Required Report - public distribution

**Date:** 31/08/2006

**GAIN Report Number:** MX6068

MX6068

**Mexico**

Livestock and Products

**LIVESTOCK ANNUAL**

2006

**Approved by:**

![](media/image1.wmf)Erich R. Kuss

#### U.S. Embassy Mexico City

**Prepared by:**

Sal Trejo

**Report Highlights:**

Mexico continued to relax its import restrictions on U.S. bovine
products during 2006 and beef imports are expected to reach 375,000 tons
in 2007, which is approaching pre-BSE levels. Ongoing negotiations to
resume imports of U.S. dairy cattle are expected to result in trade in
2006. Mexico's live cattle exports are forecast higher in 2007
reflecting improved exportable supplies of calves and good grazing
conditions. Mexico's pork imports are expected to continue rising in
2007 reflecting strong demand. Pork production and imports of live hogs
are also expected to increase.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Mexico \[MX1\]

\[MX\]

**TABLE OF CONTENTS**

**SECTION I. SITUATION AND OUTLOOK**
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
3

Executive
Summary\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
3

**SECTION II. STATISTICAL
TABLES**\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
4

PS&D, Animal Numbers, Cattle (1000
Head)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... 4

PS&D, Meat, Beef and Veal (1000 Head) (K Metric
Tons)\...\...\...\...\...\...\...\...\...\... 4

PS&D, Animal Numbers, Swine, (1000
Head)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... 5

PS&D, Meat, Swine (1000 Head) (K Metric
Tons)\...\...\...\...\...\...\...\...\...\...\...\...\.... 5

Trade
Matrix\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
6

Grass Fed Live Steer Average Wholesale Prices in Mexico
City\...\...\...\...\...\...\.... 7

Beef Carcass Average Wholesale Prices in Mexico
City\...\...\...\...\...\...\...\...\...\...\... 7

Finished Live Hog Wholesale Prices in Mexico
City\...\...\...\...\...\...\...\...\...\...\...\...\... 8

Pork Carcass Average Wholesale Prices in Mexico
City\...\...\...\...\...\...\...\...\...\...\... 8

Cattle and Hog
Slaughter\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
9

Related OAA/Mexico Reports
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
10

**SECTION III. NARRATIVE ON SUPPLY, DEMAND, POLICY AND MARKETING**\...
11

Production\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
11

Cattle/Beef\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
11

Swine/Pork\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
11

Consumption\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
12

Cattle/Beef\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
12

Swine/Pork\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
12

Trade\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
12

Cattle/Beef\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
12

Swine/Pork\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
13

Policy\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
14

Cattle/Beef\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
14

Swine/Pork\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
15

Marketing\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
15

Cattle/Beef\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
15

Swine/Pork\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
15

# SECTION I. SITUATION AND OUTLOOK

## Executive Summary

Mexico's CY 2007 exports of live cattle are forecast at 1.2 million
head, up from the previous year's estimate of 1.17 million head as
exportable supplies of cattle have improved and producers continue to
rebuild herds. Exportable supplies of calves are good and grazing
conditions have benefited from favorable weather conditions. On-going
negotiations between the United States and Mexico are expected to soon
allow imports of U.S. dairy cattle, and Mexico continues to loosen
bovine import restrictions imposed following the detection of BSE in
2003. Beef imports are forecast to reach pre-BSE levels at 375,000 MT
during CY 2007, up 10,000 MT from CY 2006. Imports of pork continue to
climb and are forecast at 460,000 MT during CY 2007. Imports of live
hogs are forecast to reach 225,000 head in 2006, still far below the
authorized quota of 462,374 head.

**SECTION II. STATISTICAL TABLES**

##  PS&D, Animal Numbers, Cattle (1000 Head)

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

  Country:             Mexico                                          

  Commodity:           CATTLE                                          

                       2005               2006               2007      

                       Old       New      Old       New      Old       New

  Calendar Year Begin  01/2005            01/2006            01/2007   

  Total Cattle Beg.    27572     27572    26997     26949    0         26819
  Stocks                                                               

  Dairy Cows Beg.      2200      2200     2200      2200     0         2200
  Stocks                                                               

  Beef Cows Beg.       11500     11500    11700     11700    0         11800
  Stocks                                                               

  Production (Calf     7500      7500     7800      7950     0         8200
  Crop)                                                                

  Intra EC Imports     0         0        0         0        0         0

  Other Imports        75        85       85        95       0         125

  TOTAL Imports        75        85       85        95       0         125

  TOTAL SUPPLY         35147     35157    34882     34994    0         35144

  Intra EC Exports     0         0        0         0        0         0

  Other Exports        1260      1260     1175      1175     0         1200

  TOTAL Exports        1260      1260     1175      1175     0         1200

  Cow Slaughter        1700      1700     1700      1700     0         1700

  Calf Slaughter       1500      1500     1500      1500     0         1500

  Other Slaughter      3100      3158     3300      3300     0         3400

  Total Slaughter      6300      6358     6500      6500     0         6600

  Loss                 590       590      625       500      0         500

  Ending Inventories   26997     26949    26582     26819    0         26844

  TOTAL DISTRIBUTION   35147     35157    34882     34994    0         35144
  -------------------- --------- -------- --------- -------- --------- --------

##  PS&D, Meat, Beef and Veal (1000 Head) (K Metric Tons)

+--------------------+-------+-------+-------+-------+-------+---+------+
| **PSD Table**      |       |       |       |       |       |   |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Country:           | M     |       | Conve |       |       |   |      |
|                    | exico |       | rsion |       |       |   |      |
|                    |       |       | f     |       |       |   |      |
|                    |       |       | actor |       |       |   |      |
|                    |       |       | for   |       |       |   |      |
|                    |       |       | CWE   |       |       |   |      |
|                    |       |       | 1.30  |       |       |   |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Commodity:         | Ca    |       |       |       |       |   |      |
|                    | ttle, |       |       |       |       |   |      |
|                    | MEAT, |       |       |       |       |   |      |
|                    | BEEF  |       |       |       |       |   |      |
|                    | and   |       |       |       |       |   |      |
|                    | VEAL  |       |       |       |       |   |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
|                    | 2005  |       | 2006  |       | 2007  |   |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
|                    | Old   | New   | Old   | New   | Old   |   | New  |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Calendar Year      | 01    |       | 01    |       | 01    |   |      |
| Begin              | /2005 |       | /2006 |       | /2007 |   |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Slaughter          | 6300  | 6358  | 6500  | 6500  | 0     | 6 |      |
| (Reference)        |       |       |       |       |       | 6 |      |
|                    |       |       |       |       |       | 0 |      |
|                    |       |       |       |       |       | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Beginning Stocks   | 0     | 0     | 0     | 0     | 0     | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Production         | 2125  | 2125  | 2175  | >     | 0     | 2 |      |
|                    |       |       |       |  2175 |       | 2 |      |
|                    |       |       |       |       |       | 0 |      |
|                    |       |       |       |       |       | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Intra EC Imports   | 0     | 0     | 0     | 0     | 0     | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Other Imports      | 325   | 313   | 365   | 365   | 0     | 3 |      |
|                    |       |       |       |       |       | 7 |      |
|                    |       |       |       |       |       | 5 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| TOTAL Imports      | 325   | 313   | 365   | 365   | 0     | 3 |      |
|                    |       |       |       |       |       | 7 |      |
|                    |       |       |       |       |       | 5 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| TOTAL SUPPLY       | 2450  | 2438  | 2540  | 2540  | 0     | 2 |      |
|                    |       |       |       |       |       | 5 |      |
|                    |       |       |       |       |       | 7 |      |
|                    |       |       |       |       |       | 5 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Intra EC Exports   | 0     | 0     | 0     | 0     | 0     | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Other Exports      | 31    | 30    | 35    | 35    | 0     | 4 |      |
|                    |       |       |       |       |       | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| TOTAL Exports      | 31    | 30    | 35    | 35    | 0     | 4 |      |
|                    |       |       |       |       |       | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Human Dom.         | 2399  | 2388  | 2485  | 2485  | 0     | 2 |      |
| Consumption        |       |       |       |       |       | 5 |      |
|                    |       |       |       |       |       | 1 |      |
|                    |       |       |       |       |       | 5 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Other Use, Losses  | 20    | 20    | 20    | 20    | 0     | 2 |      |
|                    |       |       |       |       |       | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| TOTAL Dom.         | 2419  | 2408  | 2505  | 2505  | 0     | 2 |      |
| Consumption        |       |       |       |       |       | 5 |      |
|                    |       |       |       |       |       | 3 |      |
|                    |       |       |       |       |       | 5 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| Ending Stocks      | 0     | 0     | 0     | 0     | 0     | 0 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+
| TOTAL DISTRIBUTION | 2450  | 2438  | 2540  | 2540  | 0     | 2 |      |
|                    |       |       |       |       |       | 5 |      |
|                    |       |       |       |       |       | 7 |      |
|                    |       |       |       |       |       | 5 |      |
+--------------------+-------+-------+-------+-------+-------+---+------+

##  PS&D Animal Numbers, Swine, (1000 Head)

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

  Country:            Mexico                                          

  Commodity:          Swine                                           

                      2005               2006               2007      

                      Old       New      Old       New      Old       New

  Calendar Year Begin 01/2005            01/2006            01/2007   

  TOTAL Beginning     10303     10303    10038     10125    0         10250
  Stocks                                                              

  Sow Beginning       940       940      950       950      0         955
  Stocks                                                              

  Production (Pig     15500     15500    15700     15700    0         15800
  Crop)                                                               

  Intra EC Imports    0         0        0         0        0         0

  Other Imports       189       181      200       200      0         225

  TOTAL Imports       189       181      200       200      0         225

  TOTAL SUPPLY        25992     25984    25938     26025    0         26275

  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

  Sow Slaughter       15        15       15        15       0         15

  OTHER SLAUGHTER     14700     14744    14700     14785    0         14825

  Total Slaughter     14715     14759    14715     14800    0         14840

  Loss                1239      1100     975       975      0         975

  Ending Inventories  10038     10125    10248     10250    0         10460

  TOTAL DISTRIBUTION  25992     25984    25938     26025    0         26275
  ------------------- --------- -------- --------- -------- --------- --------

##  PS&D, Meat, Swine (1000 Head) (K metric Tons)

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

  Country:             Mexico             Conversion                      
                                          factor for                      
                                          CWE 1.36                        

  Commodity:           Swine,                                             
                       MEAT                                               

                       2005               2006                  2007      

                       Old       New      Old          New      Old       New

  Calendar Year Begin  01/2005            01/2006               01/2007   

  Slaughter            14715     14759    14715        14800    0         14840
  (Reference)                                                             

  Beginning Stocks     0         0        0            0        0         0

  Production           1195      1195     1200         1200     0         1250

  Intra EC Imports     0         0        0            0        0         0

  Other Imports        420       440      450          450      0         460

  TOTAL Imports        420       440      450          450      0         460

  TOTAL SUPPLY         1615      1635     1650         1650     0         1710

  Intra EC Exports     0         0        0            0        0         0

  Other Exports        59        61       65           65       0         70

  TOTAL Exports        59        61       65           65       0         70

  Human Dom.           1556      1574     1585         1585     0         1640
  Consumption                                                             

  Other Use, Losses    0         0        0            0        0         0

  TOTAL Dom.           1556      1574     1585         1585     0         1640
  Consumption                                                             

  Ending Stocks        0         0        0            0        0         0

  TOTAL DISTRIBUTION   1615      1635     1650         1650     0         1710
  -------------------- --------- -------- ------------ -------- --------- --------

## Trade Matrix 

## 

  ------------ ----------- ----------- ------------ ----------- -----------
  Animal                               **Units:                 
  Numbers,                             Head**                   
  CATTLE                                                        

  Exports to:  2005        2006\*      Imports      2005        2006\*
                                       from:                    

  U.S.         1,258,583   512,663     U.S.         0           0

  Other                                Other                    

  El Salvador  96          0           Australia    17,464      8,145

  Colombia     84          0           Nicaragua    30,536      18,178

  Belize       22          0           New Zealand  29,734      21,262

                                       Costa Rica   4,094       2,075

  Total of     202         0           Total of     81,828      49,660
  other                                other                    

  Other not    0           117         Other not    2,873       13
  listed                               listed                   

  Grand Total  1,258,785   512,780     Grand Total  84,701      49,673
  ------------ ----------- ----------- ------------ ----------- -----------

  ------------ ----------- ----------- ------------ ----------- -----------
  Meat, Beef &                         **Units:                 
  Veal                                 Metric                   
                                       Tons**                   

  Exports to:  2005        2006\*      Imports      2005        2006\*
                                       from:                    

  U.S.         11,491      4,833       U.S.         171,708     61,660

  Other                                Other                    

  So. Korea    3,060       1,415       New Zealand  6,427       2,564

  Japan        5,970       1,695       Canada       42,803      9,916

  Puerto Rico  1,972       563         Australia    3,312       927

  Costa Rica   603         224         Chile        14,395      1,538

                                       Nicaragua    647         218

                                       Panama       423         189

                                       Costa Rica   1,306       427

  Total of     11,605      3,897       Total of     69,313      15,779
  other                                other                    

  Other not    2           0           Other not    49          0
  listed                               listed                   

  Grand Total  23,098      8,731       Grand Total  241,070     77,439
  ------------ ----------- ----------- ------------ ----------- -----------

  ------------ ----------- ----------- ------------ ----------- -----------
  Animal                               **Units:                 
  Numbers,                             Head**                   
  SWINE                                                         

  Exports to:  2005        2006\*      Imports      2005        2006\*
                                       from:                    

  U.S.         0           0           U.S.         151,353     104,012

  Other        0           0           Other                    

               0           0           Canada       29,960      9,720

  Total of     0           0           Total of     29,960      9,720
  other                                other                    

  Other not    0           0           Other not    0           0
  listed                               listed                   

  Grand Total  0           0           Grand Total  181,313     113,732
  ------------ ----------- ----------- ------------ ----------- -----------

  ------------ ----------- ----------- ------------ ----------- -----------
  Meat, Swine                          **Units:                 
                                       Metric                   
                                       Tons**                   

  Exports to:  2005        2006\*      Imports      2005        2006\*
                                       from:                    

  U.S.         8,513       2,340       U.S.         284,597     104,609

  Other                                Other                    

  Japan        34,238      13,086      Canada       32,130      6,732

  So. Korea    1,647       461         Chile        6,058       1,379

  Guatemala    52          87          Spain        491         59

  Canada       66          0                                    

  Total of     36,003      13,634      Total of     38,679      8,170
  other                                other                    

  Other not    36          26          Other not    160         65
  listed                               listed                   

  Grand Total  44,552      16,000      Grand Total  323,436     112,844
  ------------ ----------- ----------- ------------ ----------- -----------

Source: Global Trade Information Services, Inc. "World Trade Atlas"
Mexico Edition

Figures for meat are in product weight equivalent (PWE)

\*As of April 30, 2006

## Grass Fed Live Steer Average Wholesale Prices in Mexico City

(US\$/Lb.)

+--------------------+------------+------------+---------------------+
| **Month**          | **2005**   | **2006**   | **% Change**        |
+--------------------+------------+------------+---------------------+
| January            | 0.867      | 0.868      | 1.001               |
|                    |            |            |                     |
| February           | 0.865      | 0.867      | 1.002               |
|                    |            |            |                     |
| March              | 0.856      | 0.857      | 1.001               |
|                    |            |            |                     |
| April              | 0.852      | 0.864      | 1.014               |
|                    |            |            |                     |
| May                | 0.848      | N/A        | N/A                 |
|                    |            |            |                     |
| June               | 0.846      | N/A        | N/A                 |
|                    |            |            |                     |
| July               | 0.826      | N/A        | N/A                 |
|                    |            |            |                     |
| August             | 0.858      | N/A        | N/A                 |
|                    |            |            |                     |
| September          | 0.868      | N/A        | N/A                 |
|                    |            |            |                     |
| October            | 0.867      | N/A        | N/A                 |
|                    |            |            |                     |
| November           | 0.850      | N/A        | N/A                 |
|                    |            |            |                     |
| December           | 0.857      | N/A        | N/A                 |
+--------------------+------------+------------+---------------------+

Source: National Market Information Service (SNIM)

Note: 1/ N/A not available

## Beef Carcass Average Wholesale Prices in Mexico City

(US\$/Lb.)

+--------------------+------------+------------+---------------------+
| **Month**          | **2005**   | **2006**   | **% Change**        |
+--------------------+------------+------------+---------------------+
| January            | 1.26       | 1.34       | 1.063               |
|                    |            |            |                     |
| February           | 1.28       | 1.34       | 1.047               |
|                    |            |            |                     |
| March              | 1.27       | 1.34       | 1.055               |
|                    |            |            |                     |
| April              | 1.27       | 1.33       | 1.047               |
|                    |            |            |                     |
| May                | 1.28       | N/A        | N/A                 |
|                    |            |            |                     |
| June               | 1.28       | N/A        | N/A                 |
|                    |            |            |                     |
| July               | 1.27       | N/A        | N/A                 |
|                    |            |            |                     |
| August             | 1.32       | N/A        | N/A                 |
|                    |            |            |                     |
| September          | 1.34       | N/A        | N/A                 |
|                    |            |            |                     |
| October            | 1.35       | N/A        | N/A                 |
|                    |            |            |                     |
| November           | 1.35       | N/A        | N/A                 |
|                    |            |            |                     |
| December           | 1.35       | N/A        | N/A                 |
+--------------------+------------+------------+---------------------+

Source: National Market Information S N/A service (SNIM)

Note: 1/ N/A not available

## Finished Live Hog Wholesale Prices in Mexico City

(US\$/Lb.)

+--------------------+------------+------------+---------------------+
| **Month**          | **2005**   | **2006**   | **% Change**        |
+--------------------+------------+------------+---------------------+
| January            | 0.712      | 0.679      | (1.049)             |
|                    |            |            |                     |
| February           | 0.710      | 0.670      | (1.060)             |
|                    |            |            |                     |
| March              | 0.691      | 0.650      | (1.063)             |
|                    |            |            |                     |
| April              | 0.636      | 0.642      | 1.009               |
|                    |            |            |                     |
| May                | 0.603      | N/A        | N/A                 |
|                    |            |            |                     |
| June               | 0.580      | N/A        | N/A                 |
|                    |            |            |                     |
| July               | 0.633      | N/A        | N/A                 |
|                    |            |            |                     |
| August             | 0.707      | N/A        | N/A                 |
|                    |            |            |                     |
| September          | 0.699      | N/A        | N/A                 |
|                    |            |            |                     |
| October            | 0.658      | N/A        | N/A                 |
|                    |            |            |                     |
| November           | 0.679      | N/A        | N/A                 |
|                    |            |            |                     |
| December           | 0.637      | N/A        | N/A                 |
+--------------------+------------+------------+---------------------+

Source: National Market Information Service (SNIM)

Note: 1/ N/A not available

## Pork Carcass Average Wholesale Prices in Mexico City

(US\$/Lb.)

+--------------------+------------+------------+---------------------+
| **Month**          | **2005**   | **2006**   | **% Change**        |
+--------------------+------------+------------+---------------------+
| January            | 0.948      | 1.028      | 1.084               |
|                    |            |            |                     |
| February           | 0.954      | 0.987      | 1.035               |
|                    |            |            |                     |
| March              | 0.938      | 0.987      | 1.052               |
|                    |            |            |                     |
| April              | 0.928      | 0.946      | 1.019               |
|                    |            |            |                     |
| May                | 0.928      | N/A        | N/A                 |
|                    |            |            |                     |
| June               | 0.897      | N/A        | N/A                 |
|                    |            |            |                     |
| July               | 0.909      | N/A        | N/A                 |
|                    |            |            |                     |
| August             | 0.946      | N/A        | N/A                 |
|                    |            |            |                     |
| September          | 0.946      | N/A        | N/A                 |
|                    |            |            |                     |
| October            | 0.940      | N/A        | N/A                 |
|                    |            |            |                     |
| November           | 0.972      | N/A        | N/A                 |
|                    |            |            |                     |
| December           | 0.972      | N/A        | N/A                 |
+--------------------+------------+------------+---------------------+

Source: National Market Information Service (SNIM)

Note: 1/ N/A not available

######## Cattle Slaughtered in Federally Inspected Type (TIF) Slaughterhouses

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    1,535,565         1,675,789         9
  ----------------- ----------------- ----------------- -----------------

SOURCE: Confederacion Nacional Ganadera (CNG) with data from SAGARPA

## Cattle Slaughtered in Municipal Slaughterhouses

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    3,100,150         3,092,494         0
  ----------------- ----------------- ----------------- -----------------

SOURCE: Confederacion Nacional Ganadera (CNG) with data from SAGARPA

Cattle Slaughtered In-Situ Slaughtering Facilities

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    1,545,238         1,589,427         3
  ----------------- ----------------- ----------------- -----------------

NOTE: In-Situ slaughter is calculated at 25 to 30 % of total slaughter

Total Cattle Slaughtered in Mexico

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    6,180,953         6,357,710         3
  ----------------- ----------------- ----------------- -----------------

SOURCE: Confederacion Nacional Ganadera (CNG) with data from SAGARPA

## Hogs Slaughtered in Federal Inspected Type (TIF) Slaughterhouses

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    4,507,045         4,647,460         3
  ----------------- ----------------- ----------------- -----------------

SOURCE: Confederacion Nacional Ganadera (CNG) with data from SAGARPA

## Hogs Slaughtered Municipal Slaughterhouses

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    4,623,993         4,945,765         3
  ----------------- ----------------- ----------------- -----------------

SOURCE: Confederacion Nacional Ganadera (CNG) with data from SAGARPA

######## Hogs Slaughtered In-Situ Slaughtering Facilities

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    4,916,712         5,165,582         5
  ----------------- ----------------- ----------------- -----------------

##  NOTE: In-Situ slaughter is calculated at 30 to 35 % of total slaughter

## Total Hogs Slaughtered in Mexico

  ----------------- ----------------- ----------------- -----------------
  Total             2004              2005              \% Change

                    14,047,750        14,758,807        5
  ----------------- ----------------- ----------------- -----------------

##  SOURCE: Confederacion Nacional Ganadera (CNG) with data from SAGARPA 

**Related Fas/Mexico Reports**

  --------------- ----------------------------------------------- ----------
  Report Number   **Title of Report**                             **Date**

  MX6001          TRQ DAIRY PREPARATIONS                          1/9/06

  MX6002          TRQ MILK POWDER WTO                             1/9/06

  MX6003          TRQ MILK POWDER USA                             1/9/06

  MX6005          PORK LEG ANTIDUMPING RESOLUTION                 1/13/06

  MX6010          LIVESTOCK SEMI-ANNUAL                           2/1/06

  MX6014          PORK LEG PANEL REVIEW                           2/10/06

  MX6024          DAIRY IMPORT CUPOS                              3/22/06

  MX6032          MEXICO ANNOUNCES THE CONTINUANCE OF             4/25/06
                  COMPENSATORY DUTIES ON BEEF IMPORTS             

  MX6039          DAIRY SEMI-ANNUAL                               5/15/06
  --------------- ----------------------------------------------- ----------

**SECTION III. NARRATIVE ON SUPPLY, DEMAND, POLICY AND MARKETING**

**Production**

### Cattle/Beef

Overall cattle numbers are expected to rebound in 2007, following a
marginal drop in 2006. Beef cow numbers, calf production and total
slaughter are expected to increase in 2007, supported by good forage
supplies and ideal grazing conditions in key production regions. Good
rains in 2005 and 2006 appear to have alleviated the effects of several
years of dry conditions in northern Mexico. Ending inventories for CY
2007 are forecast higher than the previous year's revised estimate as
cattlemen steadily seek to rebuild herds.

Increased slaughter and good feeding conditions are expected to push
beef production higher in CY 2007. Beef production has continued to grow
steadily over the past five years despite competition from imports and
beef's relatively higher cost compared to pork and chicken. Cattlemen
and industry sources indicate that slaughter in federally inspected
(TIF) plants is forecast to increase in CY 2007. Improving export
prospects in Asian markets (Japan and Korea) and stronger demand for
quality cuts from the food processing and supermarket sectors are
leading producers to send more cattle to TIF (federally inspected)
plants.

While there are no official estimates of total slaughter, the Mexican
Government does publish estimates of cattle slaughtered in TIF and
municipal slaughter plants. The Secretariat of Agriculture, Livestock,
Rural Development, Fisheries and Food (SAGARPA) estimates that in situ
slaughter represents about 25 to 30 percent of total slaughter, which
when combined with the official estimates of TIF and municipal
slaughter, provides an estimate of total slaughter. The 2005 beef
production estimate reflects official data.

### Swine/Pork

###  

Pork production continues to expand, fueled in large part by attractive
prices during 2005 and 2006 and continued modernization, concentration,
and investment within the pork industry. An increase in the number of
specialized swine TIF plants, coupled with further integration of swine
producer associations in slaughtering and marketing activities, is
expected to contribute to a further expansion of pork production in the
future.

Expectations of stronger prices next year will likely push slaughter
numbers higher in 2007. Mexico's pork industry continues to be affected
by U.S. prices and price changes in the U.S. market will likely affect
profitability and production decisions in Mexico during the upcoming
year.

Overall hog numbers and slaughter have remained relatively stable in
recent years, a trend that is expected to continue in 2007. Underlying
this trend has been a shift in the composition of slaughter from hogs
supplied by the informal sector to those supplied by larger and more
technically advanced producers as the trend towards more modern
production practices continues. Lower costs of production relative to
the informal sector, better profitability, and strong prices during 2005
and 2006 are helping to encourage investment and consolidation in the
pork sector. Official estimates indicate that the share of in situ or
informal slaughter remains somewhere between 30 to 35 percent of
slaughter. Consequently, slaughter numbers and inventories are forecast
to increase in 2007.

Official estimates indicate that hog slaughter in federally inspected
plants (TIF) reached 4.6 million head in 2005, compared to 4.5 million
in 2004. It appears that this ongoing trend is being driven by Mexico's
growing supermarket and meat processing sectors, which require better
quality, more uniformity, and consistency in their meat products. TIF
plants are in a better position to provide such products than Mexico's
municipal and in situ slaughter operations, which combined still account
for a significant portion of hog slaughter.

Current U.S. price forecasts are still relatively attractive compared to
the cost of production in Mexico and strong and growing demand from the
domestic market is expected to help support domestic production growth.

## Consumption

### Cattle/Beef

### Beef consumption is expected to increase in 2007, continuing a steady growth pattern that has lasted for several years. Continued economic growth and expanding demand in Mexico's hotel and tourism industry has fueled the steady increase in demand. However, beef's higher cost tends to limit consumption to middle and higher income consumers along with the aforementioned hotel, tourism and hotel sectors. Thus, per capita meat consumption in Mexico is relatively low and there remains considerable potential for expanding consumption as incomes rise. Consumption for 2005 is revised slightly lower reflecting official data. 

### 

### Swine/Pork

Pork consumption for 2007 is expected to continue increasing as demand
for processed meats (such as sausages, and hams) rises faster than
demand for fresh and frozen pork cuts, reflecting an important
structural change in the composition of consumption. However, while the
consumption of pork cuts is growing at a slower pace, this segment still
represents the bulk of overall consumption in Mexico. Per capita meat
consumption is relatively low in Mexico when compared to the Unites
States and Canada, and the potential for growth as incomes rise is
considerable. Nonetheless pork will continue to face stiff competition
from lower priced poultry products.

## Trade

### Cattle/Beef

Mexico took steps to reopen its market to certain bovine products in
March of 2004, and has since expanded the range of bovine products that
can be imported from the United States. Early in 2006, Mexico re-opened
its market to bone-in beef from the United States. Mexico's total beef
imports are projected to reach 375,000 MT in 2007, the highest level
since the detection of BSE in the United States in 2003. Strong demand
from Mexico's hotel, tourism and restaurant industries coupled with an
expanded range of allowable bovine products has underpinned import
growth over the past several years.

Mexico's beef exports are expected to continue growing in 2007 as
exporters take advantage of new market opportunities in Asia. Mexico's
beef exports to Japan have jumped substantially, rising from just 90
tons in 2004 to over 5,969 tons in 2005, boosted by Mexico's recent free
trade agreement with Japan.

Imports of live cattle for 2007 are expected to jump by 30 percent to
125,000 head, owing to strong demand from Mexico's dairy and beef
industries. Ongoing restrictions on imports of live cattle from the
United States and Canada due to BSE concerns opened the door for
Australia, Nicaragua, New Zealand, which are now the primary suppliers.
Cattle imports are comprised of limited numbers of slaughter cattle from
Central American countries along with dairy cattle from Australia and
New Zealand. Ongoing negotiations between Mexico and the United States
to establish certification requirements for the importation of U.S.
dairy cattle are nearing completion, which could allow shipments to
resume this year.

Mexico's 2007 cattle exports are forecast slightly higher based on an
increased calf crop in 2006 and 2007. Ideal grazing conditions should
lead to larger exportable supplies of cattle. Durango, a major
cattle-exporting state, lost its USDA TB accreditation during 2005 and
is currently not permitted to export cattle to the United States until
further review. The loss of exports from Durango have had little effect
on overall cattle exports, as other states have made-up the difference
while Durango cattle find a home in the domestic market.

### Swine/Pork

Imports of live hogs are forecast to reach 225,000 head in 2007 as
processors seek to augment domestic hog slaughter to meet the growing
demand for pork. Pork meat imports for 2007 are forecast to rise to
460,000 MT (CWE). Domestic sausage companies continue to use more
imported U.S. pork variety meats and mechanically de-boned poultry meat
due to attractive prices and high quality. Domestically produced
sausages, processed foods, and lunch meats containing imported
ingredients, as well as imported sausages and pork products, continue to
gain market niches in Mexico, particularly among middle and upper-income
consumers. 2005 pork imports have been revised upward reflecting
official data.

Mexico's pork exports are forecast to reach 70,000 MT (CWE) in 2007,
mostly to Japan. While animal health concerns and relatively high prices
have limited Mexican pork exports, exporters have established a niche
market in Japan. Sales to Japan are expected to continue growing in the
future as exporters take advantage of Mexico's free trade agreement with
Japan. Mexico's pork exporters enjoy tariff-rate quota access in Japan
as follows:

  -------------------------------- --------------------------------------
  Year                             TRQ/Metric Tons (CWE)

  2005-2006                        52,060

  2006-2007                        52,998

  2007-2008                        89,050

  2008-2009                        101,380

  2009-2010                        109,600
  -------------------------------- --------------------------------------

Mexican producers and animal health officials are seeking to have
additional areas declared free of Classical Swine Fever (CSF).
Currently, the states of Sonora, Quintana Roo, Campeche, Baja
California, Baja California Sur, Chihuahua, Sinaloa, and Yucatan have
been declared low risk or free of CSF by USDA. Regionalization requests
are also under review by USDA officials for the states of Nayarit,
Coahuila, Nuevo Leon, Tamaulipas, and Durango.

## Policy

### Cattle/Beef 

### 

Under the PROGAN support program, the Secretariat of Agriculture
provides funding for herd and genetic improvements, provided that cattle
producers meet certain criteria relating to animal health standards,
management practices, and herd composition.

On April 24, 2006, Mexico's Ministry of Economy (Economia) announced the
continuation of compensatory duties on beef imports from the United
States, the conclusion of Mexico's Sunset Review initiated in 2005. See
MX6032 for more information.

Mexico has taken significant steps to re-open its market to bovine
products following the discovery of a single case of BSE in Washington
State on December 24, 2003. Below is a listing of approved and
prohibited products.

Prohibited products:

Live cattle (currently under negotiations to allow imports of dairy
cattle)

Boneless and bone-in meat from cattle 30 months of age or older

Bovine offal and viscera other than those currently authorized

Products derived from non-protein-free tallow

Gelatin and collagen prepared from bone

Ruminant meal

Ground beef

Permitted products:

Tallow (human consumption)

Blood (human consumption)

Breeding bulls

Bone-in meat from cattle under 30 months of age

Boneless beef from cattle under 30 months of age

Marinated boneless beef from cattle under 30 months of age

Beef based preparations, beef/pork based preparations, beef/sheep based
preparations and beef/pork/poultry based preparations

Veal boneless or bone-in

Hearts, kidneys, tongue and lips from cattle under 30 months of age

Diaphragm and trimmings from cattle under 30 months of age

Tripe from cattle under 30 months of age

Meat, carcasses, viscera, and heads from sheep under 12 months of age

Meat, carcasses, and viscera from goats under 12 months of age

Liver

Milk

Dairy products

Semen

Embryos

Protein-free tallow not fit for animal consumption

Dicalcium phosphate (DCP)

Skins and hides

Gelatin and collagen obtained from hides and skins

Pet Food (see MX4040 for more details)

Sausage made from beef and pork with or without cheese

Live sheep for immediate slaughter

### 

### Swine/Pork 

The Mexican Council of Pork Producers (CMP) continues to work with the
Mexican Government to develop programs to enhance the competitiveness of
domestic pork producers by improving efficiency, quality, product
differentiation, and marketing methods. One overriding objective among
the pork producers seems to be to help small and medium-sized producers
reach viable scales of production, possibly by establishing production
contracts with larger pork processors and slaughterhouses. To date, the
Mexican Government has yet to establish specific funding or support
programs to aid smaller hog producers.

## Marketing

### Cattle/Beef 

### 

### Marketing efforts should focus on products authorized for import while continuing to maintain contact with users of prohibited products in the expectation that Mexico will continue to loosen import restrictions. Marketing efforts should focus on the quality and safety of U.S. beef. Opportunities exist in the dairy and beef industries for the sale of U.S. genetics and breeding stock. Dairy producers in particular have been hurt by the ban on cattle imports and are planning to source U.S. dairy cattle when trade resumes. Price is a major consideration when selling dairy cattle to Mexico. SAGARPA has authorized the import of breeding bulls under a strict confinement program, which has so far been used to supply semen to the dairy industry. 

### Swine/Pork 

Good marketing opportunities for U.S. pork exist in Mexico's cold cut
and supermarket industries catering to middle and upper income
consumers. Educational seminars through supermarket chains, restaurants,
and hotels appear to be an effective way to increase awareness of the
wide variety of U.S. pork cuts available.

U.S. livestock, beef and pork exporters, new to the Mexican market, are
also encouraged to contact the following trade organizations for further
market information.

+-----------------------------------------------------------------------+
| ######## TRADE ORGANIZATIONS                                          |
+-----------------------------------------------------------------------+
| THE U.S. AGRICULTURAL TRADE OFFICE (ATO)                              |
|                                                                       |
| CHRISTINE SLOOP, DIRECTOR                                             |
|                                                                       |
| JAIME BALMES NO. 8 - 2^ND^. FLOOR                                     |
|                                                                       |
| 11510 MEXICO, D.F.                                                    |
|                                                                       |
| PH. (525) 280-5291/5276; FAX. (525) 281-6093                          |
+-----------------------------------------------------------------------+
| U.S. MEAT EXPORT FEDERATION (USMEF)                                   |
|                                                                       |
| JAIME BALMES NO. 8 -- 2^ND^. FLOOR                                    |
|                                                                       |
| 11510 MEXICO D.F.                                                     |
|                                                                       |
| PH. (525) 5281-6100; FAX (525) 5281-6013                              |
|                                                                       |
| GILBERTO LOZANO, DIRECTOR                                             |
+-----------------------------------------------------------------------+
| CONFEDERACION NACIONAL DE ORGANIZACIONES GANADERAS (CNOG)             |
|                                                                       |
| MARIANO ESCOBEDO NO. 714                                              |
|                                                                       |
| COL. ANZURES                                                          |
|                                                                       |
| MEXICO, D.F. 11590                                                    |
|                                                                       |
| PH. (525) 5254-3245; FAX (525) 5254-2574                              |
|                                                                       |
| OSWALDO CHAZARO, PRESIDENT                                            |
+-----------------------------------------------------------------------+
| CONSEJO NACIONAL DE PORCICULTORES (CMP)                               |
|                                                                       |
| JUAN DE LA BARRERA NO. 38                                             |
|                                                                       |
| COL. CONDESA                                                          |
|                                                                       |
| 06140 MEXICO, D.F.                                                    |
|                                                                       |
| PH. (525) 5212-1290, FAX. (525) 5211-1379                             |
|                                                                       |
| ENRIQUE DOMINGUEZ, GENERAL DIRECTOR                                   |
+-----------------------------------------------------------------------+