Required Report - Public distribution

**Date:** 9/24/2007

**GAIN Report Number:** MX7064

MX0000

**Mexico**

**Poultry and Products**

**Annual Report**

**2007**

**Approved by:**

![](media/image1.wmf)Suzanne E. Heinen

U.S. Embassy

**Prepared by:**

Dulce Flores and Jeff Nawn

**Report Highlights:**

Mexico's poultry industry is forecast to continue growing through MY
2008 (Jan-Dec), though not at the same rate that the industry has
experienced over the past several years. Higher costs of production,
which translate into higher consumer prices, and competition from
foreign imports, will have a dampening effect on the industry. Imports
of U.S. poultry and poultry products are forecast to increase in
response to growing demand. Mexico's avian influenza restriction on 11
Texas counties was recently lifted. The cessation of this restriction
coincided with an end to the requirement that U.S. trucks carrying raw
poultry products be sealed at the point of origin. Chile is emerging as
a more significant supplier of frozen poultry for further processing as
Mexican importers look to diversify suppliers.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Mexico City \[MX1\]

\[MX\]

Table of Contents

[SECTION I. SITUATION AND OUTLOOK 3](#section-i.-situation-and-outlook)

[POULTRY SITUATION AND OUTLOOK 3](#poultry-situation-and-outlook)

[SECTION II. STATISTICAL TABLES 4](#section-ii.-statistical-tables)

[POULTRY MEAT, BROILER PS&D 4](#poultry-meat-broiler-psd)

[POULTRY MEAT. TURKEY PS&D 5](#poultry-meat.-turkey-psd)

[BROILERS WET MARKET PRICES 6](#broilers-wet-market-prices)

[CHICKEN LEQ QUARTER WhOLESALE PRICES
6](#chicken-leq-quarter-wholesale-prices)

[MEXICAN IMPORTS FOR SELECTED POULTRY PRODUCTS Jan-Dec 2006
7](#mexican-imports-for-selected-poultry-products-jan-dec-2006)

[POULTRY NUMBERS 9](#poultry-numbers)

[SECTION III. NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING
10](#section-iii.-narrative-on-supply-and-demand-policy-marketing)

[CHICKEN MEAT 10](#chicken-meat)

[PRODUCTION 10](#production)

[CONSUMPTION 11](#consumption)

[TRADE 12](#trade)

[REGULATIONS FOR POULTRY AND POULTRY PRODUCTS EXPORTS
13](#regulations-for-poultry-and-poultry-products-exports)

[POLICY 13](#policy)

[MARKETING 14](#marketing)

[TURKEY MEAT 14](#turkey-meat)

[PRODUCTION 14](#production-1)

[CONSUMPTION 14](#consumption-1)

[TRADE 15](#trade-1)

[MARKETING 15](#marketing-1)

# SECTION I. SITUATION AND OUTLOOK

## POULTRY SITUATION AND OUTLOOK

Poultry meat production is expected to increase in both MY 2007 and MY
2008. However, the current rate of increase is lower relative to the
growth that the Mexican poultry industry has experienced over the past
decade. This slower growth rate is primarily attributable to higher
production costs, mainly imported grains, and continued competition from
poultry imports. The Mexican industry appears to have taken advantage of
the time afforded by the safeguard agreement that was signed in July of
2003, which established a tariff-rate quota (TRQ) for imports of U.S.
chicken leg quarters (CLQs). Some larger scale producers have taken
steps to improve quality and sanitary practices in an attempt to realize
new export opportunities. Mexico does not yet have an equivalency
agreement with USDA's Food Safety Inspection Service that would allow
for exports of domestically produced poultry meat and egg products to
the United States, though officials continue to work towards this
objective.

Imports of both chicken and turkey meat are forecast to increase
slightly in MY 2008, primarily in response to growing demand from
Mexican food processors for mechanically separated meat and cuts for
further processing. In July of 2007 the Government of Mexico withdrew
the avian influenza ban on poultry from 11 counties in Texas. The
termination of this ban was accompanied by an end to the requirement
that all shipments of raw U.S. poultry to Mexico to be sealed at the
point of origin. CLQ imports are expected to continue to be strong. In
fact over quota imports of CLQs are expected to increase due to
significantly higher wholesale prices.

Data included in this report is not official USDA data. Official USDA
data is available at <http://www.fas.usda.gov/psd>.

# SECTION II. STATISTICAL TABLES

## POULTRY MEAT, BROILER PS&D

  ---------------- ----------- ---------- ----------- ------------ ---------- ----------- ------------ ---------- -----------
  **Mexico**                                                                                                      

  **Poultry, Meat,                                                            (MIL HEAD)                          
  Broiler**                                                                   (1000 MT)                           
                                                                              (PERCENT)                           

                   **2006                             **2007                              **2008                  
                   Revised**                          Estimate**                          Forecast**              

                   USDA\       Post\      Post\       USDA\        Post\      Post\       USDA\        Post\      Post\
                   Official    Estimate   Estimate\   Official     Estimate   Estimate\   Official     Estimate   Estimate\
                                          New                                 New                                 New

  **Market Year                01/2006    01/2006                  01/2007    01/2007                  01/2008    01/2008
  Begin**                                                                                                         

  **Inventory      0           0          0           0            0          0           0            0          0
  (Reference)**                                                                                                   

  **Slaughter      0           0          0           0            0          0           0            0          0
  (Reference)**                                                                                                   

  **Beginning      0           0          0           0            0          0           0            0          0
  Stocks**                                                                                                        

  **Production**   2576        2576       2592        2641         2641       2656        0            0          2722

  **Whole,         0           0          0           0            0          0           0            0          0
  Imports**                                                                                                       

  **Parts,         430         430        430         460          454        415         0            0          425
  Imports**                                                                                                       

  **Intra-EU       0           0          0           0            0          0           0            0          0
  Imports**                                                                                                       

  **Other          0           0          0           0            0          0           0            0          0
  Imports**                                                                                                       

  **Total          430         430        430         460          454        415         0            0          425
  Imports**                                                                                                       

  **Total Supply** 3006        3006       3022        3101         3095       3071        0            0          3147

  **Whole,         0           0          0           0            0          0           0            0          0
  Exports**                                                                                                       

  **Parts,         1           0          1           1            0          1           0            0          0
  Exports**                                                                                                       

  **Intra EU       0           0          0           0            0          0           0            0          0
  Exports**                                                                                                       

  **Other          0           0          0           0            0          0           0            0          0
  Exports**                                                                                                       

  **Total          1           0          1           1            0          1           0            0          0
  Exports**                                                                                                       

  **Human          3005        3006       3021        3100         3095       3070        0            0          3147
  Consumption**                                                                                                   

  **Other Use,     0           0          0           0            0          0           0            0          0
  Losses**                                                                                                        

  **Total Dom.     3005        3006       3021        3100         3095       3070        0            0          3147
  Consumption**                                                                                                   

  **Total Use**    3006        3006       3022        3101         3095       3071        0            0          3147

  **Ending         0           0          0           0            0          0           0            0          0
  Stocks**                                                                                                        

  **Total          3006        3006       3022        3101         3095       3071        0            0          3147
  Distribution**                                                                                                  

  **CY Imp. from   0           0          0           0            0          0           0            0          0
  U.S.**                                                                                                          

  **CY Exp. to     0           0          0           0            0          0           0            0          0
  U.S.**                                                                                                          

  **Balance**      0           0          0           0            0          0           0            0          0

  **Inventory      0           0          0           0            0          0           0            0          0
  Balance**                                                                                                       

  **Production     3           3          3           -3           3          2           0            0          2
  Change**                                                                                                        

  **Import         15          14         15          8            6          -3          0            0          2
  Change**                                                                                                        

  **Export         0           0          0           0            0          0           0            0          0
  Change**                                                                                                        

  **Trade          -429        -430       -429        -459         -454       -414        0            0          -425
  Balance**                                                                                                       

  **Consumption    5           5          5           -2           3          2           0            0          3
  Change**                                                                                                        
  ---------------- ----------- ---------- ----------- ------------ ---------- ----------- ------------ ---------- -----------

*Not official USDA data*

#  

## POULTRY MEAT. TURKEY PS&D

## 

  ---------------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- -----------
  **Mexico**                                                                                                 

  **Poultry, Meat,                                                         (MIL HEAD)                        
  Turkey**                                                                 (1000 MT)                         
                                                                           (PERCENT)                         

                   2006                              2007                              2008                  
                   Revised                           Estimate                          Forecast              

                   USDA\      Post\      Post\       USDA\      Post\      Post\       USDA\      Post\      Post\
                   Official   Estimate   Estimate\   Official   Estimate   Estimate\   Official   Estimate   Estimate\
                                         New                               New                               New

  **Market Year               01/2006    01/2006                01/2007    01/2007                01/2008    01/2008
  Begin**                                                                                                    

  **Inventory      0          0          0           0          0          0           0          0          0
  (Reference)**                                                                                              

  **Slaughter      0          0          0           0          0          0           0          0          0
  (Reference)**                                                                                              

  **Beginning      0          0          0           0          0          0           0          0          0
  Stocks**                                                                                                   

  **Production**   14         13         14          15         0          15          0          0          15

  **Whole,         0          0          0           0          0          0           0          0          0
  Imports**                                                                                                  

  **Parts,         190        179        188         200        0          197         0          0          207
  Imports**                                                                                                  

  **Intra-EU       0          0          0           0          0          0           0          0          0
  Imports**                                                                                                  

  **Other          0          0          0           0          0          0           0          0          0
  Imports**                                                                                                  

  **Total          190        179        188         200        0          197         0          0          207
  Imports**                                                                                                  

  **Total Supply** 204        192        202         215        0          212         0          0          222

  **Whole,         0          1          0           0          0          0           0          0          0
  Exports**                                                                                                  

  **Parts,         0          0          0           0          0          0           0          0          0
  Exports**                                                                                                  

  **Intra EU       0          0          0           0          0          0           0          0          0
  Exports**                                                                                                  

  **Other          0          0          0           0          0          0           0          0          0
  Exports**                                                                                                  

  **Total          0          1          0           0          0          0           0          0          0
  Exports**                                                                                                  

  **Human          204        191        202         215        0          212         0          0          222
  Consumption**                                                                                              

  **Other Use,     0          0          0           0          0          0           0          0          0
  Losses**                                                                                                   

  **Total Dom.     204        191        202         215        0          212         0          0          222
  Consumpt.**                                                                                                

  **Total Use**    204        192        202         215        0          212         0          0          222

  **Ending         0          0          0           0          0          0           0          0          0
  Stocks**                                                                                                   

  **Total          204        192        202         215        0          212         0          0          222
  Distribution**                                                                                             

  **CY Imp. from   0          0          0           0          0          0           0          0          0
  U.S.**                                                                                                     

  **CY Exp. to     0          0          0           0          0          0           0          0          0
  U.S.**                                                                                                     

  **Balance**      0          0          0           0          0          0           0          0          0

  **Inventory      0          0          0           0          0          0           0          0          0
  Balance**                                                                                                  

  **Production     0          0          0           7          -100       7           0          0          0
  Change**                                                                                                   

  **Import         3          0          3           5          -100       5           0          0          5
  Change**                                                                                                   

  **Export         0          0          0           0          -100       0           0          0          0
  Change**                                                                                                   

  **Trade          -190       -178       -188        -200       0          -197        0          0          -207
  Balance**                                                                                                  

  **Consumption    3          0          3           5          -100       5           0          0          5
  Change**                                                                                                   
  ---------------- ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- -----------

*Not USDA official data*

## BROILERS WET MARKET PRICES

## 

+-----------------+--------------+--------------+-------+-------------+
| **[Broilers Wet |              |              |       |             |
| Market Prices,  |              |              |       |             |
| Mexico City     |              |              |       |             |
| Pesos/kilogram  |              |              |       |             |
| ]{.smallcaps}** |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| ##              | 2005         | 2006         | 2007  | \% Change   |
| ###### **[Month |              |              |       | 06/07       |
| ]{.smallcaps}** |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Janua          | 21.63        | 23.04        | 27.00 | 17.18       |
| ry]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Februa         | 22.38        | 22.50        | 24.50 | 8.88        |
| ry]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Mar            | 22.50        | 22.73        | 21.00 | (7.61)      |
| ch]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Apr            | 22.83        | 19.25        | 21.22 | 10.23       |
| il]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [M              | 23.00        | 26.50        | 22.96 | (13.35)     |
| ay]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Ju             | 22.00        | 19.00        | 26.13 | N/A         |
| ne]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Ju             | 22.67        | 20.33        | N/A   | N/A         |
| ly]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Augu           | 22.17        | 20.58        | N/A   | N/A         |
| st]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Septemb        | 21.38        | 21.50        | N/A   | N/A         |
| er]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Octob          | 20.25        | 21.25        | N/A   | N/A         |
| er]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Novemb         | 21.75        | 20.48        | N/A   | N/A         |
| er]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Decemb         | 19.00        | 23.58        | N/A   | N/A         |
| er]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Annual         | 21.80        | 21.73        | 23.33 |             |
| Av              |              |              |       |             |
| g.]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+
| [Whole chicken  |              |              |       |             |
| including       |              |              |       |             |
| off             |              |              |       |             |
| al]{.smallcaps} |              |              |       |             |
+-----------------+--------------+--------------+-------+-------------+

[Source:]{.smallcaps} [National poultry association, una.]{.smallcaps}

## 

## 

## 

## 

## CHICKEN LEQ QUARTER WHOLESALE PRICES

+---------------+------------+------------+------------+--------------+
| **[Chicken    |            |            |            |              |
| Leg Quarter   |            |            |            |              |
| Wholesale     |            |            |            |              |
| Prices,       |            |            |            |              |
| Mexico        |            |            |            |              |
| City]{        |            |            |            |              |
| .smallcaps}** |            |            |            |              |
|               |            |            |            |              |
| **[Pes        |            |            |            |              |
| os/kilogram]{ |            |            |            |              |
| .smallcaps}** |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [Month        | 2005       | 2006       | 2007       | \% Change    |
| ]{.smallcaps} |            |            |            | 06/07        |
+---------------+------------+------------+------------+--------------+
| [January      | 21.96      | 17.00      | 21.06      | 23.88        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [February     | 22.55      | 17.96      | 20.61      | 14.75        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [March        | 20.95      | 18.91      | 18.23      | (3.59)       |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [April        | 18.08      | 18.30      | 19.99      | 9.23         |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [May          | 20.34      | 20.87      | 25.07      | 20.12        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [June         | 22.98      | 24.66      | 23.81      | (3.44)       |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [July         | 27.75      | 18.57      | 23.99      | 29.18        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [August       | 27.07      | 22.42      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [September    | 22.32      | 20.05      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [October      | 18.23      | 20.00      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [November     | 17.17      | 21.66      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [December     | 18.78      | 24.50      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| **[Annual     | **21.51**  | **20.41**  | **21.82**  |              |
| Avg.]{        |            |            |            |              |
| .smallcaps}** |            |            |            |              |
+---------------+------------+------------+------------+--------------+

[Source: National information market service, (SNIIM)]{.smallcaps}

[2005 Exchange Rate Avg.: U.S.\$1.00 = 10.89 pesos]{.smallcaps}

[2006 Exchange Rate Avg.: U.S.\$1.00 = 10.90 pesos]{.smallcaps}

[2007 Exchange Rate August.: U.S.\$1.00 = 11.20 pesos]{.smallcaps}

## MEXICAN IMPORTS FOR SELECTED POULTRY PRODUCTS Jan-Dec 2006

## 

  ---------------------------------------------------------------------------------------
  **[H.S. Tariff          **[Description & Country of                 **[Volume
  Number]{.smallcaps}**   Origin]{.smallcaps}**                       MT]{.smallcaps}**
  ----------------------- ------------------------------------------- -------------------
  0105.11.01              Day old chicks, which do not need feeding   
                          during transport                            

                          U.S.                                        1,988

                          SPAIN                                       25

                          HUNGARY                                     19

                          SUBTOTAL (Thousand head)                    2,031

  0105.11.02              Breeding stock, layer-type with selected    
                          breed certificate when imports are no more  
                          of 15,000 heads in each operation           

                                                                      715

                          U.S. & SUBTOTAL (Thousand head)             715

  0105.11.99              Other                                       

                          U.S. & SUBTOTAL                             0

  0105.19.99              Other (Chickens)                            

                          U.S. & SUBTOTAL (Thousand head)             5

  0207.11.01              Other fresh or chilled whole poultry        

                          U.S. & SUBTOTAL                             29,170

  0207.12.01              Other frozen whole poultry                  

                          U.S.                                        3,093

                          CHILE                                       552

                          SUBTOTAL                                    3,644

  0207.25.01              Whole frozen turkey                         

                          U.S.                                        3,125

                          CHILE                                       2,036

                          OTHER                                       0

                          SUBTOTAL                                    5,161

  0207.33.01              Whole ducks, geese & guineas frozen         

                          U.S. & SUBTOTAL                             920

  0207.26.01              Mechanically deboned turkey meat            

                          U.S. & SUBTOTAL                             6,432

  0207.26.99              Fresh & chilled turkey parts                

                          U.S. & SUBTOTAL                             112,651

  0207.13.01              Mechanically deboned chicken meat fresh or  
                          Chilled                                     

                          U.S. & SUBTOTAL                             123,404

  0207.14.01              Mechanically deboned chicken meat frozen    

                          U.S.                                        42,885

                          CHILE                                       15,635

                          SUBTOTAL                                    58,520

  0207.13.99              Fresh & chilled chicken parts               

                          U.S. & SUBTOTAL                             5,798

  0207.14.99              Frozen poultry parts                        

                          U.S.                                        11,512

                          OTHER                                       9,733

                          SUBTOTAL                                    21,245

  0207.13.03              Chicken Leg Quarter, Fresh/chilled          

                          U.S.                                        78,369

                          OTHER                                       1,198

                          SUBTOTAL                                    79,567

  0207.14.04              Chicken Leg Quarter, Frozen                 

                          U.S.                                        70,744

                          OTHER                                       1,162

                          SUBTOTAL                                    71,706

  0207.27.01              Mechanically deboned turkey meat, frozen    

                          U.S.                                        11,655

                          OTHER                                       2,657

                          SUBTOTAL                                    14,312

  0207.27.99              Frozen turkey parts                         

                          U.S.                                        33,377

                          OTHER                                       5,524

                          SUBTOTAL                                    38,901

  0207.36.99              Duck, geese or guineas cuts, frozen         

                          U.S. & SUBTOTAL                             54

  0207.14.02 & 0207.36.01 Poultry livers                              

                          U.S. & SUBTOTAL                             4

  0407.00.01              Table eggs, fresh, including hatching eggs  

                          U.S. & SUBTOTAL                             5,601

  1601.00.01              Sausages of broiler or turkey               

                          U.S.                                        17,214

                          OTHER                                       166

                          SUBTOTAL                                    17,380

  1602.31.01              Processed meat (Turkey)                     

                          U.S.                                        2,712

                          OTHER                                       251

                          SUBTOTAL                                    2,963

  1602.32.01              Prepared or preserved chicken meat or offal 

                          U.S.                                        5,755

                          OTHER                                       1,578

                          SUBTOTAL                                    8,333

  1602.39.99              Other processed poultry meat                

                          U.S.                                        16

                          FRANCE                                      8

                          OTHER                                       10

                          SUBTOTAL                                    34

  0207.13.02              Chicken carcasses                           

                          U.S. & SUBTOTAL                             13,273

  0207.14.03              Chicken carcasses                           

                          U.S. & SUBTOTAL                             3,825

  0207.26.02              Turkey carcasses                            

                          U.S. & SUBTOTAL                             0

  0207.27.03              Turkey carcasses                            

                          U.S. & SUBTOTAL                             0
  ---------------------------------------------------------------------------------------

[Source: Global Trade Information Services, Inc. "World Trade Atlas"
Mexico Edition, September 2007.]{.smallcaps}

# 

![](media/image2.wmf)

## POULTRY NUMBERS

  --------------------------------------------- -------------------------
  **MEXICO: POULTRY NUMBERS, 2006**             

  **Type of Bird**                              **Thousand of Head**

  Laying Hens in production\*                   132,464,112

  Pullets in grow out                           39,739,234

  Light Breeding Hens in production             942,250

  Light Breeding Hens in grow out               277,161

  Heavy Breeder Hens in production              9,186,000

  Heavy Breeder Hens in grow out                6,429,000

  Heavy Progenitor Hens in production           175,579

  Heavy Progenitor Hens in grow out             114,850

  Broilers (Per cycle)                          248,060,826

  Turkeys (Per cycle)                           900,000

  Total Poultry Flock                           438,289,012
  --------------------------------------------- -------------------------

[\*There are an estimated 34 million laying hens in the second
cycle]{.smallcaps}

[Source: UNA (National Poultry Association)]{.smallcaps}

[\
]{.smallcaps}

# SECTION III. NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING

# CHICKEN MEAT

## PRODUCTION

Mexican poultry meat production for MY 2008 (Jan-Dec) is forecast to
increase to 2.7 million tons, a 2.4 percent increase over MY 2007
production. In 2008 the poultry industry will benefit from the complete
implementation of the North America Free Trade Agreement due to the fact
that corn, an important input for the industry, will no longer be
subject to a tariff rate quota (TRQ) for entrance into Mexico. However,
because of higher global grain prices, partially due to demand from the
U.S. ethanol industry, the total costs of production within the Mexican
poultry industry will likely experience a marginal increase, resulting
in more moderate growth than in years past. This slower growth rate is
also attributable to continued growth in poultry imports. Producers have
benefited from the trade protection afforded by the safeguard agreement
for chicken leg quarters (CLQs) that has been in place since 2003. The
safeguard has enabled Mexico's poultry industry to invest in modern
technologies in order to enhance their competitive position when the
safeguard is removed in 2008. Nonetheless, some producers remain
concerned about whether or not they will be competitive in 2008, even
though poultry will continue to be cheaper relative to other meats in
Mexico.

According to the Poultry Producers Association (UNA), feed consumption
for MY 2006 was estimated at 13.4 MMT, (8.4 MMT of feed grains, 2.7 MMT
of oilseeds and protein meals, and 2.3 MMT of other raw materials). UNA
estimates that feed consumption will grow about 2.2 percent in MY 2007.
Feed costs in Mexico represent 55 to 60 percent of the total cost of
production. Poultry producers continue to be major users of imported
feedstuffs from the United States. Producers indicate that 60 percent of
their imports are comprised of sorghum and yellow corn, 23 percent from
oilseeds and protein meals, and 17 percent from other products such as
safflower, orthophosphate, calcium, and methionine. However, in 2008 the
percentage of imported corn and sorghum could change depending on
international grain and oilseed prices. Poultry producers tend to prefer
yellow corn to sorghum because it boasts greater nutritional value, and
because of the color it gives to the birds' skins. Historically, Mexico
has been a white corn producer and only a small percentage of its corn
production has been utilized as animal feed, which has compelled the
poultry industry to import the grain from the United States. The poultry
industry sources yellow corn domestically, however since domestic supply
is not sufficient to cover demand, yellow corn is imported from the U.S.
at higher prices. The surge in international corn prices starting in the
fall of 2006 led to increases at the retail level for poultry and egg
prices at the beginning of 2007. According to UNA, domestic producers
absorbed most of the grain price increases through the first quarter of
2007, but they will eventually be forced to raise consumer prices. The
Poultry Producers Association estimated that for every \$1,000 pesos per
ton increase in coarse grains, poultry prices would increase by about
\$2 pesos/kg. In addition to higher grain prices, producers also
complain that higher prices for electricity, packing materials and
transportation costs continue to add to production costs.

The average bird grow-out period depends largely on where and how the
bird will be sold. For live birds and whole chickens, including offal,
which are commonly sold in street markets, the average grow-out period
is 49-56 days. Birds for the broiler market (whole chicken without
offal) have an average grow-out period of 40-44 days. Those grown for
sale in supermarkets (whole chicken without offal and chicken cuts) are
typically grown-out in 44-49 days. The average daily gain is 36-44 grams
per bird. The average bird weight when marketed is on average 2.2 kg.
The poultry industry reports that the average feed conversion ratio is
2.0 kg of feed to 1 kg of poultry meat.

Industry consolidation and investment in infrastructure are expected to
continue in the medium-term, but the expansion of large, vertically
integrated companies is slowing due to the implementation of provisions
contained in Mexico's Federal Economic Competition Law (*Ley Federal de
Competencia Economica*). The objective of this law is to restrict
monopoly practices. In 2006, three leading companies accounted for 55
percent of total domestic production of chicken meat. Medium-size
companies will likely merge into cooperatives and associations, with
smaller players becoming contract producers.

+--------------+------------+------------+-------------+-------------+
| ###### [C    |            |            |             |             |
| HICKEN FARM  |            |            |             |             |
| COMPOSITION] |            |            |             |             |
| {.smallcaps} |            |            |             |             |
+--------------+------------+------------+-------------+-------------+
|              | COMPANIES  |            | \%          |             |
|              |            |            | PA          |             |
|              |            |            | RTICIPATION |             |
|              |            |            | IN          |             |
|              |            |            | PRODUCTION  |             |
+--------------+------------+------------+-------------+-------------+
|              | 1996       | 2006       | 1996        | 2006        |
+--------------+------------+------------+-------------+-------------+
| LARGE        | 2          | 3          | 33          | 55          |
+--------------+------------+------------+-------------+-------------+
| MEDIUM       | 27         | 30         | 40          | 41          |
+--------------+------------+------------+-------------+-------------+
| SMALL        | 181        | 170        | 27          | 4           |
+--------------+------------+------------+-------------+-------------+

Source: UNA

U.S. firms are significant suppliers of genetics to the Mexican poultry
industry and an estimated 97 percent of Mexican broilers come from lines
produced by two U.S. companies. For layers, about 91 percent of
production is white eggs and U.S. firms are also the dominant suppliers
of genetic lines.

## CONSUMPTION

Chicken producers continue to enjoy favorable demand for their products.
Chicken meat consumption for MY 2008 is forecast to increase by 2.5
percent due to several factors, including population growth, the
affordability of chicken relative to other meats, effective marketing
campaigns, increased usage in processed food products, and improved
product quality. Supermarkets frequently display imported poultry meat,
including CLQs. Increased consumer concerns about cholesterol and other
health issues are resulting in greater marketing opportunities for
chicken meat.

The MY 2007 domestic consumption estimate was revised downward from
previous estimates, reflecting slower demand compared to last year,
though MY 2006 consumption was atypically high. Since CLQ prices in the
U.S. were lower during the first quarter of 2006 due to larger supplies,
Mexico imported more product for border areas and the processing
industry. Also a number of importers brought in product at a much faster
rate, believing Mexican officials might limit imports due to AI
concerns. Nonetheless, consumption has been increasing as a result of
greater demand for chicken meat at affordable prices, and increased
usage in processed food products. CLQ bulk prices in the U.S. for August
2007 averaged \$0.46 to \$0.50 cents per pound, and imported CLQs are
crossing at about U.S. \$0.52 cents per pound. Domestic wholesale CLQ
prices in Mexico City were about U.S. \$0.87/lb in January 2007 and
increased to U.S. \$0.99/lb in July 2006. The Poultry Producers
Association estimates that the average per capita consumption for
chicken will increase from 54.67 pounds in 2006 to 55.66 pounds for
2007. The consumption estimate for MY 2006 was revised upward based on
industry information.

Consumers continue to prefer fresh whole chickens to chicken cuts.
However, purchases of chicken cuts are increasing slowly, mainly in
supermarkets servicing higher-income consumers. Mexican consumers tend
to prefer dark meat to white meat. According to current industry
information, roasting chickens (whole chicken without offal) accounts
for 26 percent of chicken meat consumption, while chickens sold in wet
markets and stalls (whole chicken including offal) accounts for
approximately 24 percent of the total. Live birds represent 27 percent
of total chicken meat consumption. The trend of buying live chickens has
been decreasing over time. During the past six years it has decreased
from 31 percent to 27 percent in 2006. Chicken meat consumption
purchased in supermarkets increased from 5 to 7 percent in 2006 (whole
chicken without offal), and chicken cuts account for less than 11
percent of total consumption. Value-added products account for about 6
percent of total consumption.

## TRADE

In July of 2006 the Mexican government lifted the avian influenza ban on
the 11 counties in Texas. SAGARPA/SENASICA visited Texas in late May
2007 to confirm that the state was cleared from HPAI, and then on August
3, 2007 the import sanitary permits (HRZ) from Mexico were revised to
reflect the notification to USDA that it had withdrawn the AI ban on
poultry from the 11 counties. The lifting of the ban coincided with the
termination of the requirement that all shipments of raw U.S. poultry to
Mexico to be sealed at the point of origin. Shipments of live birds less
than three days old must still be under seal, and boxes of table eggs as
well as Specific Pathogen Free (SPF) eggs must show the stamp of the
competent authority. In recent years concerns over the presence of Low
Pathogenic Avian Influenza (LPAI) and High Pathogenic Avian Influenza
(HPAI) in the United States resulted in the establishment, by SAGARPA,
of import restrictions for poultry and poultry products from several
U.S. states during 2003 and 2004. Except for HPAI in Texas, restrictions
on LPAI were lifted in October 4, 2005.

Because U.S. trucks carrying poultry into Mexico are no longer required
to be sealed at the point of origin the costs associated with exporting
to Mexico are less prohibitive. Furthermore, the declaration of the 11
Texas counties as AI free has increased the pool of potential exporters.
Chicken and turkey meat are the primary poultry products imported by
Mexico. The processing industry imports most of the mechanically
separated poultry, chicken and turkey (MSC & MST), and poultry cuts as
inputs for the domestic sausage and cold-cut industries. Imports of
chicken cuts, mainly leg quarters, and mechanically separated chicken
(MSC) for MY 2008 are forecast to continue increasing due to rising
demand from the processing industry. Large meat processors prefer fresh,
refrigerated product, while medium-small sized processors tend to use
frozen product. Imports of chicken meat for MY 2007 were revised
downward from previous estimates due to lower demand from the industry
compared to 2006, as MY 2006 was considered by the Mexican industry as
atypical with higher imports due to concerns that Mexican officials
would limit imports due to AI concerns. MY 2006 import data remains
unchanged. The United States is the main supplier of chicken meat to
Mexico. However, Chile's presence in the poultry market is expected to
continue to increase as importers seek to diversify suppliers in
response to changing disease conditions in North America. Chile
currently supplies about 17 percent of frozen chicken cuts into Mexico.

CLQs imported under the poultry safeguard are expected to reach the
104,060 MT tariff-rate-quota (TRQ) limit for MY 2007. According to
official data, the CLQ TRQ for MY 2006 was 100 percent filled. According
to industry trade data, imported CLQs under H.T.S. 0207.13.03 &
0207.14.04 were 45,832 MT as of April 2007, about 18 percent lower
compared to the same period in 2006. Imports of CLQs beyond border areas
are subject to an over quota tariff of 19.8 percent for 2007. The
safeguard will end in January 2008, when the TRQ is phased out and the
high-tier tariff drops to zero, as the following table shows:

  ----------- ----------------- ------------- ----------------------------
  **YEAR**    **TRQ (MT)**      **TARIFF**    **HIGH-TIER TARIFF**

  2003        100,000           0             98.8

  2004        101,000           0             79.0

  2005        102,010           0             59.3

  2006        103,030           0             39.5

  2007        104,060           0             19.8

  2008        0                 0             0
  ----------- ----------------- ------------- ----------------------------

The following table summarizes some of the regulations that are
currently being implemented by the Mexican government for imports of
live poultry and poultry meat from the United States.

## 

##  REGULATIONS FOR POULTRY AND POULTRY PRODUCTS EXPORTS

+------------------+----------------+---+----------+-----------+--------+
| **ITEM**         | **RAW POULTRY  | * |          | **TABLE,  | **LIVE |
|                  | FOR RETAIL &   | * |          | SPF AND   | B      |
|                  | FOR FURTHER    | F |          | HATCHING  | IRDS** |
|                  | PROCESSING**   | U |          | EGGS**    |        |
|                  |                | L |          |           |        |
|                  |                | L |          |           |        |
|                  |                | Y |          |           |        |
|                  |                | C |          |           |        |
|                  |                | O |          |           |        |
|                  |                | O |          |           |        |
|                  |                | K |          |           |        |
|                  |                | E |          |           |        |
|                  |                | D |          |           |        |
|                  |                | P |          |           |        |
|                  |                | O |          |           |        |
|                  |                | U |          |           |        |
|                  |                | L |          |           |        |
|                  |                | T |          |           |        |
|                  |                | R |          |           |        |
|                  |                | Y |          |           |        |
|                  |                | M |          |           |        |
|                  |                | E |          |           |        |
|                  |                | A |          |           |        |
|                  |                | T |          |           |        |
|                  |                | A |          |           |        |
|                  |                | N |          |           |        |
|                  |                | D |          |           |        |
|                  |                | E |          |           |        |
|                  |                | G |          |           |        |
|                  |                | G |          |           |        |
|                  |                | P |          |           |        |
|                  |                | R |          |           |        |
|                  |                | O |          |           |        |
|                  |                | D |          |           |        |
|                  |                | U |          |           |        |
|                  |                | C |          |           |        |
|                  |                | T |          |           |        |
|                  |                | S |          |           |        |
|                  |                | * |          |           |        |
|                  |                | * |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| Export Status    | YES            |   | YES      | YES       | YES    |
| All U.S. States  |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| Required         | YES            |   | NO       | YES       | YES    |
| Language On      |                |   |          |           |        |
| Cleaning And     |                |   |          |           |        |
| Disinfection Of  |                |   |          |           |        |
| Trucks           |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| Required Sealing | NO             |   | NO       | NO        | YES    |
| Of Trucks At     |                |   |          |           |        |
| Point Of Origin  |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| Required         | YES            |   | NO       |           |        |
| Language that    |                |   |          |           |        |
| Product is Fit   |                |   |          |           |        |
| for Human        |                |   |          |           |        |
| Consumption and  |                |   |          |           |        |
| Freely Marketed  |                |   |          |           |        |
| in the U.S.      |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| Agar Gel or      |                |   | NO       |           |        |
| ELISA Test       |                |   |          |           |        |
| Required         |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| Certification    | YES            |   | YES      | YES       | YES    |
| Requirements On  |                |   |          |           |        |
| END              |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+
| The boxes of     |                |   |          |           |        |
| table eggs as    |                |   |          |           |        |
| well as SPF eggs |                |   |          |           |        |
| must show the    |                |   |          |           |        |
| stamp of the     |                |   |          |           |        |
| competent        |                |   |          |           |        |
| authority.       |                |   |          |           |        |
|                  |                |   |          |           |        |
| SPF, hatching    |                |   |          |           |        |
| eggs and live    |                |   |          |           |        |
| birds should be  |                |   |          |           |        |
| freely marketed  |                |   |          |           |        |
| in the U.S.      |                |   |          |           |        |
|                  |                |   |          |           |        |
| When a plant and |                |   |          |           |        |
| farm/flock is    |                |   |          |           |        |
| registered under |                |   |          |           |        |
| the National     |                |   |          |           |        |
| Poultry          |                |   |          |           |        |
| Improvement      |                |   |          |           |        |
| Plant (NPIP),    |                |   |          |           |        |
| the Agar Gel or  |                |   |          |           |        |
| ELISA test will  |                |   |          |           |        |
| not be required; |                |   |          |           |        |
| otherwise the    |                |   |          |           |        |
| tests will be    |                |   |          |           |        |
| required by      |                |   |          |           |        |
| SAGARPA.         |                |   |          |           |        |
|                  |                |   |          |           |        |
| END statement    |                |   |          |           |        |
| for meat, meat   |                |   |          |           |        |
| products and by  |                |   |          |           |        |
| products. -      |                |   |          |           |        |
| "That the        |                |   |          |           |        |
| product comes    |                |   |          |           |        |
| from flocks that |                |   |          |           |        |
| have a           |                |   |          |           |        |
| monitoring       |                |   |          |           |        |
| program of 70    |                |   |          |           |        |
| birds that began |                |   |          |           |        |
| after 12 days of |                |   |          |           |        |
| age, using viral |                |   |          |           |        |
| isolation tests  |                |   |          |           |        |
| and              |                |   |          |           |        |
| identification   |                |   |          |           |        |
| of velogenic     |                |   |          |           |        |
| strains through  |                |   |          |           |        |
| a test that      |                |   |          |           |        |
| indicates        |                |   |          |           |        |
| intracerebral    |                |   |          |           |        |
| pathogenicity in |                |   |          |           |        |
| chicks of one    |                |   |          |           |        |
| day of age and   |                |   |          |           |        |
| that is carried  |                |   |          |           |        |
| out for each lot |                |   |          |           |        |
| that is          |                |   |          |           |        |
| delivered for    |                |   |          |           |        |
| slaughter,       |                |   |          |           |        |
| obtaining        |                |   |          |           |        |
| negative results |                |   |          |           |        |
| for Velogenic    |                |   |          |           |        |
| Newcastle        |                |   |          |           |        |
| disease, or that |                |   |          |           |        |
| comes from a     |                |   |          |           |        |
| country free of  |                |   |          |           |        |
| Velogenic        |                |   |          |           |        |
| Newcastle        |                |   |          |           |        |
| Disease. "       |                |   |          |           |        |
|                  |                |   |          |           |        |
| For additional   |                |   |          |           |        |
| information      |                |   |          |           |        |
| regarding        |                |   |          |           |        |
| poultry meat and |                |   |          |           |        |
| egg products     |                |   |          |           |        |
| exports to       |                |   |          |           |        |
| Mexico see the   |                |   |          |           |        |
| web page         |                |   |          |           |        |
| USDA/FSIS/Export |                |   |          |           |        |
| Library at       |                |   |          |           |        |
| [http            |                |   |          |           |        |
| ://www.fsis.usda |                |   |          |           |        |
| .gov](http://www |                |   |          |           |        |
| .fsis.usda.gov/) |                |   |          |           |        |
| (Export          |                |   |          |           |        |
| Requirements for |                |   |          |           |        |
| meat and poultry |                |   |          |           |        |
| products).       |                |   |          |           |        |
+------------------+----------------+---+----------+-----------+--------+

## POLICY

The SAGARPA import requirements are outlined in the Zoosanitary Import
Requirement Sheets (HRZ) by type of products. Currently raw poultry
imports are to comply with one of two options regarding AI testing: a) a
negative result on 59 samples to AGID or ELISA tests or; b) that the
flock/farm of origin is recorded in the U.S. National Poultry
Improvement Plan (NPIP). SAGARPA and USDA agreed that the NPIP would be
deemed as an equivalent program to the regulation NOM-044-ZOO-1995
"National Campaign against Avian Influenza" that was modified and
implemented on August 14, 2006.

## MARKETING

Generic advertising campaigns have been successful at increasing
domestic consumption of poultry products in Mexico. Currently, most
poultry meat in Mexico is sold as whole birds. The local industry
supplies and delivers whole birds through wholesale public and wet
markets overnight to the major cities. Sales of chilled or refrigerated
poultry meat through supermarkets account for less than 10 percent of
overall consumption. However, Mexico's supermarket segment is growing
rapidly and now accounts for about 40 percent of overall food sales in
Mexico. As the industry expands, the share of poultry sold via
supermarkets is expected to grow as consumers become more accepting of
poultry cuts and other poultry products. USAPEEC's Mexico office has
actively promoted poultry products in various large retail and food
service exhibitions within USDA/Agricultural Trade Show Pavilions like
ANTAD and ABASTUR. For cooked and processed poultry products, USAPEEC
has also participated in EXPHOTEL and EXPO-AGROALIMENTARIA. USAPEEC will
continue to support marketing strategies within the NEPP (NAFTA Egg and
Poultry Partnership), which promotes the exchange of information and
technical expertise between both the U.S. and Mexican poultry
industries. Lat year Mexico's poultry industry, as well as USAPEEC's
Mexico office, distributed information and launched a series of
advertisements to inform Mexican consumers about avian influenza.

# TURKEY MEAT

## PRODUCTION

Turkey meat production for MY 2008 (Jan-Dec) is forecast to increase to
15,240 MT, up from the 14,800 MT estimate in MY 2007, as demand for
turkey meat continues to strengthen. MY 2006 production was also revised
upward to 14,400 MT. However, domestic producers continue to face
competition from U.S. and Chilean imports. Domestic turkey meat
production represents less than 10 percent of total poultry meat
consumption, and domestic firms sell about 75 percent of their
production as uncooked whole turkeys for the Christmas season. The
balance is sold as domestic turkey cuts and further-processed products
such as turkey patties, nuggets, cold cuts and oven-cooked turkey legs.
Two companies account for almost 90 percent of total domestic
production. Most turkey is produced in the states of Sonora, Chihuahua
and Yucatan, which account for 40, 35 and 20 percent, respectively, of
total Mexican turkey production.

Genetics are usually sourced from the United States. The main turkey
breeding flocks in Mexico are Buta with 45 percent, Orlop with 30
percent, and Nicolas with 25 percent of domestic production. Producers
import almost all of the progenitor stock and are also importing fertile
eggs for light and heavy breeders.

## CONSUMPTION

Turkey meat consumption for MY 2008 is forecast to increase to 207,000
MT in response to growing demand for turkey products from the processing
industry. Turkey meat consumption estimates for MY 2007 were revised
slightly downward from previous estimates due to a slower demand, but
still reflect an increase of almost five percent from MY 2006
consumption data. Data for MY 2006 consumption was revised upward based
on industry information. Consumption of turkey meat in the form of cold
cuts continues to increase primarily through sales in supermarkets and
delicatessen-type restaurants. Cooked hams made from blends of domestic
pork and U.S. turkey thigh meats are substantially cheaper than all-pork
cooked hams. Most of the whole turkey demand occurs during the Christmas
season, where the average bird weight is 15 pounds. Industry sources
report that consumption patterns for turkey and turkey products are
changing as consumers become increasingly health conscious. The Poultry
Producers Association estimates that average per capita consumption for
turkey has increased from 4.0 pounds in 2005 to 4.2 pounds in 2007,
including whole turkey, turkey cuts and other turkey products.

## TRADE

MY 2008 turkey meat imports are forecast to increase to 207,000 MT as
demand for turkey cuts for further processing is expected to continue.
Turkey meat import estimates for MY 2007 were revised downwards from
previous estimates due to a slower rate of imports, but still reflecting
an increase compared to MY 2006 imports. Import estimates for MY 2006
were revised upward based on trade data. The processing industry imports
most of the turkey cuts and mechanically separated turkey (MST) as
inputs for the domestic cold-cuts industry since domestic production
cannot supply domestic demand. Domestic meat processors use turkey thigh
meat to produce cooked hams made up of blends of domestic pork and U.S.
turkey thighs. The United States is the main supplier of turkey meat,
however, Chile's presence in the poultry market is expected to continue
as importers seek to diversify suppliers. Chilean products are
competitively priced and suitable for processors who are willing to work
with frozen product. Chilean poultry imports are duty free under the
Mexico-Chile Free Trade Agreement. The leading turkey processors have
been successful in gaining shelf space for fresh turkey cuts, and high
value products, by targeting medium- and high-income segments of the
population.

## MARKETING

Around 75 percent of Mexican production is marketed as whole turkeys
during the Christmas season, and approximately 25 percent is sold as
cut-up and further processed turkey meat products. USAPEEC, along with
local turkey producers, have sponsored generic marketing campaigns to
increase overall consumption of selected turkey products in Mexico.
These activities are likely to continue, as turkey meat consumption has
great potential for growth. USAPEEC Mexico has also participated in
large retail and foodservice shows to promote further-processed poultry
products (see chicken meat marketing section)