Required Report - public distribution

**Date:** 7/14/2005

**GAIN Report Number:** MX5059

MX0000

**Mexico**

**Poultry and Products**

**Poultry Annual Report**

**2005**

**Approved by:**

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

U.S. Embassy Mexico City

**Prepared by:**

Dulce Flores

**Report Highlights:**

Mexico's poultry industry is forecast to continue growing during MY 2006
(Jan-Dec), as the trend toward vertical integration in the chicken
industry continues. Imports of U.S. poultry and poultry products are
forecast to increase as well. However, Chile has emerged as a
significant supplier of frozen poultry for further processing in recent
years as Mexican importers have sought to diversify their suppliers in
response to recent disease detections in the United States. Sanitary
import restrictions due to Avian Influenza detections in the United
States continue for nine U.S. states.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Mexico \[MX1\]

\[MX\]

Table of Contents

[SECTION I. Situation and Outlook.
3](#section-i.-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 LEG QUARTER WHOLESALE PRICES
6](#chicken-leg-quarter-wholesale-prices)

[BEEF CARCASS WHOLESALE PRICES 7](#beef-carcass-wholesale-prices)

[MEXICAN IMPORTS FOR SELECTED POULTRY PRODUCTS Jan-Dec 2004
8](#mexican-imports-for-selected-poultry-products-jan-dec-2004)

[MONTHLY EXCANGE RATE 10](#monthly-exchange-rate)

[POULTRY NUMBERS 11](#poultry-numbers)

[Per Capita Consumption 11](#per-capita-consumption)

[SECTION III. Narrative on Supply and Demand, Policy & Marketing
12](#section-iii.-narrative-on-supply-and-demand-policy-marketing)

[CHICKEN MEAT 12](#chicken-meat)

[PRODUCTION 12](#production)

[CONSUMPTION 13](#consumption)

[TRADE 13](#trade)

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

[POLICY 17](#policy)

[MARKETING 17](#marketing)

[TURKEY MEAT 18](#turkey-meat)

[PRODUCTION 18](#production-1)

[CONSUMPTION 18](#consumption-1)

[TRADE 18](#trade-1)

[MARKETING 19](#marketing-1)

# SECTION I. Situation and Outlook.

POULTRY SITUATION AND OUTLOOK

Chicken meat production is again expected to increase in 2006. Growth in
chicken production continues to outstrip both beef and pork, as Mexico's
rapidly growing poultry industry becomes increasingly concentrated,
integrated, and modern. The industry appears to have benefited from the
safeguard agreement that was signed in July of 2003 and establishes a
tariff-rate quota for imports of U.S. chicken leg quarters (CLQ\\s).
Producers are now taking steps to improve quality and sanitary practices
while seeking export opportunities. Mexico still does not have an
equivalence 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. However, officials are working towards
this objective.

Imports of both chicken and turkey meat are forecast to increase in 2006
in response to strong demand from Mexican food processors for
mechanically separated meat and parts for further processing. CLQ
imports are almost filling the annual zero-duty tariff-rate quota volume
established under the safeguard agreement, despite being limited to the
border area.

Sanitary restrictions remain in place for certain U.S. states following
the detection of Low Pathogenic Avian Influenza during 2004. At this
stage, it is not clear when these restrictions will be lifted.

# SECTION II. Statistical Tables

## POULTRY MEAT, BROILER PS&D

## 

  ------------------- ---------- ---------- ---------- ---------- ---------- ----------
  Mexico                                                                     

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

                      2004                  2005                  2006       
                      Revised               Estimate              Forecast   

                      USDA       Post       USDA       Post       USDA       Post
                      Official   Estimate   Official   Estimate   Official   Estimate
                      \[Old\]    \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  Market Year Begin   01/2004               01/2005               01/2006    

  Inventory           0          0          0          0          0          0
  (Reference)                                                                

  Slaughter           0          0          0          0          0          0
  (Reference)                                                                

  Beginning Stocks    0          0          0          0          0          0

  Production          2400       2389       2520       2510       0          2635

  Whole, Imports      0          0          0          0          0          0

  Parts, Imports      326        326        360        360        0          378

  Intra EC Imports    0          0          0          0          0          0

  Other Imports       0          0          0          0          0          0

  TOTAL Imports       326        326        360        360        0          378

  TOTAL SUPPLY        2726       2715       2880       2870       0          3013

  Whole, Exports      0          0          0          0          0          0

  Parts, Exports      2          1          1          1          0          1

  Intra EC Exports    0          0          0          0          0          0

  Other Exports       0          0          0          0          0          0

  TOTAL Exports       2          1          1          1          0          1

  Human Consumption   2724       2714       2879       2869       0          3012

  Other Use, Losses   0          0          0          0          0          0

  Total Dom.          2724       2714       2879       2869       0          3012
  Consumption                                                                

  TOTAL Use           2726       2715       2880       2870       0          3013

  Ending Stocks       0          0          0          0          0          0

  TOTAL DISTRIBUTION  2726       2715       2880       2870       0          3013

  Calendar Yr. Imp.   0          0          0          0          0          0
  from U.S.                                                                  
  ------------------- ---------- ---------- ---------- ---------- ---------- ----------

## 

## 

##  

## POULTRY MEAT, TURKEY PS&D

## 

+---------------+--------+--------+--------+--------+--------+--------+
|               | ####   |        |        |        |        |        |
|               | #####  |        |        |        |        |        |
|               | Mexico |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Poultry,      |        |        |        |        | (1000  |        |
| Meat, Turkey  |        |        |        |        | M      |        |
|               |        |        |        |        | T)(MIL |        |
|               |        |        |        |        | HEAD)  |        |
+---------------+--------+--------+--------+--------+--------+--------+
|               | 2004   |        | 2005   |        | 2006   |        |
|               | R      |        | Es     |        | Fo     |        |
|               | evised |        | timate |        | recast |        |
+---------------+--------+--------+--------+--------+--------+--------+
|               | USDA   | Post   | USDA   | Post   | USDA   | Post   |
|               | Of     | Es     | Of     | Es     | Of     | Es     |
|               | ficial | timate | ficial | timate | ficial | timate |
|               | \      | \      | \      | \      | \      | \      |
|               | [Old\] | [New\] | [Old\] | [New\] | [Old\] | [New\] |
+---------------+--------+--------+--------+--------+--------+--------+
| Market Year   | 0      |        | 0      |        | 0      |        |
| Begin         | 1/2004 |        | 1/2005 |        | 1/2006 |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Inventory     | 0      | 0      | 0      | 0      | 0      | 0      |
| (Reference)   |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Slaughter     | 0      | 0      | 0      | 0      | 0      | 0      |
| (Reference)   |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Beginning     | 0      | 0      | 0      | 0      | 0      | 0      |
| Stocks        |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Production    | 14     | 13     | 14     | 13     | 0      | 13     |
+---------------+--------+--------+--------+--------+--------+--------+
| Whole,        | 0      | 0      | 0      | 0      | 0      | 0      |
| Imports       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Parts,        | 144    | 144    | 170    | 170    | 0      | 179    |
| Imports       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Intra EC      | 0      | 0      | 0      | 0      | 0      | 0      |
| Imports       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Other Imports | 0      | 0      | 0      | 0      | 0      | 0      |
+---------------+--------+--------+--------+--------+--------+--------+
| TOTAL Imports | 144    | 144    | 170    | 170    | 0      | 179    |
+---------------+--------+--------+--------+--------+--------+--------+
| TOTAL SUPPLY  | 158    | 157    | 184    | 183    | 0      | 192    |
+---------------+--------+--------+--------+--------+--------+--------+
| Whole,        | 0      | 0      | 1      | 1      | 0      | 1      |
| Exports       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Parts,        | 1      | 1      | 0      | 0      | 0      | 0      |
| Exports       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Intra EC      | 0      | 0      | 0      | 0      | 0      | 0      |
| Exports       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Other Exports | 0      | 0      | 0      | 0      | 0      | 0      |
+---------------+--------+--------+--------+--------+--------+--------+
| TOTAL Exports | 1      | 1      | 1      | 1      | 0      | 1      |
+---------------+--------+--------+--------+--------+--------+--------+
| Human         | 157    | 156    | 183    | 182    | 0      | 191    |
| Consumption   |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Other Use,    | 0      | 0      | 0      | 0      | 0      | 0      |
| Losses        |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Total Dom.    | 157    | 156    | 183    | 182    | 0      | 191    |
| Consumption   |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| TOTAL Use     | 158    | 157    | 184    | 183    | 0      | 192    |
+---------------+--------+--------+--------+--------+--------+--------+
| Ending Stocks | 0      | 0      | 0      | 0      | 0      | 0      |
+---------------+--------+--------+--------+--------+--------+--------+
| TOTAL         | 158    | 157    | 184    | 183    | 0      | 192    |
| DISTRIBUTION  |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| Calendar Yr.  | 0      | 0      | 0      | 0      | 0      | 0      |
| Imp. from     |        |        |        |        |        |        |
| U.S.          |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+

##  BROILERS WET MARKET PRICES

+---------------+------------+------------+------------+--------------+
| **            |            |            |            |              |
| [Broilers^\*^ |            |            |            |              |
| Wet Market    |            |            |            |              |
| Prices,       |            |            |            |              |
| Mexico City   |            |            |            |              |
| Pes           |            |            |            |              |
| os/kilogram]{ |            |            |            |              |
| .smallcaps}** |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| ##            | 2003       | 2004       | 2005       | \% Change    |
| ###### [Month |            |            |            | 04/05        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [January      | 20.70      | 18.08      | 21.63      | 19.63        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [February     | 21.00      | 18.17      | 22.38      | 23.17        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [March        | 21.20      | 19.63      | 22.50      | 14.62        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [April        | 21.00      | 18.88      | 22.83      | 20.92        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [May          | 21.67      | 16.83      | 23.00      | 36.66        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [June         | 22.17      | 19.35      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [July         | 22.36      | 20.38      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [August       | 21.60      | 20.25      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [September    | 22.50      | 20.21      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [October      | 16.50      | 18.10      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [November     | 17.25      | 18.50      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [December     | 18.08      | 19.40      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [Annual       | 20.50      | 18.98      | N/A        | N/A          |
| Avg.          |            |            |            |              |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [^\*^         |            |            |            |              |
| ]{.smallcaps} |            |            |            |              |
| Whole chicken |            |            |            |              |
| including     |            |            |            |              |
| offal         |            |            |            |              |
+---------------+------------+------------+------------+--------------+

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

## CHICKEN LEG QUARTER WHOLESALE PRICES

+---------------+------------+------------+------------+--------------+
| ####          |            |            |            |              |
| ## Chicken Le |            |            |            |              |
| g Quarter Who |            |            |            |              |
| lesale Prices |            |            |            |              |
| , Mexico City |            |            |            |              |
|               |            |            |            |              |
| ###### P      |            |            |            |              |
| esos/kilogram |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [Month        | 2003       | 2004       | 2005       | \% Change    |
| ]{.smallcaps} |            |            |            | 04/05        |
+---------------+------------+------------+------------+--------------+
| [January      | 18.50      | 18.34      | 21.96      | 19.73        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [February     | 20.12      | 18.83      | 22.55      | 19.75        |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [March        | 19.98      | 20.10      | 20.95      | 4.22         |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [April        | 19.61      | 18.62      | 18.08      | (2.90)       |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [May          | 19.54      | 18.50      | 20.34      | 9.94         |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [June         | 22.30      | 19.20      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [July         | 21.00      | 21.84      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [August       | 18.95      | 22.40      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [September    | 16.54      | 19.64      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [October      | 16.63      | 19.55      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [November     | 16.07      | 20.32      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [December     | 17.32      | 21.16      | N/A        | N/A          |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+
| [**Annual     | 18.88      | 19.87      | N/A        | N/A          |
| Avg**.        |            |            |            |              |
| ]{.smallcaps} |            |            |            |              |
+---------------+------------+------------+------------+--------------+

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

## BEEF CARCASS WHOLESALE PRICES

+---------------+------------------+-----------------+-----------------+
| **[Beef       |                  |                 |                 |
| Carcass       |                  |                 |                 |
| Wholesale     |                  |                 |                 |
| Prices,       |                  |                 |                 |
| Mexico        |                  |                 |                 |
| City]{        |                  |                 |                 |
| .smallcaps}** |                  |                 |                 |
|               |                  |                 |                 |
| **[Pes        |                  |                 |                 |
| os/kilogram]{ |                  |                 |                 |
| .smallcaps}** |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [Month        | 2004             | 2005            | Change %        |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [January      | 26.91            | 31.58           | 17.35           |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [February     | 27.33            | 32.11           | 17.48           |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [March        | 27.11            | 32.04           | 18.18           |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [April        | 27.10            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [May          | 27.12            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [June         | 27.16            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [July         | 27.36            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [August       | 29.00            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [September    | 30.91            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [October      | 31.60            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [November     | 31.79            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [December     | 32.08            | N/A             | N/A             |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+
| [Annual       | 28.78            | N/A             | N/A             |
| Avg.          |                  |                 |                 |
| ]{.smallcaps} |                  |                 |                 |
+---------------+------------------+-----------------+-----------------+

[Source: National Market Information Service (SNIM)]{.smallcaps}

## MEXICAN IMPORTS FOR SELECTED POULTRY PRODUCTS Jan-Dec 2004

## 

  ------------------------------------------------------------------------
  **H.S.T.**   **Description & Country of Origin**              **Volume
                                                                MT**
  ------------ ------------------------------------------------ ----------
  0105.11.01   Day old chicks, which do not need feeding during 
               transport                                        

               U.S.                                             1,464

               SPAIN                                            99

               OTHER                                            143

               SUBTOTAL (Thousand head)                         1,706

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

               U.S.                                             452

               DENMARK                                          13

               OTHER                                            31

               SUBTOTAL (Thousand head)                         496

  0105.11.99   Other                                            

               U.S. and subtotal                                207

  0105.19.99   Other (Chickens)                                 

               U.S.                                             4

               FRANCE                                           18

               OTHER                                            1

               SUBTOTAL (Thousand head)                         23

  0207.11.01   Other fresh or chilled whole poultry             

               U.S. and subtotal                                0

  0207.12.01   Other frozen whole poultry                       

               U.S.                                             34

               OTHER                                            1

               SUBTOTAL                                         35

  0207.25.01   Whole frozen turkey                              

               U.S.                                             2,050

               CHILE                                            1,120

               OTHER                                            0

               SUBTOTAL                                         3,170

  0207.33.01   Whole ducks, geese & guineas frozen              

               U.S.                                             550

               OTHER                                            247

               SUBTOTAL                                         797

  0207.26.01   Mechanically deboned turkey meat                 

               U.S. and subtotal                                3,442

  0207.26.99   Fresh & chilled turkey parts                     

               U.S.                                             73,775

               Other                                            0

               SUBTOTAL                                         73,775

  0207.13.01   Mechanically deboned chicken meat fresh or       
               Chilled                                          

               U.S. and subtotal                                89,572

  0207.14.01   Mechanically deboned chicken meat frozen         

               U.S.                                             41,160

               CHILE                                            32,160

               SUBTOTAL                                         73,320

  0207.13.99   Fresh & chilled chicken parts                    

               U.S. and subtotal                                608

  0207.14.99   Frozen poultry parts                             

               U.S.                                             1,334

               CHILE                                            4,154

               SUBTOTAL                                         5,488

  0207.13.03   Chicken Leg Quarter, Fresh/chilled               

               U.S.                                             32,157

               OTHER                                            0

               SUBTOTAL                                         32,157

  0207.14.04   Chicken Leg Quarter, Frozen                      

               U.S.                                             91,685

               OTHER                                            721

               SUBTOTAL                                         92,406

  0207.27.01   Mechanically deboned turkey meat, frozen         

               U.S.                                             8,624

               CHILE                                            4,461

               SUBTOTAL                                         13,085

  0207.27.99   Frozen turkey parts                              

               U.S.                                             39,422

               OTHER                                            168

               SUBTOTAL                                         39,590

  0207.36.99   Duck, geese or guineas cuts, frozen              

               U.S.                                             20

               CANADA                                           11

               SUBTOTAL                                         31

  0207.14.02   Poultry livers                                   
  0207.36.01                                                    

               U.S. and subtotal                                0

  0407.00.01   Table eggs, fresh, including hatching eggs       

               U.S.                                             99

               OTHER                                            0

               SUBTOTAL                                         99

  1601.00.01   Sausages of broiler or turkey                    

               U.S.                                             14,848

               OTHER                                            24

               SUBTOTAL                                         14,872

  1602.31.01   Processed meat (Turkey)                          

               U.S.                                             2,874

               OTHER                                            141

               SUBTOTAL                                         3,015

  1602.32.01   Prepared or preserved chicken meat or offal      

               U.S.                                             4,702

               OTHER                                            235

               SUBTOTAL                                         4,937

  1602.39.99   Other processed poultry meat                     

               U.S.                                             9

               FRANCE                                           5

               OTHER                                            3

               SUBTOTAL                                         17

  0207.13.02   Chicken carcasses                                

               U.S. & subtotal                                  10,618

  0207.14.03   Chicken carcasses                                

               U.S. & subtotal                                  6,694

  0207.26.02   Turkey carcasses                                 

               U.S. & subtotal                                  0

  0207.27.03   Turkey carcasses                                 

               U.S. & subtotal                                  0
  ------------------------------------------------------------------------

## 

## 

## MONTHLY EXCHANGE RATE

![](media/image2.wmf)

## 

## POULTRY NUMBERS

  --------------------------------------------- -------------------------
  **[MEXICO: POULTRY NUMBERS,                   
  2004]{.smallcaps}**                           

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

  Laying Hens in production\*                   124,196,390

  Pullets in grow out                           37,258,917

  Light Breeding Hens in production             909,034

  Light Breeding Hens in grow out               382,773

  Light Progenitor Hens in production           0

  Light Progenitor Hens in grow out             0

  Heavy Breeder Hens in production              9,157,000

  Heavy Breeder Hens in grow out                5,989,000

  Heavy Progenitor Hens in production           161,368

  Heavy Progenitor Hens in grow out             100,432

  Broilers (Per cycle)                          240,549,554

  Turkeys (Per cycle)                           810,459

  Total Poultry Flock                           419,514,927
  --------------------------------------------- -------------------------

[\*There are an estimated 30 million laying hens in the second
cycle]{.smallcaps}

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

# 

# 

## Per Capita Consumption

  ------------------------------ ------------ ------------ --------------
  **PER CAPITA CONSUMPTION**                               

  Products / pounds-             2003         2004         2005

  EGGS                           44.93        47.35        47.81

  CHICKEN MEAT                   49.77        51.54        53.74

  TURKEY MEAT                    3.17         3.21         3.24
  ------------------------------ ------------ ------------ --------------

> Source: UNA (National Poultry Association)

Forecast

Includes whole turkey, turkey parts and processed products.

# SECTION III. Narrative on Supply and Demand, Policy & Marketing

# CHICKEN MEAT

## 

## PRODUCTION

Mexican chicken meat production for MY 2006 (Jan-Dec) is forecast to
increase, just as it has in each of the preceding 20 years. Chicken
producers continue to enjoy favorable demand for their products.
Effective marketing campaigns, strong financial positions among chicken
processors, and continued improvement in product quality are expected to
contribute to increased production. Producers also appear to have
benefited from the trade protection afforded by the safeguard agreement
for CLQs, which has been in place since 2003 (see Trade Section).
Compared to pork and beef, chicken is still generally the least
expensive meat in Mexico.

The estimate of chicken meat production for MY 2005 was reduced slightly
as the detection of Low Pathogenic Avian Influenza in a major growing
region in March and unusually hot temperatures in May and June affected
production. Production is expected to recover during the second half of
the year. Major producers have also opted to direct capital resources to
improving technology along with sanitary and quality systems in an
effort to better compete against imports and enhance export prospects,
rather than using resources to maximize production. Stable and lower
grain and oilseed prices, both domestic and imported, are expected to
keep 2005 production costs in check. Feed costs are 55 to 60 percent of
the total cost of production. Producers complain that higher prices for
electricity, packing materials and transportation costs continue to add
to production costs. The estimate for MY 2004 production was revised
slightly downward based on final industry data, which is used as the
basis for final production estimates.

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 in oilseeds and
protein meals, and 17 percent in other products such as safflower,
orthophosphate, calcium, and methionine. Poultry producers tend to
prefer yellow corn to sorghum because of its better nutritional value
and the color it gives to the birds' skins. According to the Poultry
Producers Association (UNA), feed consumption for MY 2004 was estimated
at 12.4 MMT, (7.8 MMT of feed grains, 2.6 MMT of oilseeds and protein
meals, and 2.0 MMT of other raw materials).

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 1.92 kg. The poultry
industry reports that the average feed conversion ratio is 2.2 kg of
feed to 1 kg of poultry meat.

Industry consolidation and investment in infrastructure are expected to
continue in the medium-term, which, in turn, is expected to spur the
expansion of large vertically-integrated companies. In 2004, three
leading companies accounted for 52 percent of total domestic production
of chicken meat. Over the next three to four years, the industry is
expected to consolidate further and these three companies are expected
to account for an even larger share of production. Medium-size companies
will likely merge into cooperatives and associations, with smaller
players becoming contract producers.

+-------------+-------------+-------------+-------------+-------------+
| ###### CH   |             |             |             |             |
| ICKEN FARM  |             |             |             |             |
| COMPOSITION |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             | COMPANIES   |             | \%          |             |
|             |             |             | PA          |             |
|             |             |             | RTICIPATION |             |
|             |             |             | IN          |             |
|             |             |             | PRODUCTION  |             |
+-------------+-------------+-------------+-------------+-------------+
|             | 1996        | 2004        | 1996        | 2004        |
+-------------+-------------+-------------+-------------+-------------+
| LARGE       | 2           | 3           | 33          | 52          |
+-------------+-------------+-------------+-------------+-------------+
| MEDIUM      | 27          | 32          | 40          | 36          |
+-------------+-------------+-------------+-------------+-------------+
| SMALL       | 181         | 165         | 27          | 12          |
+-------------+-------------+-------------+-------------+-------------+

Source: UNA

U.S. firms are significant suppliers of genetics to the Mexican poultry
industry and an estimated 75 percent of Mexican broilers come from lines
produced by two U.S. companies. For layers, about 90 percent of
production is white eggs and U.S. firms are also the dominant suppliers
of genetic lines.

## CONSUMPTION

Chicken meat consumption for MY 2006 is forecast to increase almost 5
percent due to population growth, the affordability of chicken relative
to other meats, effective marketing, increased usage in processed food
products, and improved product quality. Lower tariffs for chicken CLQs
under the terms of the safeguard agreement (see trade section) could
result in significant shipments of imported CLQs beyond the border area
for the first time since at least the signing of the agreement in 2003.
Increased consumer concerns about cholesterol and other health issues
are resulting in greater marketing opportunities for chicken meat.

Consumers continue to prefer fresh whole chickens to chicken parts.
Purchases of chicken parts 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) account for 23 percent of chicken
meat consumption, while chickens sold in wet markets and stalls (whole
chicken including offal) account for approximately 26 percent of the
total. Live birds represent 30 percent of total chicken meat
consumption. Only 5 percent of total chicken meat consumption is
purchased in supermarkets (whole chicken without offal), and chicken
cuts account for less than 11 percent of total consumption. Value-added
products account for about 5 percent of total consumption.

The MY 2005 domestic consumption estimate was revised downward from
previous estimates, in part because of an expected reduction in
production and strong poultry prices during the first part of the year.
Higher prices are common during the winter months as production declines
due to cooler winter temperatures, but the detection of avian influenza
and hot May and June temperatures have reduced supplies and pushed
prices higher in the face of strong demand. Industry sources expect
prices to moderate over the second half of the year. It is expected that
CLQ consumption will continue to increase at the border due to
affordable prices. For the month of May, CLQ prices were about \$21
pesos/kg (US\$1.89/kg) in the Mexico City market, while imported CLQ
marketed at the border only were, on average, \$11.50 pesos/kg
(US\$1.03kg). Due to trade restrictions that closed the border city of
Reynosa to frozen CLQs in December 2004 (see Trade Section), frozen CLQs
have to cross through other border areas like Brownsville, which results
in an additional transportation cost for Reynosa of about US\$250 per
truck. The consumption estimate for MY 2004 was revised based on final
industry information.

[]{.mark}

## TRADE

Chicken and turkey meat are the primary poultry products imported by
Mexico. Imports of cuts, mainly leg quarters, and mechanically separated
chicken (MSC) for MY 2006 are forecast to increase 5 percent over MY
2005 imports, due to rising demand from the processing industry. The
processing industry imports most of the MSC and chicken cuts as inputs
for the domestic sausage and cold-cuts industries. Large meat processors
prefer fresh, refrigerated product and medium-small sized processors
tend to use frozen product.

U.S. exporters have had to adjust to shifting trade requirements and
restrictions stemming from Mexico's reaction to detections of avian
influenza in the United States beginning in 2002. While export suppliers
in individual states have clearly been hurt by these policies, overall
exports have increased each year except for 2004 when Highly Pathogenic
Avian Influenza was detected in the United States and led to a
short-term closure of the Mexican market. However, Mexican poultry
importers have recently expressed an interest in diversifying their
suppliers and significant quantities of frozen chicken meat have been
imported from Chile recently. Additionally, Mexican meat processors have
asked the Government of Mexico to consider ways of reducing tariffs and
sanitary restrictions for other potential exporting countries in the
event of another major supply disruption in the United States.

CLQs imported under the poultry safeguard (see report MX 3099) are
expected to reach the 102,010 MT tariff-rate-quota (TRQ) limit for MY
2005. According to official data the CLQ TRQ for MY 2004 was 85 percent
filled. 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 industry trade data, imported CLQs
under H.T.S. 0207.13.03 & 0207.14.04 were 37,125 MT, as of April 2005,
above the 30,164 MT imported as of April 2004. The tariff phase-out
schedule and the annual one percent increase in TRQ volume for CLQs are
shown in the following table.

  ---------- ----------------- ------------ ------------------------------
  **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
  ---------- ----------------- ------------ ------------------------------

Effective January 1, 2008, Mexico will provide full duty-free access and
eliminate the import licensing requirements for U.S. CLQs.

The poultry industry in Mexico has been concerned about CLQ "leakage"
following the signing of the July 2003 safeguard agreement. This leakage
has reportedly occurred in two forms, via companies who obtained court
injunctions *(amparos)* exempting them from the terms of the safeguard
agreement and through under invoicing of CLQs subject to the high-tier
tariff under the terms of the safeguard agreement. In response, during
December 2004, the government halted CLQ imports via the border city of
McAllen-Hidalgo/Reynosa to frozen CLQs in an effort to address issues
relating to the port's administration and concerns about the use of
court injunctions (*amparos*), see report MX 5010. The Government of
Mexico is considering a plan to re-open this crossing point, but thus
far the port remains closed to frozen CLQs. Imports of poultry products
other than frozen CLQs are allowed through Reynosa, however, most
importers in the area prefer to handle frozen CLQs. To address concerns
about under invoicing, the government announced on February 25, 2005, a
reference price for CLQs of US\$0.667/kg (US\$0.30 per lb), for imports
that do not have a duty-free import certificate (cupo) to import under
the current tariff-rate quota (TRQ) for CLQs (see report MX5031.) So
far, prices of U.S. CLQs have been above this reference price.

In early March 2005, Mexico detected Low Pathogenic Avian Influenza
(LPAI) in Northern Mexico in an area called La Laguna within the limits
of the states of Durango and Coahuila. Mexican official reported to
APHIS that the outbreak was H5N2, which the Government of Mexico
believes is the lone LPAI strain that exists in Mexico. Affected farms
were placed under quarantine and inter-state movement of product is not
currently allowed under official regulations. No more outbreaks have
been reported recently. The Japanese Government was also advised of this
situation and banned effected states from exporting poultry meat to
Japan.

Mexico's Secretariat of Agriculture (SAGARPA) deems any LPAI strain
other than H5N2 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 and 2005.
Currently, import restrictions continue for the states of California,
Connecticut, Delaware, Maryland, New Jersey, North Carolina, 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 MX5031). USDA technical experts
continue to work with SAGARPA in an effort to have these restrictions
lifted.

The following table summarizes some of the regulations that are
currently being implemented by the Mexican government for U.S. live
poultry and poultry meat exports.

## 

##  REGULATIONS FOR POULTRY AND POULTRY PRODUCTS EXPORTS

+------------+-----------+-----------+----------+-----------+--------+
| **ITEM**   | **RAW     | **RAW     | **FULLY  | **TABLE   | **LIVE |
|            | POULTRY   | POULTRY   | COOKED   | AND       | B      |
|            | DIRECT    | FURTHER   | PR       | HATCHING  | IRDS** |
|            | CO        | P         | ODUCTS** | EGGS**    |        |
|            | NSUMPTION | ROCESSING |          |           |        |
|            | 1/**      | 5/**      |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
|            |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
| AI States  | NO        | YES       | YES      | NO        | NO     |
| Export     |           | **6/**    |          |           |        |
| Status     |           |           |          |           |        |
| **2/**     |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
| Required   | YES       | YES       | NO       | YES       | YES    |
| Language   |           |           |          |           |        |
| On         |           |           |          |           |        |
| Cleaning   |           |           |          |           |        |
| And        |           |           |          |           |        |
| Di         |           |           |          |           |        |
| sinfection |           |           |          |           |        |
| Of Trucks  |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
| Required   | YES       | YES       | NO       | YES       | YES    |
| Sealing Of |           |           |          |           |        |
| Trucks At  |           |           |          |           |        |
| Point Of   |           |           |          |           |        |
| Origin     |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
| Agar Gel   | YES       | NO        | NO       | YES       | YES    |
| Test       |           |           |          | **3/**    | **3/** |
| Required   |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
| Cer        | YES       | YES       | YES      | YES       | YES    |
| tification |           |           |          |           |        |
| Re         |           |           |          |           |        |
| quirements |           |           |          |           |        |
| On END     |           |           |          |           |        |
| **4/**     |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+
| 1/ SAGARPA |           |           |          |           |        |
| still does |           |           |          |           |        |
| not allow  |           |           |          |           |        |
| imports of |           |           |          |           |        |
| bone-in    |           |           |          |           |        |
| chicken    |           |           |          |           |        |
| leg        |           |           |          |           |        |
| quarters   |           |           |          |           |        |
| for        |           |           |          |           |        |
| further    |           |           |          |           |        |
| processing |           |           |          |           |        |
| to the     |           |           |          |           |        |
| interior   |           |           |          |           |        |
| of Mexico  |           |           |          |           |        |
| because of |           |           |          |           |        |
| concerns   |           |           |          |           |        |
| about      |           |           |          |           |        |
| products   |           |           |          |           |        |
| being      |           |           |          |           |        |
| diverted   |           |           |          |           |        |
| to the     |           |           |          |           |        |
| retail     |           |           |          |           |        |
| market.    |           |           |          |           |        |
|            |           |           |          |           |        |
| 2/ Imports |           |           |          |           |        |
| are        |           |           |          |           |        |
| prohibited |           |           |          |           |        |
| from the   |           |           |          |           |        |
| states of  |           |           |          |           |        |
| Co         |           |           |          |           |        |
| nnecticut, |           |           |          |           |        |
| C          |           |           |          |           |        |
| alifornia, |           |           |          |           |        |
| Delaware,  |           |           |          |           |        |
| Maryland,  |           |           |          |           |        |
| Missouri,  |           |           |          |           |        |
| New        |           |           |          |           |        |
| Jersey,    |           |           |          |           |        |
| North      |           |           |          |           |        |
| Carolina,  |           |           |          |           |        |
| Pe         |           |           |          |           |        |
| nnsylvania |           |           |          |           |        |
| and Texas  |           |           |          |           |        |
| because of |           |           |          |           |        |
| LPAI.      |           |           |          |           |        |
|            |           |           |          |           |        |
| 3/ Agar    |           |           |          |           |        |
| Gel Test   |           |           |          |           |        |
| should     |           |           |          |           |        |
| begin 21   |           |           |          |           |        |
| days       |           |           |          |           |        |
| before     |           |           |          |           |        |
| laying and |           |           |          |           |        |
| should     |           |           |          |           |        |
| continue   |           |           |          |           |        |
| on a       |           |           |          |           |        |
| quarterly  |           |           |          |           |        |
| basis.     |           |           |          |           |        |
|            |           |           |          |           |        |
| 4/ END     |           |           |          |           |        |
| statement  |           |           |          |           |        |
| for meat,  |           |           |          |           |        |
| meat       |           |           |          |           |        |
| products   |           |           |          |           |        |
| and by     |           |           |          |           |        |
| p          |           |           |          |           |        |
| roducts. - |           |           |          |           |        |
| "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  |           |           |          |           |        |
| iden       |           |           |          |           |        |
| tification |           |           |          |           |        |
| of         |           |           |          |           |        |
| velogenic  |           |           |          |           |        |
| strains    |           |           |          |           |        |
| through a  |           |           |          |           |        |
| test that  |           |           |          |           |        |
| indicates  |           |           |          |           |        |
| int        |           |           |          |           |        |
| racerebral |           |           |          |           |        |
| pat        |           |           |          |           |        |
| hogenicity |           |           |          |           |        |
| 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. " |           |           |          |           |        |
|            |           |           |          |           |        |
| 5/ Imports |           |           |          |           |        |
| destined   |           |           |          |           |        |
| for        |           |           |          |           |        |
| further    |           |           |          |           |        |
| processing |           |           |          |           |        |
| are only   |           |           |          |           |        |
| approved   |           |           |          |           |        |
| to proceed |           |           |          |           |        |
| to Federal |           |           |          |           |        |
| Inspected  |           |           |          |           |        |
| Plants     |           |           |          |           |        |
| (TIF) and  |           |           |          |           |        |
| non-TIF    |           |           |          |           |        |
| meat       |           |           |          |           |        |
| processing |           |           |          |           |        |
| facilities |           |           |          |           |        |
| authorized |           |           |          |           |        |
| by         |           |           |          |           |        |
| SAGARPA.   |           |           |          |           |        |
|            |           |           |          |           |        |
| 6/ Imports |           |           |          |           |        |
| are        |           |           |          |           |        |
| prohibited |           |           |          |           |        |
| from       |           |           |          |           |        |
| C          |           |           |          |           |        |
| alifornia, |           |           |          |           |        |
| Co         |           |           |          |           |        |
| nnecticut, |           |           |          |           |        |
| Delaware,  |           |           |          |           |        |
| Maryland,  |           |           |          |           |        |
| Missouri,  |           |           |          |           |        |
| New        |           |           |          |           |        |
| Jersey,    |           |           |          |           |        |
| North      |           |           |          |           |        |
| Carolina,  |           |           |          |           |        |
| Pe         |           |           |          |           |        |
| nnsylvania |           |           |          |           |        |
| and Texas, |           |           |          |           |        |
| unless     |           |           |          |           |        |
| their      |           |           |          |           |        |
| d          |           |           |          |           |        |
| estination |           |           |          |           |        |
| is an      |           |           |          |           |        |
| est        |           |           |          |           |        |
| ablishment |           |           |          |           |        |
| authorized |           |           |          |           |        |
| by SAGARPA |           |           |          |           |        |
| to carry   |           |           |          |           |        |
| out        |           |           |          |           |        |
| thermal    |           |           |          |           |        |
| treatment  |           |           |          |           |        |
| processes. |           |           |          |           |        |
| However,   |           |           |          |           |        |
| imports of |           |           |          |           |        |
| raw        |           |           |          |           |        |
| materials  |           |           |          |           |        |
| for        |           |           |          |           |        |
| thermal    |           |           |          |           |        |
| processing |           |           |          |           |        |
| should not |           |           |          |           |        |
| come or    |           |           |          |           |        |
| originate  |           |           |          |           |        |
| from the   |           |           |          |           |        |
| following  |           |           |          |           |        |
| Texas      |           |           |          |           |        |
| counties:  |           |           |          |           |        |
| Gonzales,  |           |           |          |           |        |
| Guadalupe, |           |           |          |           |        |
| Galdwell,  |           |           |          |           |        |
| Bastrop,   |           |           |          |           |        |
| Fayette,   |           |           |          |           |        |
| La Vaca,   |           |           |          |           |        |
| De Witt,   |           |           |          |           |        |
| Karnes,    |           |           |          |           |        |
| Wilson,    |           |           |          |           |        |
| Comal and  |           |           |          |           |        |
| Hays.      |           |           |          |           |        |
|            |           |           |          |           |        |
| \*For      |           |           |          |           |        |
| additional |           |           |          |           |        |
| i          |           |           |          |           |        |
| nformation |           |           |          |           |        |
| regarding  |           |           |          |           |        |
| poultry    |           |           |          |           |        |
| meat and   |           |           |          |           |        |
| egg        |           |           |          |           |        |
| products   |           |           |          |           |        |
| exports to |           |           |          |           |        |
| Mexico see |           |           |          |           |        |
| the web    |           |           |          |           |        |
| page       |           |           |          |           |        |
| USDA/F     |           |           |          |           |        |
| SIS/Export |           |           |          |           |        |
| Library at |           |           |          |           |        |
| [ht        |           |           |          |           |        |
| tp://www.f |           |           |          |           |        |
| sis.usda.g |           |           |          |           |        |
| ov](http:/ |           |           |          |           |        |
| /www.fsis. |           |           |          |           |        |
| usda.gov/) |           |           |          |           |        |
| (Export    |           |           |          |           |        |
| Re         |           |           |          |           |        |
| quirements |           |           |          |           |        |
| for meat   |           |           |          |           |        |
| and        |           |           |          |           |        |
| poultry    |           |           |          |           |        |
| products)  |           |           |          |           |        |
+------------+-----------+-----------+----------+-----------+--------+

Trade between Mexico and the European Union under their free trade
agreement has been small. Fresh poultry meat was not among the
agricultural products included in the tariff negotiations. Most of the
trade has been Mexican exports of specific pathogen-free (SPF) eggs,
which at the moment enjoy a 50-percent reduction of the most favored
nation tariff in the EU. Due to AI outbreaks in the U.S., and subsequent
exporting problems to certain Asian markets, Mexico began to export some
poultry specialty cuts to Japan. Although exports were small in 2004,
this is a new market that Mexico is currently exploring.

The industry is hopeful that the recently completed Mexico-Japan Free
Trade Agreement will lead to new opportunities. Mexican poultry
producers were granted a 10 MT tariff-rate quota (TRQ) at zero duty for
tradeshow samples during the first year 04/2005-03/2006. 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.

Recently, the Secretariats of Economy and Agriculture, signed an
agreement with the National Poultry Association to formulate an export
program (Aviexporta) to enhance the export competitiveness for the
poultry sector. The program will seek to prioritize export objectives
and identify constraints. The goal of the program is to increase total
poultry exports by 25 percent within the next ten years.

## POLICY

In late 2004, Mexico's Congress passed a law that would have established
inspection fees for imports of animal products. The inspection fee for
meat would have been about US\$25.00 per ton and was intended to provide
resources for the Secretariat of Agriculture's inspection service. To
date, the fees have not been implemented because Mexico's Secretariat of
the Treasury determined that they would have duplicated existing fees.
Strong interest remains in the Mexican Congress and within certain
segments of the animal and meat industries for the implementation of
some kind of fee that would provide funds for import inspections.
Industry and government groups are reportedly working to propose an
alternative fee structure that would be consistent with Mexico's WTO and
NAFTA commitments, existing Mexican law, and would be less costly for
Mexican importers and consumers.

As part of an agreement among the members of the North American Plant
Protection Organization (NAPPO, Mexico, the United States, and Canada)
Mexico will adopt a phased-in approach that will lead to strict
enforcement of sanitary measures to prevent pest infestation by using
untreated wooden packing materials. See MX5502 for additional details.

## MARKETING

Generic advertising campaigns have been successful in increasing
domestic consumption of poultry products in Mexico. Currently, most of
the 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 different 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.

# 

# TURKEY MEAT

## PRODUCTION

Turkey meat production for MY 2006 (Jan-Dec) is forecast flat at 13,000
MT, as domestic producers continue to face competition from U.S. and
Chilean imports. Production estimates for MY 2004 were revised downward
based on final industry data. Domestic turkey meat production represents
less than 10 percent of total poultry meat consumption. Domestic firms
sell about 75 percent of their production as uncooked whole turkeys for
the Christmas season. The balance is sold as domestic turkey parts 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
Chihuahua and Sonora, which account for 40 and 50 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 the progenitor stock and are also importing fertile
eggs for light and heavy breeders.

## CONSUMPTION

Turkey meat consumption for MY 2006 is forecast to increase in response
to growing demand for turkey products from the processing industry. The
estimate of MY 2005 consumption was reduced slightly in response to
expected lower domestic production, but remains well above the revised
MY 2004 consumption estimate. Sanitary trade restrictions following the
detection of AI in the United States slowed imports during the first
five months of MY 2004, which affected turkey consumption.

Consumption of turkey 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 meat are substantially cheaper than all-pork cooked hams.
Most of the whole turkey demand is during the Christmas season, where
average bird weight is 15 pounds. The Poultry Producers Association
estimates average per capita consumption at 3.24 pounds for 2005
including whole turkey, turkey cuts and other turkey products.

## TRADE

MY 2006 turkey meat imports are forecast to increase as demand for
turkey parts for further processing continues to increase. Turkey meat
import estimates for MY 2004 and 2005 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 use turkey thigh meat to produce cooked hams made up of
blends of domestic pork and U.S. turkey thighs. Due to the quarantine
restrictions imposed on U.S. poultry imports in 2004, mechanically
de-boned turkey meat imports from Chile increased, representing 34
percent of total imports. Chile's presence in the poultry market is
expected to continue as importers seek to diversify their suppliers of
poultry in response to changing disease conditions in North America.
Chilean products are competitively priced and suitable for processors
who are willing to work with frozen product. Whole turkey imports from
the U.S. as well as from Chile have increased due to higher demand.
Chilean poultry imports are duty free under the Mexico-Chile Free Trade
Agreement. However, the United States continues as the main supplier of
turkey meat and products to Mexico. The leading turkey processors have
been successful in gaining shelf space for fresh turkey parts, 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's Mexico
office has launched two generic promotional campaigns aimed at
increasing turkey consumption. USAPEEC, along with local turkey
producers, has 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 in Mexico has also participated in large retail and
foodservice shows promoting further-processed poultry products (see
chicken meat marketing section).