""

Required Report - public distribution

**Date:** 8/27/2003

**GAIN Report Number:** MX3117

MX0000

**Mexico**

**Poultry and Products**

**Annual**

**2003**

**Approved by:**

![](media/image1.wmf)David Williams

#### Mexico City

**Prepared by:**

Dulce Flores/Gabriel Hernandez

**Report Highlights:**

Mexico's poultry industry is forecast to continue growing during MY 2004
(Jan-Dec) as the trend toward vertical integration in the chicken
industry continues. Exports of U.S. poultry and poultry products are
forecast to increase as well. The lifting of key technical requirements
on raw poultry for direct consumption should lend a boost to U.S.
exports. However, a recently signed safeguard agreement on chicken leg
quarters is expected to keep overall export growth in check. The final
safeguard agreement was signed on July 25, 2003, and will be in place
through January 1, 2008.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Mexico \[MX1\]

\[MX\]

Table of Contents

[SECTION I. Situation and Outlook 3](#section-i.-situation-and-outlook)

[Poultry Situation and Outlook 3](#poultry-situation-and-outlook)

[SECTION II. Statistical Tables 4](#section-ii.-statistical-tables)

[Poultry Meat, Chicken-16 weeks 4](#poultry-meat-chicken-16-weeks)

[Poultry Meat, Turkey 5](#poultry-meat-turkey)

[Broilers Retail Prices 6](#broilers-retail-prices)

[Broilers Wet Market Prices 6](#broilers-wet-market-prices)

[Leg Quarter Retail Prices 7](#leg-quarter-retail-prices)

[Beef Carcass Wholesale Prices 7](#beef-carcass-wholesale-prices)

[MEXICAN IMPORTS FOR SELECTED POULTRY PRODUCTS Jan-Dec 2002
8](#mexican-imports-for-selected-poultry-products-jan-dec-2002)

[NAFTA POULTRY AND EGGS TARIFF RATE QUOTAS FOR 2002
11](#nafta-poultry-and-eggs-tariff-rate-quotas-for-2002)

[Poultry Numbers 13](#poultry-numbers)

[Per Capita Consumption 13](#per-capita-consumption)

[Monthly Exchange Rate 14](#monthly-exchange-rate)

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

[CHICKEN MEAT 15](#chicken-meat)

[PRODUCTION 15](#production)

[CONSUMPTION 16](#consumption)

[POLICY 19](#policy)

[MARKETING 19](#marketing)

[TURKEY MEAT 20](#turkey-meat)

[PRODUCTION 20](#production-1)

[CONSUMPTION 20](#consumption-1)

[TRADE 20](#trade)

[MARKETING 21](#marketing-1)

# SECTION I. Situation and Outlook

## Poultry Situation and Outlook

Chicken meat production for MY 2004 (Jan-Dec) is forecast to increase
five percent over MY 2003 as the trend toward vertical integration is
expected to continue. Population growth and affordable prices relative
to other meats are expected to spur demand. Additionally, the recent
safeguard agreement on chicken leg quarters should provide some
additional protection for the industry. Turkey meat production is also
forecast to increase four percent for MY 2004. Domestic turkey meat
production still represents less than 10 percent of total consumption.

Chicken and turkey meat imports, mainly mechanically deboned meat and
turkey parts for use in the sausage and cold meat industry, are by far
the main poultry products imported by Mexico. Imports of these products
for MY 2004 are forecast to increase as demand from Mexico's food and
meat processors continues for deboned meat. Overall poultry exports are
also expected to increase in 2004 as the Government of Mexico lifts
technical requirements on Low pathogenic Avian Influenza and Exotic New
Castle Disease.

##  

# SECTION II. Statistical Tables

## Poultry Meat, Chicken-16 weeks

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

  **Country**       **Mexico**                                               

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

                    2002         Revised    2003       Estimate   2004       Forecast

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

  **Market Year                  01/2002               01/2003               01/2004
  Begin**                                                                    

  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        2188         2157       2297       2297       0          2412

  Whole, Imports    0            0          0          0          0          0

  Parts, Imports    265          254        275        264        0          277

  Intra EC Imports  0            0          0          0          0          0

  Other Imports     0            0          0          0          0          0

  TOTAL Imports     265          254        275        264        0          277

  TOTAL SUPPLY      2453         2411       2572       2561       0          2689

  Whole, Exports    0            0          0          0          0          0

  Parts, Exports    1            0          1          1          0          1

  Intra EC Exports  0            0          0          0          0          0

  Other Exports     0            0          0          0          0          0

  TOTAL Exports     1            0          1          1          0          1

  Human Consumption 2452         2411       2571       2560       0          2688

  Other Use, Losses 0            0          0          0          0          0

  Total             2452         2411       2571       2560       0          2688
  Dom.Consumption                                                            

  TOTAL Use         2453         2411       2572       2561       0          2689

  Ending Stocks     0            0          0          0          0          0

  TOTAL             2453         2411       2572       2561       0          2689
  DISTRIBUTION                                                               

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

## Poultry Meat, Turkey

+--------------+-------+-------+--------+--------+---------+---------+
| ######       |       |       |        |        |         |         |
| ## PSD Table |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| **Country**  | ####  |       |        |        |         |         |
|              | ### M |       |        |        |         |         |
|              | exico |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| *            | **Pou |       |        |        | (1000   |         |
| *Commodity** | ltry, |       |        |        | MT)(MIL |         |
|              | Meat, |       |        |        | HEAD)   |         |
|              | Tur   |       |        |        |         |         |
|              | key** |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
|              | 2002  | Re    | 2003   | Es     | 2004    | F       |
|              |       | vised |        | timate |         | orecast |
+--------------+-------+-------+--------+--------+---------+---------+
|              | USDA  | Post  | USDA   | Post   | USDA    | Post    |
|              |       | Est   | Of     | Es     | O       | E       |
|              | Off   | imate | ficial | timate | fficial | stimate |
|              | icial |       | \      |        | \[Old\] | \[New\] |
|              | \[    | \[    | [Old\] | \      |         |         |
|              | Old\] | New\] |        | [New\] |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| **Market     |       | 01    |        | 0      |         | 01/2004 |
| Year Begin** |       | /2002 |        | 1/2003 |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| 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   | 13    | 13    | 14     | 14     | 0       | 14      |
+--------------+-------+-------+--------+--------+---------+---------+
| Whole,       | 0     | 0     | 0      | 0      | 0       | 0       |
| Imports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Parts,       | 149   | 140   | 160    | 147    | 0       | 154     |
| Imports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Intra EC     | 0     | 0     | 0      | 0      | 0       | 0       |
| Imports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Other        | 0     | 0     | 0      | 0      | 0       | 0       |
| Imports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| TOTAL        | 149   | 140   | 160    | 147    | 0       | 154     |
| Imports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| TOTAL SUPPLY | 162   | 153   | 174    | 161    | 0       | 168     |
+--------------+-------+-------+--------+--------+---------+---------+
| Whole,       | 6     | 6     | 5      | 5      | 0       | 5       |
| Exports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Parts,       | 0     | 0     | 0      | 0      | 0       | 0       |
| Exports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Intra EC     | 0     | 0     | 0      | 0      | 0       | 0       |
| Exports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Other        | 0     | 0     | 0      | 0      | 0       | 0       |
| Exports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| TOTAL        | 6     | 6     | 5      | 5      | 0       | 5       |
| Exports      |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Human        | 156   | 147   | 169    | 156    | 0       | 163     |
| Consumption  |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Other Use,   | 0     | 0     | 0      | 0      | 0       | 0       |
| Losses       |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Total Dom.   | 156   | 147   | 169    | 156    | 0       | 163     |
| Consumption  |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| TOTAL Use    | 162   | 153   | 174    | 161    | 0       | 168     |
+--------------+-------+-------+--------+--------+---------+---------+
| Ending       | 0     | 0     | 0      | 0      | 0       | 0       |
| Stocks       |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| TOTAL        | 162   | 153   | 174    | 161    | 0       | 168     |
| DISTRIBUTION |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+
| Calendar Yr. | 0     | 0     | 0      | 0      | 0       | 0       |
| Imp. from    |       |       |        |        |         |         |
| U.S.         |       |       |        |        |         |         |
+--------------+-------+-------+--------+--------+---------+---------+

## Broilers Retail Prices

+-----------------+-----------------+-----------------+-----------------+
| Broilers Retail |                 |                 |                 |
| Price           |                 |                 |                 |
|                 |                 |                 |                 |
| Pesos/kilogram  |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Month           | 2001            | 2002            | Change %        |
+-----------------+-----------------+-----------------+-----------------+
| January         | 18.00           | 18.06           | 0.33            |
+-----------------+-----------------+-----------------+-----------------+
| February        | 18.83           | 16.12           | (14.39)         |
+-----------------+-----------------+-----------------+-----------------+
| March           | 17.97           | 15.08           | (16.08)         |
+-----------------+-----------------+-----------------+-----------------+
| April           | 18.54           | 16.98           | (8.41)          |
+-----------------+-----------------+-----------------+-----------------+
| May             | 19.10           | 17.92           | (6.18)          |
+-----------------+-----------------+-----------------+-----------------+
| June            | 18.47           | 18.54           | 0.38            |
+-----------------+-----------------+-----------------+-----------------+
| July            | 17.30           | 18.25           | 5.49            |
+-----------------+-----------------+-----------------+-----------------+
| August          | 16.93           | 17.93           | 5.91            |
+-----------------+-----------------+-----------------+-----------------+
| September       | 15.86           | 17.59           | 10.91           |
+-----------------+-----------------+-----------------+-----------------+
| October         | 18.50           | 17.70           | (4.32)          |
+-----------------+-----------------+-----------------+-----------------+
| November        | 17.80           | 17.74           | (0.33)          |
+-----------------+-----------------+-----------------+-----------------+
| December        | 17.40           | 18.19           | 4.54            |
+-----------------+-----------------+-----------------+-----------------+
| Annual Avg.     | 17.89           | 17.51           | (2.12)          |
+-----------------+-----------------+-----------------+-----------------+

## Broilers Wet Market Prices

+-----------------+-----------------+-----------------+-----------------+
| Broilers\* Wet  |                 |                 |                 |
| Market Prices   |                 |                 |                 |
|                 |                 |                 |                 |
| Pesos/kilogram  |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Month           | 2001            | 2002            | Change %        |
+-----------------+-----------------+-----------------+-----------------+
| January         | 18.38           | 18.00           | (2.07)          |
+-----------------+-----------------+-----------------+-----------------+
| February        | 17.75           | 17.50           | (1.41)          |
+-----------------+-----------------+-----------------+-----------------+
| March           | 18.13           | 18.17           | 0.22            |
+-----------------+-----------------+-----------------+-----------------+
| April           | 19.80           | 19.75           | (0.25)          |
+-----------------+-----------------+-----------------+-----------------+
| May             | 22.14           | 20.30           | (8.31)          |
+-----------------+-----------------+-----------------+-----------------+
| June            | 18.75           | 20.25           | 8.00            |
+-----------------+-----------------+-----------------+-----------------+
| July            | 17.50           | 19.92           | 13.83           |
+-----------------+-----------------+-----------------+-----------------+
| August          | 19.13           | 20.71           | 8.26            |
+-----------------+-----------------+-----------------+-----------------+
| September       | 18.00           | 20.00           | 11.11           |
+-----------------+-----------------+-----------------+-----------------+
| October         | 18.50           | 20.40           | 10.27           |
+-----------------+-----------------+-----------------+-----------------+
| November        | 17.80           | 20.13           | 13.08           |
+-----------------+-----------------+-----------------+-----------------+
| December        | 18.50           | 21.30           | 15.13           |
+-----------------+-----------------+-----------------+-----------------+
| Annual Avg.     | 18.69           | 19.70           | 5.40            |
+-----------------+-----------------+-----------------+-----------------+
| \* Whole        |                 |                 |                 |
| chicken         |                 |                 |                 |
| including offal |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+

Source: UNA (National Poultry Association)

Avg. Exchange rate 2001 US \$1.00 = \$9.35 pesos

Avg. Exchange rate 2002 US \$1.00 = \$9.82 pesos

## Leg Quarter Retail Prices

+-----------------+-----------------+-----------------+-----------------+
| Leg Quarter     |                 |                 |                 |
| Retail Prices   |                 |                 |                 |
|                 |                 |                 |                 |
| Pesos/kilogram  |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Month           | 2001            | 2002            | Change %        |
+-----------------+-----------------+-----------------+-----------------+
| January         | 19.95           | 17.14           | (14.09)         |
+-----------------+-----------------+-----------------+-----------------+
| February        | 16.72           | 15.92           | (4.78)          |
+-----------------+-----------------+-----------------+-----------------+
| March           | 17.44           | 17.69           | 1.43            |
+-----------------+-----------------+-----------------+-----------------+
| April           | 19.38           | 17.82           | (8.05)          |
+-----------------+-----------------+-----------------+-----------------+
| May             | 24.33           | 18.35           | (24.58)         |
+-----------------+-----------------+-----------------+-----------------+
| June            | 22.71           | 19.78           | (12.90)         |
+-----------------+-----------------+-----------------+-----------------+
| July            | 22.07           | 19.33           | (12.41)         |
+-----------------+-----------------+-----------------+-----------------+
| August          | 17.50           | 18.69           | 6.7             |
+-----------------+-----------------+-----------------+-----------------+
| September       | 16.47           | 18.96           | 15.1            |
+-----------------+-----------------+-----------------+-----------------+
| October         | 16.99           | 18.00           | 6.0             |
+-----------------+-----------------+-----------------+-----------------+
| November        | 16.95           | 18.30           | 7.9             |
+-----------------+-----------------+-----------------+-----------------+
| December        | 17.19           | 18.91           | 3.3             |
+-----------------+-----------------+-----------------+-----------------+
| Annual Avg.     | 18.97           | 18.24           | (3.84)          |
+-----------------+-----------------+-----------------+-----------------+

Source: UNA (National Poultry Association)

## Beef Carcass Wholesale Prices

+-----------------+-----------------+-----------------+-----------------+
| Beef Carcass    |                 |                 |                 |
| Wholesale       |                 |                 |                 |
| Prices          |                 |                 |                 |
|                 |                 |                 |                 |
| Pesos/kilogram  |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Month           | 2002            | 2003            | Change %        |
+-----------------+-----------------+-----------------+-----------------+
| January         | 24.58           | 24.04           | (2.20)          |
+-----------------+-----------------+-----------------+-----------------+
| February        | 24.72           | 24.18           | (2.18)          |
+-----------------+-----------------+-----------------+-----------------+
| March           | 24.83           | 24.30           | (2.13)          |
+-----------------+-----------------+-----------------+-----------------+
| April           | 24.68           | 24.19           | (1.99)          |
+-----------------+-----------------+-----------------+-----------------+
| May             | 24.29           | 24.10           | (0.78)          |
+-----------------+-----------------+-----------------+-----------------+
| June            | 24.27           | 24.11           | (0.66)          |
+-----------------+-----------------+-----------------+-----------------+
| July            | 24.24           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+
| August          | 24.15           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+
| September       | 24.13           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+
| October         | 24.17           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+
| November        | 24.06           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+
| December        | 24.04           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+
| Annual Avg.     | 24.34           | N/A             | N/A             |
+-----------------+-----------------+-----------------+-----------------+

Source: National Market Information Service (SNIM)

## MEXICAN IMPORTS FOR SELECTED POULTRY PRODUCTS Jan-Dec 2002

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

                    U.S.                                      1448

                    NETHERLANDS                               169

                    OTHER                                     

                    SUBTOTAL (Thousand head)                  1747

  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.                                      507

                    NETHERLANDS                               58

                    OTHER                                     

                    SUBTOTAL (Thousand head)                  629

  0105.11.99        Other                                     

                    U.S. and subtotal                         80

  0105.19.99        Other (Chickens)                          

                    U.S.                                      1

                    OTHER                                     22

                    SUBTOTAL (Thousand head)                  23

  0207.11.01        Other fresh or chilled whole poultry      

                    U.S. and subtotal                         1474

  0207.12.01        Other frozen whole poultry                

                    U.S.                                      430

                    CHILE                                     996

                    OTHER                                     

                    SUBTOTAL                                  1433

  0207.25.01        Whole frozen turkey                       

                    U.S.                                      1320

                    CHILE                                     153

                    OTHER                                     

                    SUBTOTAL                                  1473

  0207.33.01        Whole ducks, geese & guineas frozen       

                    U.S.                                      601

                    OTHER                                     0

                    SUBTOTAL                                  601

  0207.26.01        Mechanically deboned turkey meat          

                    U.S. and subtotal                         3411

  0207.26.99        Fresh & chilled turkey parts              

                    U.S.                                      67213

                    Other                                     19

                    SUBTOTAL                                  67232

  0207.13.01        Mechanically deboned chicken meat fresh   
                    or Chilled                                

                    U.S. and subtotal                         68089

  0207.14.01        Mechanically deboned chicken meat frozen  

                    U.S.                                      44388

                    CHILE                                     

                    SUBTOTAL                                  46507

  0207.13.99        Fresh & chilled chicken parts             

                    U.S. and subtotal                         31769

  0207.14.99        Frozen poultry parts                      

                    U.S.                                      77877

                    OTHER                                     

                    SUBTOTAL                                  79643

  0207.27.01        Mechanically deboned turkey meat, frozen  

                    U.S.                                      15220

                    OTHER                                     

                    SUBTOTAL                                  16391

  0207.27.99        Frozen turkey parts                       

                    U.S.                                      47991

                    OTHER                                     

                    SUBTOTAL                                  48455

  0207.36.99        Duck, geese or guineas cuts, frozen       

                    U.S. and subtotal                         14

  0207.14.02 &      Poultry livers                            
  0207.36.01                                                  

                    U.S. and subtotal                         1

  0407.00.01        Table eggs, fresh, including hatching     
                    eggs                                      

                    U.S.                                      5584

                    OTHER                                     

                    SUBTOTAL                                  2813

  1602.31.01        Processed meat (Turkey)                   

                    U.S.                                      2047

                    OTHER                                     

                    SUBTOTAL                                  2568

  1602.32.01        Prepared or preserved chicken meat or     
                    offal                                     

                    U.S.                                      6372

                    OTHER                                     421

                    SUBTOTAL                                  6793

  1602.39.99        Other processed poultry meat              

                    U.S.                                      67

                    OTHER                                     

                    SUBTOTAL                                  92

  0207.13.02        Chicken carcasses                         

                    U.S.                                      18317

                    OTHER                                     0

                    SUBTOTAL                                  18317

  0207.14.03        Chicken carcasses                         

                    U.S.                                      0

                    OTHER                                     0

                    SUBTOTAL                                  0

  0207.26.02        Turkey carcasses                          

                    U.S.                                      0

                    OTHER                                     0

                    SUBTOTAL                                  0

  0207.27.03        Turkey carcasses                          

                    U.S.                                      0

                    OTHER                                     0

                    SUBTOTAL                                  0

  0207.13.03        Chicken Leg Quarter, Fresh/chilled        

  This line will    U.S.                                      0
  apply for 2003                                              

                    OTHER                                     0

                    SUBTOTAL                                  0

  0207.14.04        Chicken Leg Quarter, Frozen               

  This line will    U.S.                                      0
  apply for 2003                                              

                    OTHER                                     0

                    SUBTOTAL                                  0
  -----------------------------------------------------------------------

Source: BANCOMEXT, APRIL 2003.

## NAFTA POULTRY AND EGGS TARIFF RATE QUOTAS FOR 2002

+---------------+---------+-------+------------+---+-------------+---+------+
| PRODUCT       | H.S.    | ORI   | ALLOCATION | T |             | \ |      |
|               |         | GINAL |            | O |             | % |      |
|               | Tariff  |       | MECHANISM  | T |             | f |      |
|               | Number  | MT    |            | A |             | i |      |
|               |         | TRQ   |            | L |             | l |      |
|               |         |       |            | I |             | l |      |
|               |         |       |            | M |             | e |      |
|               |         |       |            | P |             | d |      |
|               |         |       |            | O |             |   |      |
|               |         |       |            | R |             |   |      |
|               |         |       |            | T |             |   |      |
|               |         |       |            | S |             |   |      |
|               |         |       |            | ( |             |   |      |
|               |         |       |            | M |             |   |      |
|               |         |       |            | T |             |   |      |
|               |         |       |            | ) |             |   |      |
|               |         |       |            |   |             |   |      |
|               |         |       |            | C |             |   |      |
|               |         |       |            | Y |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 0 |             |   |      |
|               |         |       |            | 0 |             |   |      |
|               |         |       |            | 2 |             |   |      |
+===============+=========+=======+============+===+=============+===+======+
| EGGS Fresh:   | 040     | 8,2   | Direct     | 2 |             | 3 |      |
|               | 7.00.01 | 33.95 | allocation | , |             | 1 |      |
| Border        |         |       | Auction    | 5 |             | . |      |
| regions a/    |         |       |            | 8 |             | 3 |      |
|               |         |       | Direct     | 3 |             | 7 |      |
| Other regions |         |       | allocation | . |             | % |      |
|               |         |       |            | 8 |             |   |      |
| Fertilized:   |         |       |            | 0 |             |   |      |
| Nationwide    |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Whole fresh,  | 020     | 2,5   | Direct     | 2 |             | 8 |      |
| chilled &     | 7.24.01 | 33.53 | allocation | , |             | 1 |      |
| frozen turkey |         |       | to the     | 0 |             | . |      |
|               | 020     |       | border     | 6 |             | 5 |      |
|               | 7.25.01 |       | region and | 5 |             | 1 |      |
|               |         |       | the        | . |             | % |      |
|               |         |       | northern   | 2 |             |   |      |
|               |         |       | line b/.   | 3 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Other whole   | 020     | 16,4  | Direct     | 1 |             |   |      |
| Poultry       | 7.11.01 | 67.91 | allocation | , |             |   |      |
| (Broilers or  |         |       | to the     | 4 |             |   |      |
| hens) fresh,  | 020     |       | border     | 7 |             |   |      |
| chilled or    | 7.12.01 |       | region and | 4 |             |   |      |
| frozen)       |         |       | the        | . |             |   |      |
|               |         |       | northern   | 2 |             |   |      |
|               |         |       | border     | 5 |             |   |      |
|               |         |       | line.      |   |             |   |      |
|               |         |       |            | 4 |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 9 |             |   |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 5 |             |   |      |
|               |         |       |            | 5 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Total         |         |       |            | 1 |             | 1 |      |
|               |         |       |            | , |             | 1 |      |
|               |         |       |            | 9 |             | . |      |
|               |         |       |            | 0 |             | 5 |      |
|               |         |       |            | 3 |             | 6 |      |
|               |         |       |            | . |             | % |      |
|               |         |       |            | 8 |             |   |      |
|               |         |       |            | 1 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Ducks ,geese, | 020     | 9     | A          | 0 |             |   |      |
| and guineas,  | 7.32.01 | 99.00 | nationwide | . |             |   |      |
| whole, fresh  |         |       | auction    | 0 |             |   |      |
|               | 020     |       | (only      |   |             |   |      |
| chilled or    | 7.33.01 |       | ducks,     | 6 |             |   |      |
| frozen        |         |       | geese,     | 0 |             |   |      |
|               |         |       |            | 1 |             |   |      |
|               |         |       | and        | . |             |   |      |
|               |         |       | guineas)   | 0 |             |   |      |
|               |         |       | c/         | 8 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Total         |         |       |            | 6 |             | 6 |      |
|               |         |       |            | 0 |             | 0 |      |
|               |         |       |            | 1 |             | . |      |
|               |         |       |            | . |             | 1 |      |
|               |         |       |            | 0 |             | 6 |      |
|               |         |       |            | 8 |             | % |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Mechanically  | 020     | 34,2  | Direct     | 6 |             |   |      |
| Deboned Meat  | 7.13.01 | 02.66 | allocation | 8 |             |   |      |
|               |         |       | to sausage | , |             |   |      |
|               | 020     |       | companies  | 0 |             |   |      |
|               | 7.14.01 |       |            | 8 |             |   |      |
|               |         |       | and cold   | 8 |             |   |      |
|               | 020     |       | meat       | . |             |   |      |
|               | 7.26.01 |       | producers  | 5 |             |   |      |
|               |         |       |            | 8 |             |   |      |
|               | 020     |       | nationwide |   |             |   |      |
|               | 7.27.01 |       |            | 4 |             |   |      |
|               |         |       |            | 4 |             |   |      |
|               |         |       |            | , |             |   |      |
|               |         |       |            | 3 |             |   |      |
|               |         |       |            | 8 |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 5 |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            |   |             |   |      |
|               |         |       |            | 3 |             |   |      |
|               |         |       |            | , |             |   |      |
|               |         |       |            | 4 |             |   |      |
|               |         |       |            | 1 |             |   |      |
|               |         |       |            | 0 |             |   |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            | 3 |             |   |      |
|               |         |       |            |   |             |   |      |
|               |         |       |            | 1 |             |   |      |
|               |         |       |            | 5 |             |   |      |
|               |         |       |            | , |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 0 |             |   |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 4 |             |   |      |
|               |         |       |            | 0 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Total         |         |       |            | 1 |             | 3 |      |
|               |         |       |            | 3 |             | 8 |      |
|               |         |       |            | 1 |             | 3 |      |
|               |         |       |            | , |             | . |      |
|               |         |       |            | 1 |             | 3 |      |
|               |         |       |            | 0 |             | 2 |      |
|               |         |       |            | 7 |             | % |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 8 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Fresh or      | 020     | 35,4  | Direct     | 6 |             |   |      |
| chilled       | 7.26.99 | 69.49 | allocation | 7 |             |   |      |
| Turkey parts  |         |       | to border  | , |             |   |      |
|               | 020     |       | region and | 2 |             |   |      |
| Frozen Turkey | 7.27.99 |       | the        | 1 |             |   |      |
| parts         |         |       | northern   | 2 |             |   |      |
|               |         |       | border     | . |             |   |      |
|               |         |       | line       | 7 |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       | Direct     |   |             |   |      |
|               |         |       | allocation | 4 |             |   |      |
|               |         |       | to sausage | 7 |             |   |      |
|               |         |       | companies. | , |             |   |      |
|               |         |       |            | 9 |             |   |      |
|               |         |       |            | 9 |             |   |      |
|               |         |       |            | 1 |             |   |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 4 |             |   |      |
|               |         |       |            | 9 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Total         |         |       |            | 1 |             | 3 |      |
|               |         |       |            | 1 |             | 2 |      |
|               |         |       |            | 5 |             | 4 |      |
|               |         |       |            | , |             | . |      |
|               |         |       |            | 2 |             | 8 |      |
|               |         |       |            | 0 |             | 0 |      |
|               |         |       |            | 4 |             | % |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 6 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Poultry cuts  | 020     | 30,6  | Direct     | 3 |             |   |      |
| (broilers or  | 7.13.99 | 08.34 | allocation | 1 |             |   |      |
| hens) fresh,  |         |       | to border  | , |             |   |      |
| chilled or    | 020     |       | region and | 7 |             |   |      |
|               | 7.14.99 |       |            | 6 |             |   |      |
| Frozen        |         |       | the        | 8 |             |   |      |
|               |         |       | northern   | . |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       | border     | 5 |             |   |      |
|               |         |       | line       |   |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            | , |             |   |      |
|               |         |       |            | 8 |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            | 7 |             |   |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 2 |             |   |      |
|               |         |       |            | 9 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Total         |         |       |            | 1 |             | 3 |      |
|               |         |       |            | 0 |             | 5 |      |
|               |         |       |            | 9 |             | 8 |      |
|               |         |       |            | , |             | . |      |
|               |         |       |            | 6 |             | 2 |      |
|               |         |       |            | 4 |             | 2 |      |
|               |         |       |            | 6 |             | % |      |
|               |         |       |            | . |             |   |      |
|               |         |       |            | 0 |             |   |      |
|               |         |       |            | 4 |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
|               |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Duck, goose   | 020     | 10.00 | (only      |   | 0.00        |   |      |
| and guinea    | 7.35.99 |       | ducks,     |   |             |   |      |
| cuts, fresh   |         |       | geese and  |   | 13.77       |   |      |
| chilled or    | 020     |       | guineas)   |   |             |   |      |
| frozen        | 7.36.99 |       | d/         |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| Total         |         |       |            |   | 13.77       |   | 13   |
|               |         |       |            |   |             |   | 7.7% |
+---------------+---------+-------+------------+---+-------------+---+------+
| Source: UNA   |         |       |            |   |             |   |      |
| (Based on     |         |       |            |   |             |   |      |
| data from     |         |       |            |   |             |   |      |
| General       |         |       |            |   |             |   |      |
| Customs       |         |       |            |   |             |   |      |
| Administra    |         |       |            |   |             |   |      |
| tion‑Treasury |         |       |            |   |             |   |      |
| Minister,     |         |       |            |   |             |   |      |
| SHCP)         |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+
| a/ Border     |         |       |            |   |             |   |      |
| region:       |         |       |            |   |             |   |      |
| Includes      |         |       |            |   |             |   |      |
| states of     |         |       |            |   |             |   |      |
| Baja          |         |       |            |   |             |   |      |
| California,   |         |       |            |   |             |   |      |
| Baja          |         |       |            |   |             |   |      |
| California    |         |       |            |   |             |   |      |
| Sur,          |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| Quintana Roo  |         |       |            |   |             |   |      |
| and a portion |         |       |            |   |             |   |      |
| of the state  |         |       |            |   |             |   |      |
| of Sonora;    |         |       |            |   |             |   |      |
| the southern  |         |       |            |   |             |   |      |
| border        |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| region along  |         |       |            |   |             |   |      |
| with          |         |       |            |   |             |   |      |
| Guatemala and |         |       |            |   |             |   |      |
| the           |         |       |            |   |             |   |      |
| m             |         |       |            |   |             |   |      |
| unicipalities |         |       |            |   |             |   |      |
| (counties) of |         |       |            |   |             |   |      |
| Comitan       |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| de Dominguez, |         |       |            |   |             |   |      |
| Chiapas and   |         |       |            |   |             |   |      |
| Salina Cruz,  |         |       |            |   |             |   |      |
| Oaxaca. This  |         |       |            |   |             |   |      |
| region        |         |       |            |   |             |   |      |
| included      |         |       |            |   |             |   |      |
| former        |         |       |            |   |             |   |      |
| free‑trade    |         |       |            |   |             |   |      |
| border areas. |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| b/ Northern   |         |       |            |   |             |   |      |
| border line:  |         |       |            |   |             |   |      |
| The Mexican   |         |       |            |   |             |   |      |
| territory     |         |       |            |   |             |   |      |
| between the   |         |       |            |   |             |   |      |
| International |         |       |            |   |             |   |      |
| line with the |         |       |            |   |             |   |      |
| US.           |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| and a 20 km   |         |       |            |   |             |   |      |
| parallel line |         |       |            |   |             |   |      |
| from the      |         |       |            |   |             |   |      |
| International |         |       |            |   |             |   |      |
| limit,        |         |       |            |   |             |   |      |
| including a   |         |       |            |   |             |   |      |
| portion of    |         |       |            |   |             |   |      |
| the state of  |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| Sonora and    |         |       |            |   |             |   |      |
| the Gulf of   |         |       |            |   |             |   |      |
| Mexico, and   |         |       |            |   |             |   |      |
| the           |         |       |            |   |             |   |      |
| municipality  |         |       |            |   |             |   |      |
| (county) of   |         |       |            |   |             |   |      |
| Cananea,      |         |       |            |   |             |   |      |
| Sonora.       |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| c/ Whole      |         |       |            |   |             |   |      |
| ducks, geese, |         |       |            |   |             |   |      |
| and guineas   |         |       |            |   |             |   |      |
| TRQ is part   |         |       |            |   |             |   |      |
| of the Other  |         |       |            |   |             |   |      |
| Whole Poultry |         |       |            |   |             |   |      |
| TRQ.          |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| d/ Cuts of    |         |       |            |   |             |   |      |
| ducks, geese, |         |       |            |   |             |   |      |
| and guineas   |         |       |            |   |             |   |      |
| TRQ is part   |         |       |            |   |             |   |      |
| of the        |         |       |            |   |             |   |      |
| Poultry Cuts  |         |       |            |   |             |   |      |
| TRQ.          |         |       |            |   |             |   |      |
|               |         |       |            |   |             |   |      |
| Note: In      |         |       |            |   |             |   |      |
| cases where   |         |       |            |   |             |   |      |
| TRQ amounts   |         |       |            |   |             |   |      |
| were          |         |       |            |   |             |   |      |
| exceeded, the |         |       |            |   |             |   |      |
| Government of |         |       |            |   |             |   |      |
| Mexico        |         |       |            |   |             |   |      |
| approved      |         |       |            |   |             |   |      |
| additional    |         |       |            |   |             |   |      |
| import        |         |       |            |   |             |   |      |
| permits.      |         |       |            |   |             |   |      |
+---------------+---------+-------+------------+---+-------------+---+------+

## Poultry Numbers 

+--------------------------------------------+-------------------------+
| **MEXICO: POULTRY NUMBERS, 2002**          |                         |
+--------------------------------------------+-------------------------+
| #### Type of Bird                          | **Thousand of Head**    |
+--------------------------------------------+-------------------------+
| Laying Hens in production\*                | 115,287                 |
+--------------------------------------------+-------------------------+
| Pullets in grow out                        | 34,586                  |
+--------------------------------------------+-------------------------+
| Light Breeding Hens in production          | 872                     |
+--------------------------------------------+-------------------------+
| Light Breeding Hens in grow out            | 340                     |
+--------------------------------------------+-------------------------+
| Light Progenitor Hens in production        | 0                       |
+--------------------------------------------+-------------------------+
| Light Progenitor Hens in grow out          | 0                       |
+--------------------------------------------+-------------------------+
| Heavy Breeder Hens in production           | 8,955                   |
+--------------------------------------------+-------------------------+
| Heavy Breeder Hens in grow out             | 6,102                   |
+--------------------------------------------+-------------------------+
| Heavy Progenitor Hens in production        | 159                     |
+--------------------------------------------+-------------------------+
| Heavy Progenitor Hens in grow out          | 107                     |
+--------------------------------------------+-------------------------+
| Broilers (Per cycle)                       | 225,593                 |
+--------------------------------------------+-------------------------+
| Turkeys (Per cycle)                        | 821                     |
+--------------------------------------------+-------------------------+
| Total Poultry Flock                        | 392,822                 |
+--------------------------------------------+-------------------------+

\*There are an estimated 19 million laying hens in the second cycle

Source: UNA (National Poultry Association)

## Per Capita Consumption

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

  Products / pounds-         2000        2001        2002        2003\*

  EGGS                       43.87       44.50       44.54       44.76

  CHICKEN MEAT               43.87       45.97       47.80       49.30

  TURKEY MEAT\*\*            3.57        4.18        4.29        4.41
  -------------------------- ----------- ----------- ----------- -----------

Source: UNA (National Poultry Association)

\*Forecast

\*\*Includes whole turkey, turkey parts and processed products.

## Monthly Exchange Rate

+---------------------+-----------+---+-----------+---+-----------+---+
| **MONTHLY EXCHANGE  |           |   |           |   |           |   |
| RATE AVERAGES**     |           |   |           |   |           |   |
+=====================+===========+===+===========+===+===========+===+
| Month               | **2001**  |   | **2002**  |   | **2003**  |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| ######### January   | 9.76      |   | 9.16      |   | 10.59     |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **February**        | 9.70      |   | 9.10      |   | 10.93     |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **March**           | 9.60      |   | 9.07      |   | 10.92     |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **April**           | 9.33      |   | 9.14      |   | 10.61     |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **May**             | 9.14      |   | 9.49      |   | 10.25     |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **June**            | 9.09      |   | 9.75      |   | 10.50     | \ |
|                     |           |   |           |   |           | * |
+---------------------+-----------+---+-----------+---+-----------+---+
| **July**            | 9.15      |   | 9.79      |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **August**          | 9.12      |   | 9.83      |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **September**       | 9.40      |   | 10.05     |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **October**         | 9.45      |   | 10.09     |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **November**        | 9.25      |   | 10.19     |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **December**        | 9.16      |   | 10.21     |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+
| **Annual Avg.**     | **9.35**  |   | **9.82**  |   | N/A       |   |
+---------------------+-----------+---+-----------+---+-----------+---+

Source: Mexican Federal Register

Note: Monthly rates are averages of daily exchange rates from the Banco
de Mexico.

\* as of June 26, 2003.

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

# CHICKEN MEAT

## PRODUCTION

Mexican chicken meat production for MY 2004 (Jan-Dec) is forecast to
increase five percent over MY 2003 production, similar to the growth
rate of the past two years. Despite the slowdown in the economy during
2002-2003, chicken producers continue to face favorable demand for their
products. The provisional poultry safeguard which was in place from
January 22 to July 22, 2003, and the final safeguard, which was put in
place on July 25, 2003, should help the domestic industry to continue
expanding production (See Trade Section). Chicken is still considered as
the least expensive meat in Mexico. Feed costs account for nearly 55
percent of the cost of production, however, increased vertical
integration in the industry helps to lower production costs.

The chicken meat production estimate for MY 2003 remains unchanged.
Effective marketing campaigns, strong financial positions among chicken
processors, and continued improvement in product quality should all help
to spur demand and production during the balance of the marketing year.
The estimate of MY 2002 production was revised downward about 1 percent
based on revised industry (UNA) data. This decrease was mainly the
result of damage caused by the Hurricane Isidore in Merida, Yucatan.

According to industry sources, poultry feed consumption for MY 2004 is
expected to grow about 5 percent over MY 2003. Producers indicate that
60 percent of imported feedstuffs are sorghum and corn, 23 percent
oilseeds and protein meals, and 17 percent other products such as
safflower, orthophosphate, calcium, and methionine. By the end of June
2003, domestic white corn prices averaged 1,700 pesos/MT (US\$162.00/MT)
and domestic sorghum prices averaged from 1,000 to 1,300 pesos/MT
(US\$95.23 to \$123.80/MT).

Modern technology continues to be widely used by domestic poultry
producers. UNA indicates that 60 percent or more of the industry is
mechanized. About 80 percent of total Mexican chicken meat is produced
in large vertically integrated companies. Genetics are usually sourced
from the United States. The main broiler breeding flocks in Mexico are
ROSS BREEDERS and HYBRO, which, combined, represent approximately 70
percent of the total broiler breeding stock. For the layer breeding
flocks, 90 percent of production is white eggs, and the most
representative genetic lines are HY LINE with 33 percent of total
domestic production and ISE BABCOCK-300 with 35.3 percent of total
production. The main genetic line for brown egg production is HISEX
BROWN with 5.1 percent of total domestic production.

Industry consolidation and investment in infrastructure are expected to
continue in the medium term and it is expected that the expansion of
large vertically integrated companies will continue through growing
investment in large-scale production operations. Currently, three
leading companies account for nearly 60 percent of total domestic
production of chicken meat. Over the next five years, the industry is
expected to consolidate further and these three companies could account
for as much as 80 percent of production. Medium size companies will
likely merge into cooperatives and associations, with smaller players
becoming contract producers. According to UNA data, large poultry
producers accounted for 33 percent of the total production in 1996,
compared to 52 percent in 2001. Whereas small farms accounted for 27
percent of production in 1996, compared to 14 percent in 2001.

The average bird grow-out period depends largely 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 1.775 kg. UNA reports
that the average feed conversion ratio is 2.2 kg of feed to 1 kg of
poultry meat.

## CONSUMPTION

Chicken meat consumption for MY 2004 is forecast to increase 5 percent
due to population growth, the affordability of chicken relative to other
meat, effective marketing, and improved product quality. Chicken meat
demand is relatively elastic, so changes in price result in significant
changes in consumption. However, broiler consumption continues to
increase because it is cheaper compared to red meats. Increased consumer
awareness of cholesterol problems is resulting in greater marketing
opportunities for chicken meat. Consumers continue to prefer fresh whole
chickens to chicken parts. Although, purchases of chicken parts are
increasing slowly, mainly in supermarkets servicing higher-income
consumers. Mexican consumers tend to prefer dark meat over white meat.

Domestic consumption estimates for MY 2003 were revised downward, due to
animal health and food safety regulations that have slowed imports, but
still reflect an increase over MY 2002. Wholesale prices for the month
of June 2003 were on average about \$22.00 pesos/Kg (US\$2.09/kg) for
chicken leg quarters and \$14.25 pesos/kg (US\$1.35/kg) for broilers.
Industry sources estimate that chicken prices were higher due in part to
import restrictions on Avian Influenza (AI), Exotic Newcastle disease
(END), and other sanitary measures (See Trade Section). Consumption
estimates for MY 2002 were also revised downward based on industry
information and slightly higher prices during the latter part of the
year.

Roasting chickens (whole chicken without offal) account for 25 percent
of chicken meat consumption, while chickens sold in wet markets and
stalls (whole chicken including offal) account for approximately 27
percent of the total. Live birds represent 29 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 10 percent of total consumption. Value added
products account for about 4 percent of total consumption.

TRADE

Chicken and turkey meat are the primary poultry products imported by
Mexico. Tariffs and tariff rate quotas were lifted for 2003 to comply
with NAFTA. Imports of cuts and mechanically deboned meat (MDM) for MY
2004 are expected to increase 5 percent over MY 2003 imports. Due to
concerns that duty free imports of U.S. chicken leg quarters (CLQs)
bone-in could injure the domestic industry, a safeguard was negotiated
between the U.S.- and Mexican poultry industries that establishes a
tariff-rate quota for CLQs (see details later in this section).

Imports of poultry cuts and mechanically deboned chicken (MDC) for MY
2003 were revised downward, however, imports are estimated 4 percent
over MY 2002 revised imports. Quarantine requirements implemented by the
Mexican government on imported poultry products during 2002 and 2003
were a key factor in slowing imports during MY 2003. MY 2002 poultry
imports were revised downward based on available data. Also, according
to official Mexican trade data, further processed chicken products
imports (HTS 160232) have not been increasing as expected, lowering
total poultry imports for 2002 and 2003.

*(Note: Mexican trade data for January 2003 show a huge increase in
chicken parts imports (HTS 0207.14) of about 104,323 MT, while U.S data
is about 1,285 MT. Although the Mexican poultry industry claims that
this product was imported, importers and brokers indicate that this
volume was never physically imported. It appears that importers filed
import documents (master pedimentos) in order to buy large quantities of
CLQs, but the imports did not take place. Nevertheless, it appears that
the documents were counted as if the products had been physically
imported. Mexican authorities are still reviewing this issue).*

Due to concerns about the presence of Low Pathogenic Influenza (LPAI) in
certain U.S. states in 2002 and the Exotic Newcastle Disease (END)
outbreaks, the Secretariat of Agriculture (SAGARPA) through the Mexican
Animal Health authorities established LPAI and END import requirements
for imported poultry products. The regulations required that all raw
poultry, hatching and table eggs destined for retail sale (direct raw
consumption by consumers) originate from END and LPAI free states, and
come from flocks that have undergone two AI tests using the agar gel
immunodifusion (AGID) procedure and the hemagglutination inhibition (HI)
test. For the 20 km border area, SAGARPA continued to exempt imported
poultry products from the HI testing requirement.

However, following technical meetings between the Animal and Plant
Health Inspection Service and SAGARPA and as part of the safeguard
agreement, the Government of Mexico lifted the HI testing requirement
for all of Mexico. Consequently, the test is no longer required.
Additionally, on June 16, 2003, SAGARPA lifted the END ban on the five
buffer states of Oregon, Idaho, Utah, Colorado and New Mexico. However,
poultry and poultry meat imports from those states will have to comply
with stringent END certifications required by SAGARPA. Exporters should
check requirements with importers before shipping any product. Under the
terms of the safeguard agreement, SAGARPA is to lift all remaining END
and LPAI restrictions. It is expected that these requirements will be
lifted during late August 2003.

The following table shows how the current AI and END regulations are
affecting U.S. poultry and poultry products exports to Mexico. []{.mark}

[]{.mark}

#### REGULATIONS FOR POULTRY AND POULTRY PRODUCTS EXPORTS

+------------+----------+-----------+----------+-----------+--------+
| **Item**   | **Raw    | **Raw     | **Fully  | **Table   | *      |
|            | Poultry  | poultry   | Cooked   | and       | *Three |
|            | for      | Further   | Pr       | Hatching  | Day    |
|            | Retail   | P         | oducts** | Eggs**    | Old    |
|            | 1/**     | rocessing |          |           | Ch     |
|            |          | 6/**      |          |           | icks** |
|            | *        |           |          |           |        |
|            | *CLQs.** |           |          |           |        |
+============+==========+===========+==========+===========+========+
| END states | NO       | YES       | YES      | NO        | NO     |
| export     |          |           |          |           |        |
| status 2/  |          |           |          |           |        |
+------------+----------+-----------+----------+-----------+--------+
| AI states  | NO       | YES       | YES      | NO        | NO     |
| export     |          |           |          |           |        |
| status 3/  |          |           |          |           |        |
+------------+----------+-----------+----------+-----------+--------+
| 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 4/    | YES 4/ |
| test       |          |           |          |           |        |
| required   |          |           |          |           |        |
+------------+----------+-----------+----------+-----------+--------+
| New        | YES      | YES       | YES      | YES       | YES    |
| cer        |          |           |          |           |        |
| tification |          |           |          |           |        |
| re         |          |           |          |           |        |
| quirements |          |           |          |           |        |
| on END 5/  |          |           |          |           |        |
+------------+----------+-----------+----------+-----------+--------+
| New        | YES      | YES       | YES      | YES       | NO     |
| labeling   |          |           |          |           |        |
| and export |          |           |          |           |        |
| re         |          |           |          |           |        |
| quirements |          |           |          |           |        |
+------------+----------+-----------+----------+-----------+--------+

N.A.- Does not apply

1/ SAGARPA temporarily suspended imports of bone-in chicken leg quarters
for further processing because some importers declaring this product was
undergoing further processing was in reality being diverted to local
markets for direct consumption.

2/ [The four states affected by END are: Texas, California, Nevada and
Arizona.]{.mark} The ex-buffer states of Oregon, Idaho, Utah, Colorado
and New Mexico can now export to Mexico complying with stringent testing
END certifications. Except Texas, all END affected states are not
eligible to store or consolidate raw product for direct human
consumption or further processing. Restrictions should be lifted shortly
in accordance with the terms of the safeguard agreement.

3[/ The eight states affected by low path AI are: Maine, Connecticut,
Pennsylvania, West Virginia, Virginia, North Carolina, Texas and
California.]{.mark} Restrictions should be lifted shortly in accordance
with the terms of the safeguard agreement.

4/ Test should be conducted on a quarterly basis.

5/ Statement for meat, meat products and by products. -"That the product
comes from flocks that have a 70 bird monitoring program which began
after the age of 12 days, using viral isolation and velogenic strain
identification tests and interbrain pathogenic index test in one-day old
chicks; and is carried out on each lot entering a particular farm,
obtaining Newcastle Disease velogenic presentation negative results."

6/ Imports are only approved to proceed to Federal Inspected Plants
(TIF) and non-TIF meat processing facilities. Meat processors/importers
are also responsible of submitting a letter before SAGARPA indicating
that all raw poultry ingredients will be subject to thermal treatment.
(See reports MX 3002 & MX 3009)

For additional information regarding poultry meat and egg products
exports to Mexico see the web page USDA/FSIS/Export Library at-
http://www.fsis.usda.gov/OFO/export/Mexico.htm

Source: FAS, USAPEEC Mexico.

While the LPAI requirements (chiefly the HI testing requirements) halted
nearly all exports of raw chicken to the interior of Mexico from July
2002 through July 2003, exports of mechanically deboned meat (MDM) and
poultry products for further processing were largely unaffected. Mexican
processors import MDM as an input for the domestic sausage and cold-cuts
industries. Domestic production of MDM is only around 10,000 MT. The
leading meat packers account for more than 80 percent of total MDM
imports. MDM imports for MY 2003 and 2004 are expected to remain strong.

Exports of duck and goose meat, which are typically consumed directly,
were hit hard by the HI testing requirement. Now that the HI test is not
required, duck and goose meat trade is expected to increase.

Following the elimination of remaining poultry tariffs on January 1,
2003, under the provisions of the NAFTA, the Mexican poultry industry
petitioned the Government of Mexico for a safeguard on CLQs. On January
22, 2003, the Secretariat of Economy (SE) announced a provisional
safeguard tariff that would be in place for up to six months. SE allowed
50,000 MT of U.S. CLQs into the Mexican border zone at zero duty and
imposed a provisional safeguard tariff of 98.8 percent on imported CLQs
above that level and for other regions in Mexico. All other U.S. poultry
exports continued to enter Mexico duty free. On []{.mark}July 25, 2003,
the final safeguard was published establishing a tariff-rate quota of
46,950 MT for the balance of CY 2003 and imposing an over-quota tariff
of 98.8 percent on U.S. imported CLQs. This safeguard will be in place
for five years when the over-quota tariff will drop to zero on January
1, 2008. The tariff-rate quota will be limited, as in the past, to the
northern border line, and the border region. The tariff-rate quota will
grow 1 percent annually through 2007. (See Report MX3099) Mexico will
allow any imports of U.S. CLQs in excess of the tariff-rate quota to be
sold throughout the country.

**The northern border line is defined as** \-- The Mexican territory
between the international line with the United States and a 20 km
parallel line from the International limit, including a portion of the
state of Sonora and the Gulf of Mexico, and the municipality of Cananea,
Sonora.

**The border region is defined as** \-- Includes the states of Baja
California, Baja California Sur, Quintana Roo (Puerto Morelos -Cancun),
and a portion of the state of Sonora; the southern border region along
with Guatemala and the municipalities of Comitan de Dominguez, Chiapas
and Salina Cruz, Oaxaca.

[]{.mark}

Due to the fact that Mexican consumers prefer chicken dark meat to white
meat, this preference tends to result strong prices for dark meat.
During the first half of 2003, wholesale prices in Mexico City for whole
chicken breasts were US\$1.21/lb to \$1.42/lb, while CLQs ranged from
US\$0.73/lb to US\$0.99/lb. Wholesale prices for imported CLQs marketed
at the border were on average US\$0.33/lb to \$0.34/lb. On the other
hand, U.S. prices for whole breasts during the same period were
approximately US\$0.66/lb to US\$1.00/lb F.O.B, while CLQs were priced
at approximately US\$0.16 to \$0.26/lb F.O.B. []{.mark}

[]{.mark}

Trade between Mexico and the European Union under their free trade
agreement has been small. Fresh poultry meat was not among the
agricultural products negotiated in the tariff negotiations. Most of the
trade has been Mexican exports of SPS eggs, which enjoy a 50 percent
reduction in the EU tariff.

## POLICY

The Government of Mexico has implemented on again, off again *Listeria*
and *salmonella* testing procedures. The actions appear to have been
initiated by the Secretariat of Health (SSA) in response to perceived
concerns about the safety and quality of U.S. meat. Currently, some
random sampling of imported meat is taking place, but there are no
penalties or requirements in place in the event of a positive finding.
However, SSA is considering the publication of NOM-194-2000, which would
establish a testing program for salmonella and E. Coli. At this time,
it's not clear if or when this regulation will be published.

## MARKETING

Although generic advertising campaigns have been a good approach to
increase domestic consumption of poultry products, recent import
restrictions have resulted in a drop in these kinds of activities. As
barriers are lifted, it's expected that these kinds of activities will
resume. Some seminars geared towards the processing industry on the use
of chicken thighs were held. 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.

For cooked and processed poultry products, USAPEEC's Mexico office has
participated in large retail and food service shows like EXPHOTEL. The
main challenge to U.S. exporters of high value products continues to be
finding a local distributor with wide distribution capacity. In
addition, distribution of imported food products, particularly frozen
products, is dominated by only a few local distributors with established
relationships and product lines. One possible way of broadening
distribution options would be to find Mexican partners amongst meat and
poultry processors with distribution capabilities. Local processors may
be interested in selling imported products under their local brands.

# TURKEY MEAT

## PRODUCTION

Turkey meat production is forecast to grow around 4 percent during MY
2004 to 14,400 MT. Turkey meat production for MY 2003 is still estimated
at 13,800 MT. LPAI and END regulations on imported chicks and fertile
eggs has complicated access to genetic stock (See Chicken Trade Section)
for turkey producers. Production for MY 2002 remains unchanged. Domestic
meat production represents less than 10 percent of total consumption and
domestic firms sell 75 percent of their production as uncooked whole
turkeys for the Christmas season. Production of domestic turkey parts
and further-processed products is very limited. Two large companies
(Parson and Jerome-Mezoro) represent almost 90 percent of total domestic
production. Most turkey is produced in the states of Chihuahua (40
percent) and Sonora (50 percent).

Genetics are usually sourced from the United States. The main turkey
breeding flocks in Mexico are ORLOP with 50 percent, NICOLAS with 40
percent, and BUTA with 10 percent of domestic production. Producers
import almost all the progenitor stock and are also importing fertile
eggs for light and heavy breeders.

## CONSUMPTION

Consumption for MY 2004 is expected to grow more than 4 percent, as
sanitary restrictions on imports ease following the signing of the
poultry safeguard agreement (see chicken trade section). The consumption
estimates for MY 2003 have been revised downward based on the most
recent industry information, reflecting the effects of the sanitary
import requirements on imports. Consumption of turkey in the form of
cold cuts continues to increase, primarily through sales in supermarkets
and deli-restaurants, but at a slower pace. Cooked hams made from blends
of domestic pork and U.S. turkey thigh meat are substantially cheaper
than pure pork cooked hams. Most of the whole turkey demand is during
the Christmas season, where average bird weight is 15 pounds. Average
per capita consumption is estimated by UNA at 4.41 pounds for 2003
including whole turkey, turkey cuts and other turkey products.
Consumption estimates for MY 2002 were revised downward based on the
most recent information from UNA.

## TRADE

Turkey meat imports are forecast to grow 5 percent for MY 2004. Sanitary
measures had some effect on overall Turkey imports as imports of fresh
Turkey for direct consumption were slowed in 2003; however, this
situation is expected to improve for MY 2004 as sanitary requirements
ease (see chicken trade section). Turkey parts and MDT for further
processing were not required to comply with stringent LPAI and END
regulations. Therefore growth in imports of these products has remained
strong. Whole turkey imports have been hit by shifting labeling
requirements, but this issue appears to be resolved for now. The
labeling requirements primarily affect smoked whole turkeys, which
compete directly with domestic production around the Christmas season.
Chilean poultry imports were banned during 2002 due to an AI outbreak,
which is why overall turkey imports decreased during 2002. However,
Mexico lifted the ban it had on Chilean imported poultry products in
June 2003. Chilean poultry imports are duty free under the Mexico-Chile
Free Trade Agreement.

The United States is by far the main supplier of turkey meat and
products to Mexico. Imported parts and MDT have been very successful,
mainly turkey thigh meat, which is used to produce franks, hams, and
cold cuts. Currently, two large corporations have about 75 percent of
the market share for these products. Imports are expected to continue
because domestic producers cannot meet Mexican packers' demand for MDT.
However, the domestic pork industry continues to be concerned about
these imports. The Government of Mexico recently established standards
for defining "hams", which is expected to change the name of some of the
products that have been labeled as hams previously, but is not expected
to affect turkey import demand. Domestic meat processors are demanding
more turkey thigh meat to produce cooked hams made up of blends of
domestic pork and U.S. turkey thigh. 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 the total production in Mexico is marketed as whole
turkeys during the Christmas season and approximately 25 percent is sold
as cut-up and further processed turkey meat products. USAPEEC, along
with local turkey producers, 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 food service shows promoting further-processed poultry
products. For example, USAPEEC members have showcased their products at
the ExpoHotel show in Cancun along with other U.S. selected food and
beverage products.