advantage that Mexican hog producers have. Although the minimum wage
in Mexico is $0.43 per hour, the farm wage rate is normally in the range of
$0.70 to $1.20 per hour. When compared with U.S. wage rates ranging from
$5.50 to $7.50 per hour, this is a tremendous competitive advantage for
Mexican hog producers, even though it has enormous social and economic
implications for the country.

(5) Cost comparison. Table 4 compares the production cost of two good
hog-farrowing units in the United States and Mexico. The Mexican hog
operation in the table produces a 5.6-kilogram weaned pig at $22.29,
compared with $20.10 in the United States. Feed accounts for 44 percent of
the Mexican producer’s total costs, compared with 29 percent in the United
States. The difference in feed costs ($4.01) is partially offset by the savings
that the Mexican farmer has for labor and management costs ($4.25). When
catching and hauling costs are compared, Mexican expenses are about $0.86
higher per animal than in the United States.

Table 4--Comparison of Production Costs in United States and Mexico

Concept

U.S.top

Mexico

Difference

%

Production Credit

$20.10

$22.90

Costs of Production

Breeding Stock

$0.66

$1.27

$0.60

91%

Management

$2.00

$0.96

-$1.04

-52%

Salaries & Benefits

$4.56

$1.33

-$3.23

-71%

Feed

$5.87

$9.88

$4.01

68%

Medication

$0.27

$0.37

$0.10

35%

Vaccination

$0.15

$0.19

$0.05

34%

Catching and Hauling

$0.03

$0.90

$0.86

2799%

Utilities

$0.65

$0.61

-$0.04

-6%

Depreciation

$2.03

$2.81

$0.78

39%

Repairs & Maintenance

$0.49

$0.50

$0.01

2%

Supplies

$0.46

$0.42

-$0.04

-8%

General & Administrative

$0.95

$1.50

$0.55

188%

Waste Disposal

$0.48

-$0.48

-100%

Communications

$0.02

-$0.02

-100%

Subtotal

$18.62

$21.98

$3.36

18%

Other

$1.48

$1.56

$0.09

6%

Total

$20.10

$22.29

$2.20

17%



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