The challenges are disease outbreaks, such as Porcine Epidemic Diarrhea virus and PRRS, the report said, and the farming sector needs investments in biosecurity, worker education and further consolidations.
Resolving those challenges will provide processors with a more stable supply of market hogs so it can continue to advance. However, if supply disruptions continue, the processing sector will struggle.
In the last 30 years, the pork industry in Mexico has transformed from a highly fragmented, low-tech industry by investing in production facilities, breeding and nutrition programs and adding modern processing plants and distribution systems, RaboResearch said.
The modernization efforts have boosted local pork demand and aided the country in gaining access to global markets.
The sow herd has increased from 730,000 in 2014 to more than a million now.
The degree of integration has increased from 30 to 55 per cent.
The pork processing sector has also changed to increase meat production, to develop export markets and to mature from selling carcasses to processing high-value cuts and processed products.
In 2020, the industry produced more that 1.6 million tonnes, up from 1.2 million metric tons in 2014, however, destabilizing events in the market have curtailed growth.
“Inconsistent hog supplies are raising cost and creating product inconsistencies,” the report said.
“At the same time, an underdeveloped cold chain and slow progress on brand development are threatening industry growth and financial returns.”
The report suggests that additional investment will afford Mexico's pork industry an opportunity to stabilize production and generate more predictable financial returns.
To advance modernization efforts, the RaboResearch analysts recommend the industry accelerate investments in biosecurity and worker education, consolidate weaker players in a move toward vertical integration and raise carcass values through selling higher value products and growth in exports.
However, if the industry pauses its modernization pathway, it will leave itself "exposed to the volatility that has been associated with herd health challenges and the tighter margins associated with inconsistent pork quality," wrote the analysts.