Uneasy normality in the Mexican poultry industry

At the beginning of the COVID-19 pandemic crisis there was a much higher demand and consumption of eggs. Like the entire global poultry industry, the Mexican industry was no exception.

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(Benjamin Ruiz)
(Benjamin Ruiz)

At the beginning of the COVID-19 pandemic crisis there was a much higher demand and consumption of eggs. Like the entire global poultry industry, the Mexican industry was no exception.

"People saw it as an easy-to-use product, in addition to being able to store it for many days," said Juan Manuel Gutiérrez, president of the National Poultry Producers Association (UNA) in Mexico, in an exclusive interview with Industria Avícola. "There was panic buying and there was a bit of speculation and nervousness from people and authorities." But the situation did not escalate.

However, this context is also related to the U.S. market, with rising prices. "I think the egg market is already declining in the United States and in Mexico it is also beginning a downward trend, although nervousness continues."

With lowering prices, intermediaries worry about the value of their inventories depreciating and they stop buying, so as not to keep expensive inventories.

In the case of chicken, it is pretty much the same behavior as in other parts of the world, due to the closure of the food service sector, which channeled around 30% of production.

"This has generated panic among producers because they have to keep inventories. The price drops, and since it is not known how far it will go or if the accumulation of inventories will be greater, there is a lot of nervousness."

"There is disruption of the markets," said the president of the UNA, together with the case of chicken in the United States, where it is still more serious than in Mexico, causing unbelievably cheap chicken entering that country.

There is no oversupply per se, but rather the closure of marketing channels, and the channels that remain open have not had the capacity to absorb all that the closure of the food service sector has entailed.

Processing plants work normally

To date, "we have had no reports of any plant or company that has had problems in Mexico caused by COVID-19,” said Gutiérrez. According to reports, so far, the crisis has not been as strong as in the United States, except perhaps in Mexico City and some border city.

"Here in Los Altos, State of Jalisco, there is still no evidence of any contagion," and prevention has worked. "We are acting as if there is infection, but thankfully we have not had that problem yet," he added.

As for security measures in farms, chicken processing plants or egg grading rooms, "since we are a food industry and we work with living animals on farms, in general terms we already have biosecurity practices."

Regarding personnel safety, many companies have made changes in things such as dedicated personnel transportation, by decreasing the people density by 50-60% in the buses. In addition, upon arriving at the entrance of offices, plants or farms, their temperature is taken, and shoes and hands are checked. Also, as always, many bath or change their clothes.

Raw materials and costs

With all this disruption, it is evident to ask what has happened to raw materials distribution, and chicks and pullets. In the case of broiler chicks, there are no problems, because most of the Mexican companies are integrated and have partnerships with the grandparent companies. In these cases, there has always been a strong culture of biosecurity. “They are still working as always”.

In this context, what they are doing is taking care of and lowering future egg setting and chick placement. "Producers are already thinking that people's consumption and income can decrease."

As for layer pullets, UNA has also not received any reports of supply problems.

Regarding costs in Mexico, "we are relatively used to the exchange rate variations." Currently, there has been a devaluation of about 30%, but "grain futures have depreciated." Gutiérrez stated that the worst cost impact is yet to come because they still have previous inventories and coverage, but it will be gone over time. "I estimate that in the short term we will have an impact of 12 to 15% in global costs, due to the exchange rate."

In broiler production is where the impact weighs the most.

"I have spoken to some producers who told me that their cheap inventories were practically finished and were going into crisis," he added, due to the drop in prices for live chicken and the increase in the exchange rate. So, there are already companies that begin to pay the consequences.

Trade with the United States

Trade between Mexico and the United States continues to flow as usual. There are no anomaly reports, as the poultry industry is an essential industry.

In support of this, he indicated that "when the COVID-19 situation in Mexico started to become more critical, Senasica (the food security agency) issued a report where they announced that to avoid bottlenecks on foods or food ingredients at points of entry into the country, they would work remotely." In this way, Senasica also protects its staff, so as to expose them as little as possible. "There are no reports that imports of raw materials have been delayed in any way, in any of the routes (rail, ocean or truck).

But in addition to grains and other raw materials, what is also coming in is finished product: breast, as well as other chicken parts. "It is what worries us the most, that they we are going to be flooded, apart from the high inventories we already have."

Medium-term future: the last quarter of 2020

"At least in the next three to six months, there has to be a revision of production figures, because there will be a decreased consumption" and the existing high inventories will have to be consumed.

The problem is that we do not know how long this situation will last, otherwise we could plan ahead. On the other hand, we will have loss of jobs, people who will be left without income.

"The fact that egg and chicken proteins are still the most accessible is on our favor, particularly when people have little money, they are the best alternatives," said Gutiérrez.

Hopes do not waver that by July, the food service sector will begin to reactivate. "If producers know how to foresee well what is happening, and they know how to plan inwardly, in general terms, the last quarter can be good for the industry."

It is necessary to understand that consumption is going to drop, and that purchasing capacity is going to be affected, in order to avoid oversupply. "We also have to see what happens in the United States, if we have open borders, because we depend on them. If the U.S. market reactivates quickly, that will pull us up."

Conditions to reposition poultry proteins

"We have to lean heavily on promoting consumption," says Juan Manuel Gutiérrez. To do this, UNA works on videos, recipes and information sent by social media to promote the consumption of eggs and chicken. Even dates such as upcoming Mother's Day – so popular in Mexico – are being used to promote consumption of chicken at home, for example.

Another important aspect is to highlight what happens in a crisis and how the intensive animal industry provides food. In the Mexican supermarkets, the alternative producers could not do enough to supply demand. It has been the traditional poultry industry that one that has responded.

"This is going to be an especially important lesson for tomorrow, to be able to argue what are the great ways of doing things. We have to show that we do things and do them well." It is the time to reposition poultry proteins as the most accessible and that is what UNA is doing.

View our continuing coverage of the coronavirus/COVID-19 pandemic.

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