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THE MEXICAN POULTRYTHE MEXICAN POULTRY

INDUSTRY AND THE NAFTAINDUSTRY AND THE NAFTA

Cesar de AndaCesar de AndaCancún, MéxicoCancún, MéxicoMay 6 - 7, 2004May 6 - 7, 2004

FIRST ANNUAL NORTH AMERICAN AGRIFOODFIRST ANNUAL NORTH AMERICAN AGRIFOOD

MARKET INTEGRATION WORKSHOPMARKET INTEGRATION WORKSHOP

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Performance of Poultry Industry

1. Situation before NAFTA

2. Transition period

3. Free Trade

4. Conclusions

3

The relationship before NAFTA

• Commercial exchange with not clear rules

• Restrictions determined by the government

• Continues changes

• United States exported poultry products to the mexican market

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Before NAFTA• Differences between Mexican and US

Industries (1990):

– Scale of Production:• Poultry industry 7.6 times bigger in US than Mexico• Egg 3.6 times bigger in US than Mexico• Turkey 217.3 times bigger in US than Mexico

– Pattern of consumption has an impact on the prices of products

– Access to raw materials had a direct impact on costs

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Performance of Poultry Industry

1. Situation before NAFTA

2. Transition period

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• Clear rules

• Obligations for both countries

• Trade and more trade

• Dispute mechanism

What means NAFTA ?

7

1.38 1.

51

1.48

1.49 1.

59

1.78 1.

94

2.07

2.16

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Mil

lon

es d

e T

onel

adas

1994

1995

1996

1997

1998

1999

2000

2001

2002

CHICKEN MEAT PRODUCTION

Transition periodM

illi

on T

ons

8

1.46

1.45

1.47 1.59

1.69

1.83

1.94 2.

01

2.04

1.0

1.2

1.4

1.6

1.8

2.0

2.2M

illo

nes

de T

onel

adas

1994

1995

1996

1997

1998

1999

2000

2001

2002

SHELL EGG PRODUCTION

Transition periodM

illi

on T

ons

9

7,00

0

9,60

0 11,2

00

11,6

00

11,8

40

12,0

80

12,4

40

12,8

16

13,1

63

6,000

8,000

10,000

12,000

14,000

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

TURKEY MEAT PRODUCTION

TONS

Transition period

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Transition periodEVOLUTION OF CORN QUOTAS ( QUOTA NAFTA VS. IMPORTS )

3,26

3,23

8

3,07

4,68

4

3,16

6,92

4

2,98

5,13

0

2,89

8,18

5

2,81

3,77

2

2,73

1,81

7

2,65

2,25

0

2,57

5,00

0

2,50

0,00

0

5,909,037

5,033,938

5,356,501

6,000,0006,040,300

5,911,376

2,103,085 2,718,508

2,439,7375,100,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

YEAR

TO

NS

QUOTA NAFTA IMPORTS

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• Considering all those factors, Mexico is:

– The fourth producer of chicken meat worldwide

– The sixth producer of shell egg worldwide

Transition period

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• With the NAFTA the US industry consolidated its position like main supplying of poultry products to the Mexican market:

– 99 % of the imports of poultry meat products are from USA

– 98 % of the egg products are from USA

– 80 % of the egg for hatching and live chickens are from USA

Transition period

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• Final imports of chicken meat(thousand tons)

73.8

115.

5

141.

6

137.

9

123.

3

50

70

90

110

130

150

1996

2000

2001

2002

2003

• Evolution of the AYG:– 1996 to 2001 was 14%– 1996 to 2002 was 11%– 2001 to 2002 was - 2.7%– 2002 to 2003 was - 10.6%

• In average, from 1996 to the year 2002, imports of chicken meat represent 6% of national production

• 100% of the imports are for the border zone

Imports

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• Final imports of fresh egg(tons)

9,36

3

9,95

1

10,2

45

11,3

52

9,40

3

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

1996

2000

2001

2002

2003

• Evolution of theAYG:– 1996 to 2001 was 1.8%– 1996 to 2002 was 3.3%– 2001 to 2002 was10.8%– 2002 to 2003 was - 17.2%

• 90% of imports belong to fertile egg

• In 2003 only 17 tons of fresh egg were imported

Imports

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• Final imports of turkey meat(thousand tons)

61

94

98

79

113

50

60

70

80

90

100

110

1996

2000

2001

2002

2003

• Evolution of AYG:– 1996 to 2001 was 10%– 1996 to 2002 was 4.3%– 2001 to 2002 was -

20.8%– 2002 to 2003 was 43.3%

• There has been an increase on imports of pieces by the inlay industry and imports of turkey legs by roasteries.

Imports

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Performance of Poultry Industry

1. Situation before NAFTA

2. Transition period

3. Free trade

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• Access to raw materials – Mexico is not self sufficient in grains

40% comes from local market 60% comes imports

– Poultry market is open to free trade and yellow corn will be liberalized in 4 years This generates a real negative protection

• Technology on the Industry– In the US, 90% of the plants have further processes:

nuggets, ready to cook meals, etc.– In Mexico just starting up

Free Trade Facts

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Industry Performance in 2003

• In 2003 poultry industry produced 4.24 million tons – 1.9 million tons of table eggs– 2.3 million tons of chicken meat– 13.7 thousand tons of turkey meat

• Total value of production was almost $4.5 billion dollars

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A friendly relationship has always existed

It has strengthened during the last years

In 1999 UNA proposed to create a mechanism to talk officially with their counterparts

the NAFTA Egg & Poultry Partnership (NEPP) was borned in October 2000

RELATIONSHIP WITH THE US INDUSTRY

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Objectives of NEPP:– Be a mechanism to discuss and analize problems of the

industries

– Create a forum for mutual understanding and cooperation

– Create task groups to discuss, analize and solve issues on: Consumption Free trade barriers Sanitary policies Trade disputes

Free Trade

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Safeguard on chicken quarters:– Meetings to analyze impact since 2001

– Common solution UNA and USAPEEC: mechanism to protect mexican industry on certain

products

– Intense lobbying through 2001 and 2002 with: Federal Government Mexican representatives abroad US Authorities Industries

Free Trade

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Performance of Poultry Industry

• Situation before NAFTA

• Transition period

• Free trade

• Conclusions

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• The transition period and the rules of the NAFTA have evidenced that the markets of United States and Mexico are complementary

– United States consumes Breast and wings

– Mexico consumes Leg quarters

– Mexico needs of the agricultural inputs and egg for hatching and live birds of breeding of United States

– Mexico offers to United States, workforce cheap, beneficent weather for the production

Conclusions

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• In both industries, USAPEEC and UNA, has the vision of integrating a poultry market of North America (Mexico, United States and Canada), this will allow :

– To be more competitive in front of the Brazilian industry

– To supplement the export areas for the attention of common markets

– To have poultry production in the three countries

– To maintain the growth of the industry

Conclusions

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THANKSTHANKS