Kay's Korner

Jan 10, 2014

SuKarne keeps growing

The U.S. cattle feeding industry has depended for years on Mexican feeder cattle to help fill its pens. Annual imports have averaged about one million head, although they have fluctuated dramatically at times, in large part due to drought. That’s why 2011 and 2012 saw more than 1.4 million head come north but just under one million head last year.

This year and next will see fewer Mexican cattle cross the border for a number of reasons. One is country of origin labeling (COOL). Another is that Mexican producers are rebuilding their herds so more heifers will remain at home. In addition, Mexico’s largest beef company, SuKarne, will make sure fewer feeder cattle go north. It operates five feedlots in Mexico and one in Nicaragua that currently have a one-time feeding capacity of 425,000 head. This makes it the third largest cattle feeder in the world behind JBS Five Rivers and Cactus Feeders. It will increase its capacity to 450,000 head by the end of 2014.

That’s because it will by then have completed construction of its fifth beef processing, part of what will be SuKarne’s fifth integrated beef production unit. The unit will be unique in world beef production. The new cattle plant, in Tlahualilo, Durango, will have feedlots surrounding it. The lots, which include one owned by SuKarne, will eventually have pen space for 250,000 cattle. All finished cattle will be able to walk to the new plant. The project will represent the world’s largest concentration of cattle on feed, says SuKarne’s Efrain Resendiz.

SuKarne is already operating its feedlot there. It currently has 70,000 head of capacity and will add another 50,000 head of capacity. Other feedlots owned by other cattle feeders will have the capacity to feed another 130,000 head. SuKarne expects the new plant to process 600,000 fed cattle and 200,000 cows per year. This will make it by far the largest fed/non-fed beef plant in Mexico. I wouldn’t be surprised if SuKarne is already thinking of a sixth integrated unit. Mexico has enough feeder cattle to support SuKarne’s growth plans, it says. It notes that Mexico produces about 8 million feeder cattle per year but in 2012 exported 1.4 million head.

SuKarne’s highly integrated model starts at the ranch level. It has 230 cattle buying stations around the country and buys cattle from 45,000 ranches. SuKarne even produces its own cattle feed (1.4 million metric tons annually). It fed 800,000 head in 2012 and will increase this to one million head in 2014. All the beef it produces is grain-fed. Cattle are a mix of Cebu and European breeds, are on feed an average of 157 days and are finished to an A maturity carcass.

Tyson, Cargill, JBS and National Beef tend to dominate North American beef production. But SuKarne is a strong fifth player and unique in its integrated approach and alliances with livestock producers in the regions it operates. It developed its first integrated beef production unit in 1986 in Culiacan and its second in Mexicali in 1989. It acquired its third such unit in 1997 in Monterrey and established its fourth in Michoacan in 2005.

Founded by the Vizcarra Calderon family in 1969, the company has sustained a steady 20 percent annual growth in sales over the past 20 years and shows no sign of slowing. SuKarne has always been a company built on growth, says Chairman Jesus Vizcarra Calderon. It processed a mere 153,000 cattle in 1997 but 1.058 million in 2012. Its annual sales during that period went from 563 million pesos to nearly 26 billion pesos ($2.1 billion). It

projects its 2014 sales to reach $2.45 billion and says it will process 1.3 million cattle.

SuKarne isn’t content to be just a beef processor. It is also a sizeable player in Mexico’s other main proteins. It has two pork processing plants in northern Mexico which can process the equivalent of 1.3 million hog carcasses in value terms. Its 2013 pork sales were about $150 million. It also buys chicken parts and makes marinated and deboned products. One focus is on developing labor-intensive products for Asian markets. It sold about 50,000 metric tons of products in 2013.

SuKarne is also a major importer of beef, offal, chicken and pork. It imported 140,000 metric tons worth $350 million in 2012. This made it Mexico’s second largest beef and pork importer and its largest chicken importer. It is better known though in the U.S. meat industry for its beef. It is Mexico’s largest beef exporter by far (73 percent share) and is an increasingly important supplier to the U.S. market. Just over $600 million of its $787 million in beef exports in 2013 came to the U.S. Its products can be found in stores ranging from Walmart to HEB. Don’t be surprised to see the SuKarne brand in more U.S. stores in the future. — Steve Kay