Required Report - public distribution

**Date:** 05/16/2005

**GAIN Report Number:** MX5044

MX0000

**Mexico**

Dairy and Products

**Semi-Annual Report**

2005

**Approved by:**

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

#### U.S. Embassy Mexico City

**Prepared by:**

Sal Trejo

**Report Highlights:**

Imports of butter are forecast slightly higher as social feeding
programs reconstitute greater volumes of skim milk powder at the expense
of whole milk powder imports. Fluid milk imports are also higher than
previously forecast as processors and the government's parastatal milk
corporation increase their purchases of domestically produced milk.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Mexico \[MX1\]

\[MX\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 4](#production)

[Consumption 4](#consumption)

[Trade 5](#trade)

[Stocks 5](#stocks)

[Policy 6](#policy)

[Marketing 6](#marketing)

#### Statistical Tables\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...9

# Executive Summary

**Dairy Situation and Outlook**: Mexico's fluid milk production for CY
2005 is adjusted slightly upwards from our previous forecast reflecting
the Secretariat of Agriculture, Livestock, Rural Development, Fisheries
and Food (SAGARPA)'s higher forecast and an expected increase in goat
milk production.

Imports of fluid milk are forecast higher as users in border areas seek
alternative supplies to compensate for fluid milk that is bid away by
processors and the government's parastatal milk corporation Leche
Industrializada CONASUPO (LICONSA). Imports of butter are also expected
to increase as LICONSA expands its use of butterfat for reconstituting
skim milk powder.

Mexico continues with the ban on imported dairy cattle from the United
States and Canada. Imports of dairy cattle from Australia went from
2,507 head in CY 2003 to 29,567 head in CY2004. Dairy cattle imports
from New Zealand have also increased from 1,719 head in CY 2003 to 6,094
head in CY2004. Mexico does, however, continue to import U.S. and
Canadian semen and embryos since these products are not affected by the
ban.

Note: Currently, the Mexican peso is valued at US\$10.89

# Production

## 

The forecast of fluid milk production for CY 2005 is up slightly from
the previous forecast, reflecting an expected increase in the production
of goat milk for candy and cheese production, as well as a slight
increase in the official milk production forecast. The estimate of 2004
cow and goat milk production reflects official data and less than
expected production in southern Mexico due to moderately dry conditions.

# 

# Cheese

# 

# No change from our previous report. (See MX4121)

## 

#### Butter

No change from our previous report. (See MX4121)

Non-Fat Dry Milk (NFDM)

# 

# No change from our previous report. (See MX4121)

## 

# Whole Milk Powder (WMP)

# 

# No change from our previous report. (See MX4121)

## 

# Consumption

#### 

#### Fluid Milk

CY 2005 fluid milk consumption is expected slightly higher reflecting
the rise in fluid milk imports and consumption in border areas. Consumer
prices in Mexico currently range from 7.36 pesos per liter for
pasteurized milk (US\$0.67) to 8.14 pesos per liter of UHT milk
(US\$0.75). More widespread consumption of fluid milk continues to be
hampered by problems with sanitation, transportation, and processing
capacity, although supplies and quality are continually improving.

Mexico's public sector milk distribution parastatal (LICONSA) continues
to play a major role in the procurement and distribution of milk to
Mexico's poor. LICONSA imports large volumes of milk powder but is also
expected to procure as much domestic fluid milk as possible in an effort
to reduce its dependence on imports. Depending on the region, poor
infrastructure, quality issues or strong demand from processors and
consumers have made it difficult for LICONSA to expand its domestic
procurement. It's estimated that LICONSA distributes almost 3.3 million
liters of subsidized milk per day at the current price of 3.50 pesos per
liter (US\$0.30).

## 

## Cheese

## 

## Estimates of cheese consumption are largely unchanged from our previous report. (See MX 4121)

Butter

Combined butter and butterfat consumption for CY 2005 and CY 2004 is
estimated upwards from our previous estimates due to increased demand
from bakeries, confectioners, LICONSA, and other dairy food processors.
The estimate for CY 2003 has been revised upwards to reflect official
data from SAGARPA.

Non-fat Dry Milk

No change from our previous report. (See MX4121)

Whole Milk Powder

Whole milk powder (WMP) consumption for CY 2005 and CY 2004 is estimated
downward from our previous estimates stemming from the drop in imports
of WMP. LICONSA, to save costs has started using domestic and imported
butterfat to reconstitute skim milk powder to full fat milk for its
social programs at the expense of WMP imports. According to LICONSA,
over 60 percent of the WMP and NFDM is consumed by the poor.

## 

# Trade

Fluid Milk

Fluid milk imports for CY 2005 and CY 2004 (reflects official data) are
estimated upwards from our previous estimates as retailers along the
border source larger volumes of fluid milk from the United States to
compensate for domestic supplies that are being bid away by processors
in the interior of Mexico as well as LICONSA's increased purchasing of
fluid milk.

Cheese

Imports for CY 2004, which reflect official data, are revised slightly
upwards due to increased demand from restaurants, fast food outlets and
consumers in general.

Butter

Imports for CY 2005, are estimated upwards from our previous forecast as
LICONSA has increased its purchases of imported butterfat to
reconstitute NFDM to full fat milk for its social programs. Imports for
CY 2004 reflect official data. Note: Mexican trade data do not
distinguish between butter and butterfat.

Non-Fat Dry Milk

No change from our previous report. (See MX4121)

Whole Milk Powder

Mexico continues to be far from reaching self‑sufficiency in WMP
production because of limited domestic processing capacity. Imports for
CY 2005 and CY 2004 are estimated downwards from our previous estimates
given LICONSA's emphasis on purchasing domestic fluid milk and using
domestic and imported butterfat to reconstitute NFDM to full fat milk
for its social program. The CY 2004 estimate reflects official data.

# Stocks

Non-Fat Dry Milk

No change from our previous report. (See MX4121)

# Policy

Fluid Milk

No change from our previous report. (See MX4121)

# Marketing

# 

# No change from our previous report. (See MX4121)

#### Statistical Tables

  --------------------- ------------ ------- --------- ------- --------- --------
  **PSD Table**                                                          

  **Country:**          **Mexico**                                       

  **Commodity:**        **Dairy,                                         
                        Milk,                                            
                        Fluid**                                          
                        (1000 Metric                                     
                        Tons)                                            

                        2003                 2004              2005      

                        Old          New     Old       New     Old       New

  Calendar Year Begin   01/2003              01/2004           01/2005   

  Cows In Milk          6800         6800    6800      6800    6850      6850

  Cows Milk Production  9784         9784    9900      9874    10020     10063

  Other Milk Production 140          140     140       155     140       155

  TOTAL Production      9924         9924    10040     10029   10160     10218

  Intra EC Imports      0            0       0         0       0         0

  Other Imports         58           58      55        70      50        60

  TOTAL Imports         58           58      55        70      50        60

  **TOTAL SUPPLY**      9982         9982    10095     10099   10210     10278

  Intra EC Exports      0            0       0         0       0         0

  Other Exports         0            0       0         0       0         0

  TOTAL Exports         0            0       0         0       0         0

  Fluid Use Dom.        4352         4352    4345      4349    4400      4468
  Consum.                                                                

  Factory Use Consum.   5630         5630    5750      5750    5810      5810

  Feed Use Dom. Consum. 0            0       0         0       0         0

  TOTAL Dom.            9982         9982    10095     10099   10210     10278
  Consumption                                                            

  **TOTAL               9982         9982    10095     10099   10210     10278
  DISTRIBUTION**                                                         
  --------------------- ------------ ------- --------- ------- --------- --------

  --------------------- ------------ ------- --------- ------- --------- --------
  **PSD Table**                                                          

  **Country:**          **Mexico**                                       

  **Commodity:**        **Dairy,                                         
                        Cheese**                                         
                        (1000 Metric                                     
                        Tons)                                            

                        2003                 2004              2005      

                        Old          New     Old       New     Old       New

  Calendar Year Begin   01/2003              01/2004           01/2005   

  Beginning Stocks      0            0       0         0       0         0

  Production            126          126     130       130     132       132

  Intra EC Imports      0            0       0         0       0         0

  Other Imports         78           78      80        82      85        85

  TOTAL Imports         78           78      80        82      85        85

  **TOTAL SUPPLY**      204          204     210       212     217       217

  Intra EC Exports      0            0       0         0       0         0

  Other Exports         0            0       0         0       0         0

  TOTAL Exports         0            0       0         0       0         0

  Human Dom.            204          204     210       212     217       217
  Consumption                                                            

  Other Use, Losses     0            0       0         0       0         0

  Total Dom.            204          204     210       212     217       217
  Consumption                                                            

  TOTAL Use             204          204     210       212     217       217

  Ending Stocks         0            0       0         0       0         0

  **TOTAL               204          204     210       212     217       217
  DISTRIBUTION**                                                         
  --------------------- ------------ ------- --------- ------- --------- --------

  --------------------- ------------ ------- --------- ------- --------- --------
  **PSD Table**                                                          

  **Country:**          **Mexico**                                       

  **Commodity:**        **Dairy,                                         
                        Butter**                                         
                        (1000 Metric                                     
                        Tons)                                            

                        2003                 2004              2005      

                        Old          New     Old       New     Old       New

  Calendar Year Begin   01/2003              01/2004           01/2005   

  Beginning Stocks      0            0       0         0       0         0

  Production            74           77      80        80      80        80

  Intra EC Imports      0            0       0         0       0         0

  Other Imports         40           40      40        53      40        50

  TOTAL Imports         40           40      40        53      40        50

  **TOTAL SUPPLY**      114          117     120       133     120       130

  Intra EC Exports      0            0       0         0       0         0

  Other Exports         0            0       0         0       0         0

  TOTAL Exports         0            0       0         0       0         0

  Domestic Consumption  114          117     120       133     120       130

  TOTAL Use             114          117     120       133     120       130

  Ending Stocks         0            0       0         0       0         0

  **TOTAL               114          117     120       133     120       130
  DISTRIBUTION**                                                         
  --------------------- ------------ ------- --------- ------- --------- --------

  --------------------- ------------ -------- --------- ------- --------- --------
  **PSD Table**                                                           

  **Country:**          **Mexico**                                        

  **Commodity:**        **Dairy, Dry                                      
                        Whole Milk                                        
                        Powder**                                          
                        (1000 Metric                                      
                        Tons)                                             

                        2003                  2004              2005      

                        Old          New      Old       New     Old       New

  Calendar Year Begin   01/2003               01/2004           01/2005   

  Beginning Stocks      0            0        0         0       0         0

  Production            0            0        0         0       0         0

  Intra EC Imports      0            0        0         0       0         0

  Other Imports         45           45       45        35      45        35

  TOTAL Imports         45           45       45        35      45        35

  **TOTAL SUPPLY**      45           45       45        35      45        35

  Intra EC Exports      0            0        0         0       0         0

  Other Exports         0            0        0         0       0         0

  TOTAL Exports         0            0        0         0       0         0

  Human Dom.            45           45       45        35      45        35
  Consumption                                                             

  Other Use, Losses     0            0        0         0       0         0

  Total Dom.            45           45       45        35      45        35
  Consumption                                                             

  TOTAL Use             45           45       45        35      45        35

  Ending Stocks         0            0        0         0       0         0

  **TOTAL               46           46       45        35      45        35
  DISTRIBUTION**                                                          
  --------------------- ------------ -------- --------- ------- --------- --------

## PRODUCTION OF FLUID MILK BY STATE 

(000 LITERS)

  ------------------------------ ------------- -------------- ------------
  STATES                         2004          2005\*         \% Change

  AGUASCALIENTES                 402,541       405,000        0.61

  BAJA CALIFORNIA                208,752       218,358        4.60

  BAJA CALIFORNIA SUR            42,982        43,448         1.08

  CAMPECHE                       33,270        32,000         (3.96)

  COAHUILA                       1,087,526     1,126,352      3.57

  COLIMA                         34,384        35,118         2.13

  CHIAPAS                        300,050       322,858        7.60

  CHIHUAHUA                      784,031       812,608        3.64

  MEXICO CITY                    13,039        12,983         (0.43)

  DURANGO                        958,776       948,120        (1.12)

  GUANAJUATO                     664,786       650,700        (2.16)

  GUERRERO                       78,036        85,166         9.13

  HIDALGO                        411,105       428,872        4.32

  JALISCO                        1,701,291     1,714,426      0.77

  MEXICO                         490,145       483,370        (1.40)

  MICHOACAN                      312,874       326,679        4.41

  MORELOS                        17,798        18,092         1.65

  NAYARIT                        67,438        65,399         (3.11)

  NUEVO LEON                     41,441        37,989         (9.08)

  OAXACA                         143,180       141,232        (1.37)

  PUEBLA                         364,452       372,542        2.21

  QUERETARO                      209,328       221,115        5.63

  QUINTANA ROO                   4,590         3,453          (32.92)

  SAN LUIS POTOSI                144,523       154,080        6.61

  SINALOA                        77,243        84,695         9.64

  SONORA                         136,375       152,717        11.98

  TABASCO                        99,432        111,497        12.13

  TAMAULIPAS                     30,015        34,503         14.95

  TLAXCALA                       141,560       133,968        (5.66)

  VERACRUZ                       719,360       720,187        0.11

  YUCATAN                        7,749         7,082          (9.41)

  ZACATECAS                      145,684       158,035        8.47

  TOTAL                          9,873,755     10,062,645     1.91
  ------------------------------ ------------- -------------- ------------

SOURCE: Agriculture Secretariat (SAGARPA)

\*SAGARPA's forecast figures for January to December 2005

## MEXICO'S MONTHLY FLUID MILK PRODUCTION

(000 LITERS)

  -------------------------- ---------------- --------------- ------------
  MONTH                      2004             2005            \% Change

  JANUARY                    746,674          745,750         (0.12)

  FEBRUARY                   747,800          744,482         (0.44)

  MARCH                      765,109          N/A             N/A

  APRIL                      763,177          N/A             N/A

  MAY                        800,716          N/A             N/A

  JUNE                       807,373          N/A             N/A

  JULY                       858,744          N/A             N/A

  AUGUST                     919,976          N/A             N/A

  SEPTEMBER                  932,720          N/A             N/A

  OCTOBER                    864,940          N/A             N/A

  NOVEMBER                   839,771          N/A             N/A

  DECEMBER                   826,755          N/A             N/A

  TOTAL                      9,873,755        N/A             N/A
  -------------------------- ---------------- --------------- ------------

SOURCE: Agriculture Secretariat (SAGARPA)

## AVERAGE MILK PRICES PAID TO PRODUCERS IN MEXICO PER MONTH

(PESOS PER LT.)

  ------------------------------- ------------- ------------- ------------
  MONTH                           2004          2005          VAR. %

  January                         3.37          3.40          0.09

  February                        3.38          3.41          0.08

  March                           3.36          3.39          0.09

  April                           3.50          N/A           N/A

  May                             3.50          N/A           N/A

  June                            3.55          N/A           N/A

  July                            3.55          N/A           N/A

  August                          3.60          N/A           N/A

  September                       3.27          N/A           N/A

  October                         3.26          N/A           N/A

  November                        3.34          N/A           N/A

  December                        3.39          N/A           N/A
  ------------------------------- ------------- ------------- ------------

SOURCE: Agriculture Secretariat (SAGARPA)