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International Egg and Poultry Review: Mexico

by 5m Editor
27 July 2011, at 9:45am

MEXICO - This is a weekly report by the USDA's Agricultural Marketing Service (AMS), looking at international developments concerning the poultry industry. This week's looks at the impacts of the resolution of the Mexico-US cross-border dispute and the state of the Mexican broiler industry.

Mexico and US resolve cross-border dispute

The United States and Mexico signed a Memorandum of Understanding on Cross-Border Motor Trucking on 6 July 2011. Two days later, the Government of Mexico posted an official notice that beginning 8 July 2011, Mexico would reduce retaliatory tariffs by 50 per cent. Mexico will lift all retaliatory tariffs within five days after the first Mexican carrier is certified to operate in the US.

Under NAFTA, by December 1995, the US and Mexico were supposed to have access to highways in border states for the delivery and back-haul of goods. By January 2000, Mexico was to have full access for cross-border trucking to and from any point in the US; the US was to have full access for cross-border trucking to and from any point in Mexico. In February 2007, the US and Mexican Secretaries of Transportation announced a demonstration project to implement the NAFTA trucking provisions. In March 2009, funding for the pilot programme that allowed Mexican-registered trucks to operate beyond the 25-mile border commercial zone inside the US was terminated in the FY2009 Omnibus Appropriations Act.

In March 2009, Mexico responded by imposing retaliatory tariffs on 89 US agricultural and industrial products totalling about $2.4 billion in exports from 40 states. On 19 August 2010, Mexico added some new products and removed others, bringing the revised list to 99 types of goods, including 54 agricultural products. The retaliatory tariffs ranged from five per cent to 25 per cent; no poultry or egg products were affected.

Background
The North American Free Trade Agreement (NAFTA) went into force on 1 January 1994. The US–Canada FTA had already gone into effect in 1989. Canada and Mexico reached a separate bilateral NAFTA agreement that maintained the tariffs between the two countries affecting trade in dairy, poultry, eggs and sugar. The US agreement with Mexico eliminated all non-tariff barriers to agricultural trade and many tariffs were eliminated immediately. Other tariffs were phased out over periods of five to 15 years.

Under NAFTA, the US and Mexico were to have allowed access to each other's border states for the delivery and backhaul of cargo by December 1995. By 2000, all restrictions on cross-border trucking were to be lifted. Trucks would not be allowed to move goods between points once they are in the country. Over 95 per cent of agricultural products exported to Mexico from the US cross through inland ports-of-entry located in northern Mexico.

Mexico was the United States' second largest goods export market in 2010 ($163.3 billion) and the third largest market for agricultural goods ($11.8 billion). Mexico was the third largest supplier of goods to the US in 2010 ($229.7 billion); the second largest supplier of agricultural products ($13.6 billion.)
Source: Office of the United States Trade Representative; USDA Foreign Agricultural Service; US Department of Transportation; news wires



Mexico's broiler industry

Mexico's broiler production increased one per cent in 2010 and is forecast to grow one per cent in 2011. Higher feed prices have slowed growth in broiler production. Price volatility in grains affects medium and small producers to a greater effect as they are less likely to use risk management practices. For 2011, producers are hedging against price risks by using the government's programme, Agricultura por Contrato, under which the price-risk volatility for domestic corn and sorghum is covered. Forty per cent of feed grains are sourced domestically purchasing power. Demand by lower-income consumers is expected to continue increasing; the preference of middle-income consumers is shifting from chicken to beef, limiting per-capita consumption growth.

Mexico's broiler exports are expected to grow 20 per cent in 2011 as a result of approval given to certain establishments to export to foreign countries, including the US. According to UNA, during 2010 Mexico started exporting chicken feet to Asia; chicken breast and boneless chicken leg quarters (CLQs) to Japan; and powdered egg to Africa. Chicken sausage exports (HS 16011001) were estimated at 4,000MT in 2010. The 2011 Mexican congressionally approved budget includes 400 million pesos (MXP; US$31.7 million) for export promotion of agricultural products. As the Mexican poultry sector continues to focus on exports, a portion of this funding could be used for foreign market development.

On 8 February 2011, the Secretariat of Economy (SE) published a notice announcing an anti-dumping investigation of US fresh, chilled or frozen CLQs (HS 0207.13.03 and 0207.14.04) exported to Mexico. The reference period is from 1 January 2007 to 30 September 2010, focusing on the period from 1 October 2009 to 30 September 2010. The petitioners claim US export chicken prices are below the US cost of production. This investigation was initiated without preliminary import duties.
Source: USDA GAIN Report MX1013, 2/14/2011

Further Reading

- You can view the full report by clicking here.