Executive Summary

Mexico’s 2010 broiler meat production forecast has been revised lower than previously reported, although this year’s production level will not recover to 2008 level. Production for 2009 was revised lower due to the impact of the international economic crisis and accumulated financial problems faced by domestic poultry producers. Imports are revised up by 35,000 metric tons (MT). During 2010, imports of poultry products sourced from Chile are forecast to increase. This year, the Mexican poultry sector will face a Government of Mexico’s investigation of the Mexican poultry sector regarding possible monopolistic business practices, a slower economic recovery due to Mexican fiscal policy and increased imported products. Furthermore, a lack of USDA recognition for areas free of exotic Newcastle disease continues to constrain the domestic market due in part to its inability to export Mexican poultry products to the United States and the world.

Government of Mexico officials continue working on a Mexico equivalency agreement with USDA’s Food Safety Inspection Service (FSIS) and Animal and Plant Health Inspection Service (APHIS) that would allow for the exports of Mexican poultry products and egg products to the United States.

Broiler Meat Production

Mexico’s broiler meat production forecast for CY 2010 is revised down 3.1 per cent lower from the previous forecast due in part to slow economic recovery, this after a decline of 2.2 per cent in 2009. The figures for 2010 are still slightly lower than the revised 2008 broiler production.

There are two factors that could stimulate broiler production during 2010: the rate of economic recovery it pertains to family incomes, and an expected record level of US corn yield, which would reduce grain prices. However, broiler production will maintain close to 2009 levels. The slow rate of economic recovery is due in part to Mexican fiscal policy affecting disposable incomes and, thus, purchases of poultry products, especially among low-income families. In addition, the decline in the cost of production because of lower grain prices will be nullified by the increase cost for inputs such as transportation and energy.

Figures for 2009 were also revised down to reflect the Mexican industry forecast. These reductions are the result of the difficulties selling poultry products during 2009 due in part to the decline in family incomes. Even though poultry products are the cheapest animal protein, the international economic crisis affected consumption, especially in lower-income consumers, forcing producers to raise birds to a higher slaughter weight and driving up production costs. Furthermore, during the second week of October 2009, within the Mexico City metropolitan area the Mexican National Poultry Union (UNA) members began selling chicken breast at 35 pesos (MXP) per kilo (US$ 2.64 per kilo), as well as legs and thighs at MXP22 per kilo (US$ 1.66 per kilo), which were record low prices for the year.

Poultry producers continue to be major users of animal feed; however, Mexico is a grain-deficient country. Mexico covers domestic demand with imports from the United States. According to the feed industry data, for 2009, the Mexican feed production was 26,600 metric tons (MT) of which 13,900 MT was used by the poultry sector. For 2009, this represented an increase of 1.67 per cent from 2008 feed production used by the poultry sector.

Consolidation of the Mexican industry is expected to continue. However, on 17 December 2009, Mexico’s Federal Commission of Economic Competition (CFC) published a notice announcing an investigation of the Mexican poultry sector regarding possible monopolistic business practices. At this time, no specific companies have been cited as conducting business in this manner. However, it is possible that the three largest companies will be asked to provide information for the investigation.

As previously stated, the Mexican poultry sector is very concentrated; three companies account for 55 per cent of all Mexican broiler production, and two of them are US firms. However, the findings of the investigation could result in sanctions that would affect the entire sector.

After 12 years of increasing broiler production, 2009 resulted in a decline. The decline is the result of many factors during the past three years, beginning with higher grain prices in 2007 which affected the cost of production, the devaluation of the Mexican peso, the international economic crisis, and competition from imports.

In the second half of 2009, industry research showed that broiler prices in some wet markets declined from MXP22.23 (US$1.52) per kilo in June, to MXP15.89 (US$1.20) per kilo in October. In fact, it was reported that there was a domestic oversupply of broiler meat in September due to slack demand and cheaper imports. Furthermore, producers faced higher production costs due to more expensive electricity, packing materials and transportation.

In order to recover, the Mexican poultry sector will focus on consolidation, production of valued-added products, and development of facilities and strategies to export products. However, export efforts are constrained due to the lack of USDA recognition of areas free of exotic Newcastle disease (END).

Consumption

The consumption estimate for CY 2010 was revised down to 3.37 million MT due in part to a slower than expected economic recovery. Consumption will be supported by economic recovery, the affordability of chicken relative to other meats, increased use in processed food products, and improved product quality.

Figures for 2009 were revised up from those previously estimated due to higher imports. The international economic crisis affected family incomes, reducing broiler consumption for 2009, especially, in low income consumers. However, broiler consumption continued to grow. The consumption increase was supported by middle income consumers who consumed cheaper protein, i.e. chicken.

Consumption data for 2008 was also revised slightly up as the result of final import and export numbers for 2008.

For 2010, UNA estimates the average per-capita consumption of chicken at 25.73 kilos. This level is slightly down from the 2009 level of 25.96 kilos, but still higher than the 2000 level of 19.66 kilos.

Finally, it is important to point out that even though the H1N1 outbreak in 2009 affected pork consumption and temporarily benefited broiler meat consumption, the international economic crisis affected the consumer’s purchasing power, which cut the consumption of broiler meat.

The past year was very volatile for poultry prices. For the first half of the year consumer prices for chicken leg quarters (CLQs) were significantly higher compared to prices during the second half of 2009. However, prices fell throughout the year primarily because of the economic crisis, oversupply, and international price volatility. In Mexico City, prices for CLQ were the highest in March at MXP28.42 per kg (US$1.94/kg) and were the lowest in October at MXP17.39 per kg (US$1.31/kg). The average broiler price for 2009 was MXP20.15 per kg (US$1.49/kg), which was 12.7 per cent lower than in 2008 (MXP23.08 or US$2.07 per kg).

Trade

Imports

Imports of broiler meat for CY 2010 were revised up 10.1 per cent from the previous estimate. However, the product mix of imports will change. It is expected more raw material for meat processing (mainly mechanically separated meat and liver) will be imported this year; imports of whole chicken and cuts could decline.

Data for 2009 were revised upwards by 7.2 per cent over the previous estimate due in part to the availability of cheaper imports during the second half of the year. During 2009 imports of chicken carcasses and CLQ’s (fresh/chilled) recorded an unusual increase because of the lower international prices.

The United States is the main supplier of broiler meat to Mexico. However, Chile’s presence in the poultry market has begun to affect the US presence. During the first 10 months of 2009, imports from Chile of frozen mechanically separated chicken (HS 0207.14.01) represented 28 per cent of total Mexican imports, an increase of more than 108 per cent, while imports from the United States of the same product declined. This is due in part to some avian influenza (AI) outbreaks, which are causing Mexican importers to diversify their suppliers in order to ensure raw material supplies continue to flow without interruptions.

Imports of broiler meat for CY 2008 were unchanged.

The top three products imported by Mexico are: fresh or chilled mechanically deboned chicken meat, fresh and chilled turkey parts and frozen chicken leg quarters. Although imports of chicken products have been increasingly diversified, during the first 10 months of 2009 imports of mechanically deboned turkey meat declined due in part to the decline in consumption caused by the international economic crisis. However, it is expected that for 2010 more raw material for processed meats will be imported as a result of an increasing demand for cheaper meats.

Mexico maintains restrictions on bird and poultry products from Edmonson County, Kentucky; Giles and Lincoln Counties, Tennessee; and Meeker County, Minnesota.

Exports

Broiler export forecasts were revised up from the previous estimates in 2010, 2009 and 2008 to reflect official data and the continuous efforts of UNA and the GOM to increase the exports. Currently, UNA and the GOM continue focusing on increasing the exports of value-added poultry products.

However, the slow rate of increase demonstrates the poultry industry’s problems with consolidation and diversification of markets for its exports. According to the Mexican poultry industry, the principal problems are the restrictions created by the lack of recognition of disease-free areas in Mexico by USDA. The Mexican poultry industry has been working with USDA, USA Poultry and Egg Export Council (USAPEEC) and the Secretariat of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) in order to obtain the recognition of exotic Newcastle disease-free status for at least six states of Mexico. .

Further Reading

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April 2010