Report Highlights:

Supply and use estimates for MY 2004 and 2005 (Jan-Dec) are largely unchanged. Mexico continues to be a growing producer of chicken meat as well as a growing importer, with imports of meat forecast to reach 364,000 MT in 2005. Turkey production is expected somewhat lower in 2005 as imports of parts and mechanically separated meat rise to meet demand from the food processing industry. The Government of Mexico continues to maintain import restrictions for certain poultry products from certain U.S. states following the detection of Low Pathogenic Avian Influenza in 2004.

Poultry Situation and Outlook

2005 forecasts of chicken meat supply and use remain unchanged as production of chicken meat continues to expand, spurred by population growth, competitive prices, rising incomes, and growing consumer health consciousness. The July 2003 safeguard agreement on chicken leg quarters continues to provide some additional trade protection for the Mexican industry. Turkey meat production is now forecast slightly lower in the face of stiff competition from U.S. and Chilean imports.

Mexico’s poultry imports are largely comprised of chicken leg quarters, turkey parts for further processing, and mechanically separated meat (MSM). With limited domestic production of MSM, imports of these products for MY 2005 are forecast to increase as demand from Mexico’s food and meat processors continues to grow. Imports of MSM for further processing are not affected by the Government of Mexico’s restrictions on Low Pathogenic Avian Influenza, which apply to the U.S. states of California, Connecticut, Delaware, Maryland, Missouri, New Jersey, Texas, and Pennsylvania.

Recently, because of administrative concerns, the Government of Mexico closed Reynosa as a port-of-entry to frozen chicken leg quarters (CLQ) and selected meat varieties (H.T.S. 0207.14.04 & 0206.29.99, respectively). A plan is currently being developed that would permit the re-opening of this crossing point.

Chicken Meat

Estimates of chicken meat supply and demand in this report are unchanged from the previous official USDA estimates. All 2003 estimates are based on final official or final industry data.

Production

Mexican chicken production continues to rise as producers enjoy growing demand for their products. Effective marketing campaigns, strong financial positions among chicken processors, and continued improvement in product quality should contribute to increased production. Producers also appear to have benefited from the trade protections afforded by the safeguard agreement for chicken leg quarters, which has been in place since 2003. Chicken meat is generally the least expensive meat in Mexico.

Costs of production for MY 2005 are expected to increase with anticipated regular increases in the cost of electricity and transportation. In the case of electricity, despite the availability of lower rates for agricultural producers, some poultry producers say that supplies of electricity at the lower rates are not always sufficient, leaving them to use electricity at the established consumer rates. As the industry expands and demands mo re electricity, this added cost is expected to become more burdensome. However, lower U.S. prices for grain and oilseeds should help to offset much of the increase in costs of other inputs.

Consumption

Chicken meat demand is considered to be relatively elastic in Mexico, so changes in price result in significant changes in consumption, particularly among lower income consumers. If prices rise, consumers can switch to cheaper beans. Similarly, if prices drop, chicken tends to be the first meat adopted by lower income consumers. Additionally, among medium and higher income consumers, health consciousness and concerns about cholesterol are prompting growth in chicken consumption. Consumers continue to prefer fresh whole chickens to chicken parts. Although, purchases of chicken parts are increasing, mainly in Mexico’s rapidly growing supermarket sector which caters primarily to higher-income consumers. Also, Mexican consumers tend to prefer dark meat to white meat. However, medium and high-income consumers appear to be expanding their consumption of white meat.

For 2004, estimated average wholesale prices for CLQs in the northern border region were USD $ 0.29 per lb. Retail prices for the same product in the main border region cities (Nuevo Laredo, Reynosa, Tijuana and Ciudad Juarez) ranged between USD $ 0.39 - $ 0.63 per lb. Wholesale CLQ prices in Mexico City ranged between USD $ 0.74 and 0.87 cents during 2004, well above prices in the border area, demonstrating that imports of CLQs under the safeguard agreement affected prices near the border, but provided sufficient protection to leave CLQ prices significantly higher in interior markets. In 2003, prices of CLQs marketed at the border averaged USD $ 0.38 per Lb. For retail prices in Mexico City see table on Section II. Statistical Tables.

Trade

Chicken and turkey meat are the primary poultry products imported by Mexico. The processing industry imports most of the MSM and chicken cuts as inputs for the domestic sausage and lunchmeat industries. The final safeguard imposed on U.S. chicken leg quarters in July 2003 has been administered in accordance with the terms of the agreement (see report MX 3099). According to the most recent official Mexican trade data, imported CLQs under H.T.S. 0207.13.03 & 0207.14.04 were 88,147 MT, as of September 2004, nearly 14 percent above the 77,632 MT imported as of September 2003.

Effective January 1, 2008, Mexico will provide full duty-free access and eliminate the import licensing requirements for U.S. CLQs. Mexico’s Secretariat of Agriculture (SAGARPA) deems any Low Pathogenic Avian Influenza (LPAI) strain other than H5 as being exotic to Mexico. As a result, detections of various LPAI strains in the United States led to the imposition of import restrictions for several U.S. states during 2004.

Most recently, on September 13, 2004, SAGARPA, through the Office of Animal Health, notified the U.S. government that they were banning imports of raw poultry meat for direct consumption, live birds, and hatching, table eggs and Specific Pathogen Free (SPF) eggs from Missouri due to detections of LPAI in that state. Currently, import restrictions continue for the states of California, Connecticut, Delaware, Maryland, New Jersey, Texas, and Pennsylvania because of detections of LPAI, and for the following Texas counties due to a 2004 detection of High Pathogenic Avian Influenza: Gonzales, Guadalupe, Galdwell, Bastrop, Fayette, La Vaca, De Witt, Karnes, Wilson, Comal and Hays. (see MX4123). USDA technical experts continue to work with SAGARPA in an effort to have these restrictions lifted. On December 28, 2004, the Secretariat of Treasury (SHCP) published in the Diario Oficial (Federal Register) the Sixth Resolution modifying the 2004 Foreign Trade General Rules, in which the closure of the Mexican border city of Reynosa and the opening of the Pacific port of Salina Cruz were established for the entry of apples, certain variety meats, and frozen chicken leg quarters. (see MX 5002).

Mexican officials appear to have imposed the restrictions in an effort to address issues relating to the port’s administration and concerns about the use of court injunctions (amparos) which enabled importers to evade the terms of the safeguard agreement. It’s estimated that 20,000 MT of frozen CLQ crossed Reynosa under amparos, during 2004. Officials are currently working on a plan that would enable the port to re-open with improved administrative procedures. Other ports of entry are not affected by this decision.

Following the Avian influenza detections in Asia and the United States, Mexico’s poultry industry began more closely exploring export options in Asia, particularly in China and Japan. The industry participated in a SAGARPA trade mission to China and is hopeful that the recently completed Mexico-Japan Free Trade Agreement will lead to new opportunities. While the agreement is not yet in effect, Mexican producers will be granted a 10 MT tariff-rate quota (TRQ) at zero duty for trade show samples during the first year. TRQ access will increase to 2,500 MT in year two and will increase by 2,000 MT annually until reaching 8,500 MT in year five. TRQ access will then remain at the 8,500 MT level. TRQ and high-tier tariff levels have not yet been established, but Mexican poultry producers are hopeful that they will be able to make inroads in the Japanese market, possibly even at the high-tier tariff level.

Marketing

Mexico’s poultry producers conduct generic promotional campaigns, particularly during the holiday season. Additionally, major processors advertise their products regularly. The campaigns, coupled with the relative affordability of poultry products and consumer health concerns appear to have been consistently successful in expanding per capita chicken consumption. The majority of U.S. chicken exports are used as inputs to further processing or are consumed directly (primarily CLQs) in the border area. U.S. exporters should focus on the many uses of chicken in food processing, institutional uses, and the health benefits of chicken. Mexico also imports small quantities of whole ducks for consumption in the restaurant sector, primarily by Chinese restaurants.

Turkey Meat Production

Turkey meat production for MY 2004 and 2005 (Jan-Dec) is now estimated lower at 14,000 MT as domestic producers continue to face competition from U.S. and Chilean imports. While most of the turkey produced in Mexico is marketed as whole birds, imports of both parts and whole birds appear to be stifling the growth in domestic production.

Consumption

Demand for turkey products from the processing industry is expected to continue strong. Consumption of turkey in the form of cold cuts continues to increase, primarily through sales in supermarkets and delicatessen-type restaurants. Average per capita consumption is estimated by UNA at 4.51 pounds for 2004 including whole turkey, turkey cuts and other turkey products. Consumption estimates for MY 2003 were revised slightly upwards based on the latest official data. Turkey prices during the Christmas season in 2004 were US $2.84 to $3.10/kg for whole uncooked turkey, and US $3.72 to $3.99/kg for smoked turkey.

Trade

MY 2005 turkey meat imports are forecast slightly higher in light of expectations that imports from the U.S. and Chile will increase. Demand for turkey parts, mainly from the United States, for further processing remains strong. Turkey meat imports for MY 2004 were revised upward to 171,000 MT due to increased demand and the pace of imports. Turkey meat imports for MY 2003 remain unchanged. The processing industry imports most of the turkey parts and mechanically separated turkey (MST) as inputs for the domestic cold-cuts industry. Domestic meat processors are importing turkey thigh meat to produce cooked hams made up of blends of domestic pork and U.S. turkey thighs.

Marketing

Around 75 percent of the total production in Mexico is marketed as whole turkeys during the Christmas season and approximately 25 percent is sold as cut-up and further processed turkey meat products. The USA Poultry and Egg Export Council, along with local turkey producers, has sponsored generic marketing campaigns to increase overall consumption of selected turkey products in Mexico. Turkey’s strength in Mexico appears to be its flexibility as an input in the food processing sector as well as its growing acceptance among consumers in the form of lunchmeat and turkey hams. Consumption of whole birds has thus far been limited primarily to the holiday season, and at this stage there does not appear to be a shift away from this tendency.

Further Information

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