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Commodities

Top Mexican pork firm plans $550 million expansion, amid U.S. trade tension

MEXICO CITY (Reuters) - Mexico’s top pork producer, Granjas Carroll, said on Thursday it plans to double its sow count in the next four years as part of a $550 million expansion plan, as it eyes the risk of a crossborder trade spat with the United States.

The firm’s sow tally will reach some 137,000 heads by 2021, while the company will also build a $94 million slaughterhouse that can process 600 pigs per hour, said Chief Executive Officer Victor Manuel Ochoa.

“We’re not just thinking about growth, we’re also going to enter the meat market,” he said in an interview.

Once the expansion is complete, the company will annually produce some 2.8 million pigs, or about 140,000 tonnes of meat, and the slaughterhouse will be the largest ever built in Mexico.

Uncertainty over the future of the North American Free Trade Agreement (Nafta) is forcing Mexico to look to new markets for pork, both for imports and exports, said Ochoa.

U.S. President Donald Trump has threatened to rip up Nafta if he cannot secure more favorable terms for the United States. However, it is still unclear what a reworked NAFTA may look like.

While Mexico produced almost 1.4 million tonnes of pork last year, it imported 990,000 tonnes, nearly 90 percent coming from the United States, according to government data.

Ochoa said over-dependence on U.S. imports for domestic consumption in Mexico, where both the population and pork demand are growing, creates “a tremendous opportunity” to substitute imports with more local production.

“Unfortunately, we have a close neighbor that now is becoming more distant,” said the CEO of Granjas Carroll, a joint venture between ECOM Agroindustrial Corporation, a major commodity trader, and China’s WH Group.

Ochoa said he expects total Mexican pork production to reach 2 million tonnes by 2021.

The executive said Mexico could grow pork exports to Japan and Korea and could import more pork from producers in the European Union, if trade with the United States proves more difficult in the future.

Mexico also heavily relies on the United States for yellow corn imports used to feed livestock, including pigs.

Ochoa said South American yellow corn producers like Argentina and Brazil would be attractive alternative suppliers at nearly identical costs.

In 2013, WH Group bought U.S.-based Smithfield Food, the world’s biggest pork producer, for almost $5 billion.

Reporting by David Alire Garcia; Editing by Leslie Adler

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