Voluntary Report - public distribution

**Date:** 1/27/2004

**GAIN Report Number:** MX4012

MX4012

**Mexico**

**Agricultural Situation**

**Weekly Highlights & Hot Bites, Issue #4**

**2004**

**Approved by:**

![](media/image1.wmf)William L. Brant

U.S. Embassy

**Prepared by:**

Dan Martinez, Kate Snipes, Benjamin Juarez, Dulce Flores and Gabriel
Hernandez

**Report Highlights:**

\*ATO RESTAURANT PROMOTION RESULTS IN LONG-TERM SOYBEAN OIL SALES TO
SANBORNS

\*MEXICO IS FREE OF POULTRY AVIAN INFLUENZA

\*FARMERS FORECAST RECORD PRODUCTION OF CORN IN SINALOA

\*NORTHERN MEXICO BORDER UPDATE: BIO-TERRORISM LAW IMPLEMENTATION AND
MEXICAN FARM EXPORTS

\*U.S. WILL IMPOSE FINES FOR NON-COMPLIANCE OF BIO-TERRORISM LAW

\*LOCAL MEDIA REPORTS RISING PRICES AND SHORTAGES OF HIGH-VALUE MEAT
CUTS

\*NOT ONE KILO OF U.S. MEAT HAS ENTERED INTO MEXICO: ECONOMY SECRETARIAT

\*MEXICAN CATTLEMEN MEET WITH COUNTERPARTS IN THE UNITED STATES

\*FEEDLOT OWNERS WANT ORDER IN THE MEXICAN MEAT MARKET

\*LOCAL IMPORTERS SWITCHING TO ALTERNATIVE MEAT PRODUCTS

\*NORTHERN MEXICAN CATTLE FEEDERS AT FULL CAPACITY

\*MEXICAN MEAT PACKERS STRUGGLE TO KEEP UP WITH DEMAND

\*MEXICAN CATTLEMEN LOOK FORWARD TO REGAINING THE MARKET

\*MEXICO TO TAKE ADVANTAGE OF MEXICO-JAPAN FTA NEGOTIATIONS

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Mexico \[MX1\]

\[MX\]

Welcome to Hot Bites from Mexico, a weekly review of issues of interest
to the U.S. agricultural community. The topics covered in this report
reflect developments in Mexico that have been garnered during travel
around the country, reported in the media, or offered by host country
officials and agricultural analysts. Readers should understand that
press articles are included in this report to provide insights into the
Mexican \"mood\" facing U.S. agricultural exporters. Significant issues
will be expanded upon in subsequent reports from this office.

DISCLAIMER: Any press summary contained herein does NOT reflect USDA's,
the U.S. Embassy's, or any other U.S. Government agency's point of view
or official policy.

**ATO RESTAURANT PROMOTION RESULTS IN LONG-TERM SOYBEAN OIL SALES TO
SANBORNS**

As a result of the U.S. Agricultural Trade Office\'s restaurant
promotion and follow-up efforts by the American Soybean Association,
Sanborns (a Mexican restaurant chain) has decided to use U.S. soybean
oil for cooking in its restaurants nation-wide. The initial purchase was
for 210 metric tons or US\$126,000 dollars. With more than 100
restaurants and coffee shops, the annual sales to Sanborns are estimated
to be as much as 10,000 metric tons, or approximately US\$6 million
dollars annually at current oil prices. (Source*:* ATO Mexico City,
1/22/04)

**MEXICO IS FREE OF POULTRY AVIAN INFLUENZA**

Mexican Animal Health authorities declared that Mexico is free of avian
influenza and indicated that it is very unlikely that this disease that
affects Vietnam will reach Mexican poultry farms, as Mexico does not
import poultry products from Asia. The Poultry Producers Association in
Mexico indicated that there is permanent supervision of whatever risk
situation arises and producers comply with all official health
requirements. (Source: *Universal*, 1/17/04)

**FARMERS FORECAST RECORD PRODUCTION OF CORN IN SINALOA**

Corn producers in the Mexican State of Sinaloa estimate a harvest of 3.6
million tons for the autumn-winter season, 2003/04. A total of 424,283
hectares (933,422 acres) of corn were planted and farmers are optimistic
that they will have no commercialization problems, due to the favorable
market situation. (Source: *El Debate*, Sinaloa, 1/26/04)

NORTHERN MEXICO BORDER UPDATE: BIO-TERRORISM LAW IMPLEMENTATION AND
MEXICAN FARM EXPORTS

After five weeks since implementation of the Bio-Terrorism Law, FDA's
interim policy of flexibility and discretion coupled with compliance
education has resulted in smooth trade flows of Mexican farm exports and
minimal rejections. Three rejections occurred at the Nuevo Laredo/Laredo
port of entry, the busiest crossing point along the 1,960-mile border,
due to inaccurate registration data. At Tijuana, the third busiest port,
the chief SAGARPA inspector stated that no rejections had occurred and
that it appeared that exporters had done their homework well. At
Nogales, a major crossing point for fresh fruits and vegetables, no
rejections were reported, but officials on both sides of the border
expressed concern regarding the problems that small-time exporters will
face when the law is fully enforced. (Source: ATO/Monterrey, 1/16/04)

# U.S. WILL IMPOSE FINES FOR NON-COMPLIANCE OF BIO-TERRORISM LAW

The General Director of International Negotiations of the Economy
Secretariat, Kenneth Smith, stated after more than a month since the
Bio-terrorism Law was enforced, Mexican authorities have not registered
any detention of food shipments exported to the United States. He said
that the U. S. government is not enforcing the law strictly due to the
grace period of three months. However, commencing March 12, 2004, the
law will be strictly enforced and non-compliance will evoke fines.
(Source: *EL Financiero*, 1/20/04)

**LOCAL MEDIA REPORTS RISING PRICES AND SHORTAGES OF HIGH-VALUE BEEF
CUTS**

A business analyst of a National Television Station reported that as a
result of closing the Mexican border to U.S. beef imports, restaurants
are reporting major price increases of between 25-30 percent for
domestic meat products. Stocks of available U.S. meat imports will most
likely be terminated in 1-2 weeks adding pressure to beef substitutes
such as seafood, fish and chicken, and opening the way for contraband
trade. According to the analyst, "We are going to see a lot of
contraband (meat products) and the introduction of meat coming from
clandestine slaughter facilities. This is a major risk to national
health." (Source: *Televisa*, 1/19/04)

NOT ONE KILO OF U.S. MEAT HAS ENTERED INTO MEXICO: ECONOMY SECRETARIAT

The Under Secretary of International Trade Negotiations of the Economy
Secretariat, Angel Villalobos, assured that not one kilogram of U.S.
bovine meat has entered into Mexico since in the Mad Cow disease was
detected. Therefore, he said, the food safety and health of Mexicans is
guaranteed. (Source: *La Jornada*, 1/21/04)

# MEXICAN CATTLEMEN MEET WITH COUNTERPARTS IN THE UNITED STATES 

According to the Secretary of the Cattleman's National Confederation,
Miguel Aleman-Migliolo, a Mexican delegation of cattlemen, industrial
and rural producers will travel to United States to meet with their
counterparts and USDA authorities January 25-27, 2004. The objective of
this visit is to evaluate safety measures taken against the mad cow
disease in order to reopen Mexican border to U.S. beef. (Source:
*Reforma*, 1/21/04)

## FEEDLOT OWNERS WANT ORDER IN THE MEXICAN MEAT MARKET 

Mexico's feedlot owners will have an urgent meeting to discuss how to
bring order to the domestic beef market and avoid continued speculation
on prices and supply. Arnulfo Ortiz-Chamez, General Director of the VIZ
Group, denied that beef prices would continue increasing in the short
term because of the ban imposed on red meat imports from the United
States. He based this statement on the fact that Mexico has enough meat
supply, in addition to other supply options coming from Canada,
Australia and New Zealand. (Source: *Reforma*, 1/21/04)

**LOCAL IMPORTERS SWITCHING TO ALTERNATIVE MEAT PRODUCTS**

Monterrey-based importers of meat products from the United States are
becoming hard-pressed to commercialize beef substitutes such as pork,
pork offals and chicken to greater degrees in order to keep up with
their sales objectives. Although the importation of boneless Canadian
and Australian beef is permitted, high prices are limiting importers'
willingness to place orders beyond mid-February because of uncertainty
when the GOM will re-open its border to U.S. beef. Importers state that
high prices of Canadian and Australian beef are a consequence of the
high demand on beef in Asian markets and if the border re-opens for U.S.
beef within the time they receive their "expensively bought" orders,
beef prices will stabilize at lower levels, resulting in potentially
large losses in their operations. For some importers, U.S. beef made up
60 percent of their total sales prior to the border closure. (Source:
ATO Monterrey, 1/26/04)

**NORTHERN MEXICO CATTLE FEEDERS AT FULL CAPACITY**

Cattle feedlot owners in Northern Mexico are taking advantage of the low
price situation in the United States within the feeder cattle market,
forcing a drop in feeder cattle prices in Mexico and creating a higher
supply for the local feeding industry. By contrast, local feeders are
selling fed cattle at higher prices due to the great internal demand for
domestic beef unleashed after Mexico banned US beef imports on December
23, 2003. In addition, local feeders state that the current high prices
reflect cattle that were bought between September and October 2003, when
cattle prices were expensive and the United States was importing large
numbers of feeder steers for U.S. feedlots. (Source: ATO Monterrey,
1/26/04)

**MEXICAN MEAT PACKERS STRUGGLE TO KEEP UP WITH DEMAND**

Beef packers in Northern Mexico are facing a double-sided struggle:
cattle feeders are not complying with delivery contracts for fed cattle
which in turn, is preventing the packers from keeping up with their
sales contracts. Since prices have risen and demand is high, feeders
prefer to put their former contracts aside and sell their cattle to the
highest bidder. This is causing packers to reduce product availability
to regular customers (in some cases by half). And, since supply is
short, new customers are emerging, but packers are being forced to
prioritize customer quality with their most important receiving their
best attention and service until the border is re-opened for U.S. beef.

(Source: ATO Monterrey, 1/26/04)

**MEXICAN CATTLEMEN LOOK FORWARD TO REGAINING THE MARKET**

Mexican cattlemen are working \"against the clock,\" making strategic
alliances and investments to recover at least half of the 40 percent
share of the domestic market they claim "was lost to competing meat
product imports from the United States." For example, they plan to take
advantage of the BSE issue in order to invest in new \"TIF\" (Federally
Inspected Type) establishments. Mexican meat buyers advise that the
strategy could dissolve if domestic producers do not offer good prices
when the border re-opens to U.S. meat imports. (Source: *El Norte*,
Monterrey, 1/19/04)

**MEXICO TO TAKE ADVANTAGE OF MEXICO-JAPAN FTA NEGOTIATIONS**

The *Daily Yomiuri*, a Japanese newspaper, indicated that from the
thirty Free Trade Agreements (FTA) that Mexico has signed since 1992,
only four have contributed to improve Mexico's balance of payments. The
poor results obtained from NAFTA, mainly in the agricultural sector,
have compelled Mexico to assume a radical position and look for better
negotiations. By doing so, a FTA with Japan seems to be stuck because
Mexican farmers have demanded that the Government of Mexico assume a
"hard line position" when negotiating future trade agreements. The FTA
between Mexico and Japan has been in negotiations for over a year and is
expected to be signed within the week. Thus far, Japan has signed only
one agreement, with Singapore, and Mexico is looking for an advantageous
outcome in their FTA. (Source: *El Universal*, 1/19/04)

REPORTS RECENTLY SUBMITTED BY FAS/MEXICO CITY

+-------------+--------------------------------------------+----------+
| ##          | ###### Title                               | **Date** |
| #### Number |                                            |          |
+-------------+--------------------------------------------+----------+
| MX4009      | Weekly Highlights & Hot Bites Issue #3     | 1/20/04  |
+-------------+--------------------------------------------+----------+
| MX4010      | Tax for Beverages Using HFCS Continues     | 1/20/04  |
+-------------+--------------------------------------------+----------+
| MX4011      | Semi-Annual Fresh Deciduous Report         | 1/26/04  |
+-------------+--------------------------------------------+----------+

We are available at **<http://www.fas-la.com/mexico>** or visit our
headquarters' home page at **http://www.fas.usda.gov** for a complete
selection of FAS\' worldwide agricultural reporting.

**FAS/MEXICO EMAIL**

To reach us at FAS/Mexico City:

**[AgMexico@usda.gov]{.underline} and/or <ATOMexico@usda.gov>**