THE MEXICAN POULTRY INDUSTRY AND THE NAFTA

1
THE MEXICAN POULTRYINDUSTRY AND THE NAFTA
FIRST ANNUAL NORTH AMERICAN AGRIFOOD MARKET
INTEGRATION WORKSHOP
Cesar de Anda Cancún, México May 6 - 7, 2004
2
Performance of Poultry Industry

• Situation before NAFTA ?
• Transition period
• Free Trade
• 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

4
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

5
Performance of Poultry Industry

• Situation before NAFTA
• Transition period ?

6
What means NAFTA ?

• Clear rules
• Obligations for both countries
• Trade and more trade
• Dispute mechanism

7
Transition period
CHICKEN MEAT PRODUCTION
AYG (94/02) 5.7
Million Tons
8
Transition period
SHELL EGG PRODUCTION
AYG (94/02) 4.3
Million Tons
9
Transition period
TURKEY MEAT PRODUCTION TONS
AYG (94/02) 8.2
10
Transition period
11
Transition period

• Considering all those factors, Mexico is
• The fourth producer of chicken meat worldwide
• The sixth producer of shell egg worldwide

12
Transition period

• 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

13
Imports

• Final imports of chicken meat
• (thousand tons)

• 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

14
Imports

• Final imports of fresh egg
• (tons)

• 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

15
Imports

• Final imports of turkey meat
• (thousand tons)

• 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.

16
Performance of Poultry Industry

• Situation before NAFTA
• Transition period
• Free trade ?

17
Free Trade Facts

• 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

18
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

19
RELATIONSHIP WITH THE US INDUSTRY

• 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

20
Free Trade

• 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

21
Free Trade

• 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

22
Performance of Poultry Industry

• Situation before NAFTA
• Transition period
• Free trade
• Conclusions ?

23
Conclusions

• 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

24
Conclusions

• 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

25
THANKS