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USDA GAIN: Poultry and Products

05 December 2012

USDA GAIN: Mexico Poultry, Egg Prices, Trade Snapshot - 5 December 2012USDA GAIN: Mexico Poultry, Egg Prices, Trade Snapshot - 5 December 2012

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.

USDA GAIN: Poultry and Products

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).


Mexican Egg and CLQ Prices Remain Higher than the U.S. due to Input Costs and Consumer Preferences

Source: Economia/SNIIM and USDA/AMS

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.

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.


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).

Mexico: Imports of Broiler and Turkey Meat by Country in Metric Tons

Source of Data: INEGI [2006-present]

Mexico: Imports of Eggs and Products by Country in Metric Tons

Source of Data: INEGI [2006-present]

December 2012

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