Poultry and Egg Prices and Trade Snapshot

An Expert's View about Poultry in Mexico

Posted on: 19 Dec 2012

This report spotlights developments affecting the Mexican poultry and egg sector as it relates to trade opportunities and challenges.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 11/29/2012 GAIN Report Number: MX2087 Mexico Post: Mexico Poultry and Egg Prices and Trade Snapshot Report Categories: Poultry and Products Agricultural Situation Agriculture in the Economy Agriculture in the News Pest/Disease Occurrences Trade Policy Incident Report Approved By: Daniel K. Berman Prepared By: Adam Branson Report Highlights: This report spotlights developments affecting the Mexican poultry and egg sector as it relates to trade opportunities and challenges (e.g., allegations of antidumping) as well as Mexico’s avian influenza outbreak that occurred in June 2012. U.S. poultry and egg prices remain competitive and provide Mexican consumers with a low-cost and highly nutritious source of protein. It appears that imports of U.S. poultry and egg products into Mexico could be a record in 2012 and surpass U.S. $1 billion. General Information: Avian Influenza Outbreak Disrupts Egg Market and Chicken Leg Quarter (CLQ) Antidumping Case On November 16, 2012, Mexico surpassed 90 days from its most recent detection of highly pathogenic avian influenza (HPAI) H7N3 in commercial egg-layer flocks. Over the course of the outbreak, the National Service of Health, Food Safety, and Food Quality (SENASICA) surveyed 513 farms (271 layers, 200 broilers, and 42 breeders) for the H7N3 virus and detected it only on 44 layer farms in the state of Jalisco. The source of the outbreak was not definitively determined, but Mexican officials report that the source likely was wild and/or migratory birds or waterfowl. The outbreak resulted in the death or culling of around 22.4 million layers and, according to Mexico’s poultry and egg industry organization (UNA), reduced national egg production by 15 percent for calendar year 2012. Mexico’s high level of egg consumption (NOTE: Mexico is considered to have the greatest per capita consumption of eggs in the world) coupled with the production decrease and HPAI-related market speculation, pushed egg prices higher for all major population centers (see Chart 1) and necessitated that Mexico open its market more broadly to imported eggs. UNA reports that industry members attempted to maintain supplies and dampen the price spike by reducing or eliminating egg and egg product exports while also extending egg-layer production cycles to between 125 to 128 weeks. Nevertheless, prices more than doubled during the outbreak and are still hovering more than $0.50 per kilogram (kg) greater than the same period one year ago whereas U.S. egg prices in dollars per dozen are virtually unchanged from the same period last year. In addition to disrupting the general supply and demand of Mexico’s egg market, escalating prices pushed Mexico’s Foreign Trade Commission (COCEX) to refrain from imposing antidumping duties on imported U.S.-origin CLQs. U.S. CLQs remain a low-cost protein source for many Mexican consumers and are much cheaper than their Mexican equivalent CLQ as feed grain input costs and consumption preferences between the countries differ significantly. At the time when COCEX and the International Trade Practices Unit (UPCI) of the Mexican Secretariat of Economia announced that antidumping duties would not be imposed, the government bodies indicated that they would be monitoring prices and could impose duties when market circumstances dictated. As of November 28, 2012, the Mexican Government has not imposed any duties on U.S. CLQs, but the issue remains active as the U.S. industry appealed the decision to the NAFTA Secretariat and the Mexican industry filed the equivalent of an injunction to overturn the decision to refrain from imposing duties (see Chart 11 at the end of this report for a timeline of events in Mexico’s poultry sector). Prices MX2087 Poultry and Egg Prices and Trade Snapshot Page 2 Mexican Egg and CLQ Prices Remain Higher than the U.S. due to Input Costs and Consumer Preferences Mexican authorities and industry members indicate that egg prices (both farm-gate and wholesale market) have stabilized albeit at levels greater than before the outbreak. The pre- and post-incident prices are considerably different in Mexico while prices in the U.S. are similar to one year ago. (NOTE: In Chart 1, above, Mexican wholesale market prices are listed in U.S. $ per kilogram whereas U.S. warehouse prices for Grade A medium and large eggs are listed in U.S. $ per dozen. In order to accurately compare the Mexican and U.S. price series, it would be necessary to convert dozen eggs into kilograms by factors for both medium- and large-sized eggs or to try and develop some standard for sizing Mexican eggs which, from Post experience often vary). As can be seen in Chart 2, below, there is a significant markup on CLQ prices at Mexican wholesale markets over imported chilled (red) or frozen (green) U.S. CLQs and even U.S.0-based domestic bulk CLQ prices (blue). The Mexican wholesale markets (Mexico City, purple and Baja California, orange) could both sell imported and domestic origin CLQs however; U.S. industry sources report that these markets carry negligible volumes of U.S. origin product and that the prices generally reflect Mexican- origin product prices. MX2087 Poultry and Egg Prices and Trade Snapshot Page 3 Chart 2 also provides perspective on Mexico’s antidumping findings on U.S. CLQs with key dates for the investigation, preliminary and final determination, and timeframes of the investigation and damage period noted. Also, as noted in the chart, it is evident that imported products are always cheaper than Mexican origin product by a significant degree and virtually always more expensive than U.S. domestic recorded CLQ prices. Interestingly, U.S. imported CLQ prices are often less expensive than even Mexican wholesale market egg prices. Trade Despite Industry Tensions, Trade Volumes and Values Keep Growing In spite of the tension between the U.S. and Mexican industries over the CLQ issue there are strong degrees of cooperation for joint marketing efforts and combating animal health and food safety issues. Also, interestingly, in spite of the tensions, according to Mexican customs statistics, imports of U.S. poultry products continue growing as can be seen in Charts 3 and 4, below. In 2011, imports from the U.S. were just under U.S. $1 billion while total worldwide poultry meat imports surpassed this mark and will likely do so again in 2012. Based on year to date statistics, imports of U.S. poultry and egg products will likely be a record and surpass U.S. $1 billion in 2012. When Mexico’s egg price crisis hit this past summer and fall, Mexican buyers were looking exhaustively for suppliers and the Mexican government (Economia) accommodated many of them by dropping tariffs and removing labeling requirements. In addition, SENASICA negotiated numerous animal health zoosanitary requirements (HRZs) that afforded much broader access while still maintaining preventative measures to protect animal health and safeguard food safety. As can be seen in charts 5 and 6, imports are not significantly greater over the first 8 months of the year, but most egg imports as a result of the AI outbreak did not get into full swing until September. As such and as additional data becomes available, it will be revealing to see the impact that the crisis had on egg buying habits (both by location and by harmonized tariff system (HTS) code). MX2087 Poultry and Egg Prices and Trade Snapshot Page 4 Chart 3. Mexico: Imports of Broiler and Turkey Meat by Country in Metric Tons Mexico Import Statistics Commodity: _PSD BROILER and TURKEY MEAT Annual Series: 2007 - 2011, Year To Date: 08/2011 & 08/2012 Quantity (Metric Tons) Calendar Year Year To Date Partner Country Unit 2007 2008 2009 2010 2011 08/2011 08/2012 World MT 576166 630294 635737 701405 730541 483013 508842 United States MT 554994 601230 605074 681420 712485 470698 497239 Chile MT 20663 28749 30436 19709 17706 12082 11368 Canada MT 509 312 227 277 350 233 234 Spain MT 0 0 0 0 0 0 0 China MT 0 4 0 0 0 0 0 Source of Data: INEGI [2006-present] Chart 4. Mexico: Imports of Broiler and Turkey Meat by Country in U.S. Thousand Dollars Mexico Import Statistics Commodity: _PSD BROILER and TURKEY MEAT Annual Series: 2007 - 2011, Year To Date: 08/2011 & 08/2012 United States Dollars (Thousands) Calendar Year Year To Date Partner Country 2007 2008 2009 2010 2011 08/2011 08/2012 World 703,305 790,726 733,990 864,068 1,024,926 665,607 741,831 United States 634,724 706,417 661,180 801,225 965,219 624,694 705,613 Chile 67,072 82,762 71,603 61,321 57,794 39,628 34,880 Canada 1,509 1,521 1,206 1,523 1,912 1,284 1,338 Spain 1 0 0 0 2 0 0 China 0 26 0 0 0 0 0 Source of Data: INEGI [2006-present] Chart 5. Mexico: Imports of Eggs and Products by Country in Metric Tons Mexico Import Statistics Commodity: Eggs & Products Annual Series: 2007 - 2011, Year To Date: 08/2011 & 08/2012 Quantity (Metric Tons) Calendar Year Year To Date Partner Country Unit 2007 2008 2009 2010 2011 08/2011 08/2012 World MT 12242 7824 11129 10718 14597 10061 10444 United States MT 12226 7820 11128 10694 14552 10030 10418 Canada MT 0 0 0 0 23 20 0 New Zealand MT 0 0 0 22 22 11 21 Spain MT 0 0 0 1 0 0 5 Germany MT 0 1 0 0 0 0 0 Chile MT 16 3 0 0 0 0 0 Source of Data: INEGI [2006-present] MX2087 Poultry and Egg Prices and Trade Snapshot Page 5 Chart 6. Mexico: Imports of Eggs and Products by Country in U.S. Thousand Dollars Mexico Import Statistics Commodity: Eggs & Products Annual Series: 2007 - 2011, Year To Date: 08/2011 & 08/2012 United States Thousand Dollars Calendar Year Year To Date Partner Country 2007 2008 2009 2010 2011 08/2011 08/2012 World 36,585 30,010 33,474 36,926 55,061 37,572 38,165 United States 36,344 29,937 33,421 36,670 54,750 37,409 37,910 New Zealand 7 19 53 247 267 128 237 Canada 8 2 0 3 37 32 0 Germany 0 10 0 0 3 3 0 Spain 0 0 0 5 2 0 17 United Kingdom 1 0 0 1 1 0 0 France 0 0 0 0 0 0 0 Chile 225 40 0 0 0 0 0 Italy 1 2 0 0 0 0 0 Source of Data: INEGI [2006-present] Chart 7. Mexico: Imports of Broiler and Turkey Meat by Harmonized Tariff Schedule (6 digits) in Metric Tons MX2087 Poultry and Egg Prices and Trade Snapshot Page 6 Chart 8. Mexico: Imports of Broiler and Turkey Meat by Harmonized Tariff Schedule (6 digits) in U.S. Thousand Dollars MX2087 Poultry and Egg Prices and Trade Snapshot Page 7 Chart 9. Mexico: Imports of Poultry Eggs and Products by Harmonized Tariff Schedule (6 digits) in Metric Tons MX2087 Poultry and Egg Prices and Trade Snapshot Page 8 Chart 10. Mexico: Imports of Poultry Eggs and Products by Harmonized Tariff Schedule (6 digits) in U.S. Thousand Dollars MX2087 Poultry and Egg Prices and Trade Snapshot Page 9 Chart 11. Mexico: Events in the Mexican Poultry and Egg Sector Date Event 10/1/2009 Beginning Point of AD Investigation 9/20/2009 Ending Point of AD Investigation 2/8/2011 Mexico (GOM) Publishes Federal Register Notice Announcing AD Investigation Mexican Poultry Industry Member Bachoco Reaches Agreement to Acquire U.S. Firm O.K. 10/28/2011 Foods 12/21/2011 United States Meets with UPCI to Explore AD Process and Industry Negotiations 1/19/2012 GOM Publishes Preliminary Determination of AD Investigation 5/15/2012 United States Expresses Concerns with AD Methodology at GOM Public Hearing 5/23/2012 United States Meets with UPCI to Reiterate Concerns with AD Case 6/18/2012 Jalisco Producers Notify GOM of Possible AI Outbreak 6/20/2012 GOM Confirms H7N3 Outbreak and Notifies the OIE 7/6/2012 GOM Announces Intention to Open Egg Tariff Rate Quota (TRQ) 7/26/2012 GOM Introduces H7N3 Vaccine Into Production System 7/31/2012 GOM Publishes Final Determination of AD Investigation 8/22/2012 GOM Exempts Table and Industrial Use Eggs from Import Duties 9/3/2012 U.S. Poultry Industry Appeals GOM Decision to the NAFTA Secretariat Mexican Poultry Industry Appeals GOM Decision to Not Impose AD Duties and Requests New 10/9/2012 Final Determination 11/12/2012 GOM Announces Fine on Bachoco for Antitrust Violation in the Yucatan Peninsula 11/16/2012 GOM Surpasses 90 Days from H7N3 Detection in Commercial Flock Additional Information FAS/Mexico Web Site: We are available at www.mexico-usda.com or visit the FAS headquarters' home page at www.fas.usda.gov for a complete selection of FAS worldwide agricultural reporting. Other Relevant Reports Submitted by FAS/Mexico: Report Subject Date Number Submitted MX2069 Eggcellent Industry and Government Cooperation Facilitates Trade 10/19/2012 MX2067 Egg Import Tariffs Eliminated 9/14/2012 MX2059 Mexico Announces Import Quotas for U.S. Eggs 8/17/2012 MX2058 Chicken AD Final Resolution 8/6/2012 MX2053 SENASICA Delivers Vaccines to Control AI Outbreak 8/2/2012 MX2049 Poultry, Meat and Broiler Annual 7/18/2012 MX2046 Economia Opens 221K Metric Ton Egg Quota Due to Market 7/11/2012 Speculation MX2044 Avian Influenza Outbreak Hits More Farms in Jalisco 7/6/2012 MX2043 Emergency Management System Activated to Combat Avian Influenza 7/6/2012 MX2040 High Pathogenic Avian Influenza Outbreak in Jalisco 6/29/2012 Useful Mexican Web Sites: Mexico's equivalent to the U.S. Department of Agriculture (SAGARPA) can be found at www.sagarpa.gob.mx, equivalent to the U.S. Department of Commerce (SE) can be found at www.economia.gob.mx and equivalent to the U.S. Food and Drug Administration (SALUD) can be found at MX2087 Poultry and Egg Prices and Trade Snapshot Page 10 www.salud.gob.mx. These web sites are mentioned for the readers' convenience but USDA does NOT in any way endorse, guarantee the accuracy of, or necessarily concur with, the information contained on the mentioned sites. MX2087 Poultry and Egg Prices and Trade Snapshot Page 11
Posted: 19 December 2012

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