NAFTA Deadline Makes Mexican Poultry Industry Nervous

SourceMex Economic News & Analysis on Mexico, September 4, 2002 | Go to article overview

NAFTA Deadline Makes Mexican Poultry Industry Nervous


By Chris Wright

[The author is editor of Industria Avicola, the WATT Poultry Publication serving the Latin American poultry industry].

In a recent visit to Mexico, the topic of the North American Free Trade Agreement (NAFTA) was addressed by several organizations. As of Jan. 1, 2003, there will be zero tariffs and quotas for US poultry coming into Mexico. The funny thing is that four months out nobody in Mexico is really sure what will happen. Will the US show restraint or will it flood the market with leg quarters? There is a great deal of nervousness and concern in Mexico at the moment.

For eggs and turkey, however, there will be no fight by Mexico, and the zero tariffs and quotas will go into effect without much fanfare. Because Mexico is such a large egg producer, and the country just recently became the number one egg consumer in the world, US egg imports don't make much difference.

The Mexican turkey industry is quite small and has never been able to compete with US imports, and won't even try. Most US turkey exports--whose volume is quite significant-- come in the form of mechanically deboned meat (MDM). MDM is a method also used extensively by the Mexican meat packing industry. Turkey is a very popular component of lunch meats, deli meats, hot dogs and other value-added products. So, Mexico concentrates on the whole-turkey market, producing 2.6 million turkeys a year, which is still very seasonal, centered on Christmas. Turkey MDM imports will continue to grow.

But the Mexican poultry industry is very worried that its market might be swamped with a wave of cheap US leg quarters; so producers are hoping to negotiate a voluntary agreement with the US poultry industry that would "phase-in" leg-quarter imports through 2008. Why 2008? Because that is the extension that has been given to the Mexican corn industry under NAFTA. US corn will have tariffs and quotas until 2008.

Expensive grain prices are keeping Mexican livestock and poultry producers from being competitive. The Mexican poultry and swine industries can hardly buy any Mexican or US corn, and whatever amounts they buy are expensive. With corn used almost exclusively used for human consumption, the industry has to buy US sorghum at very high prices. As a result, Mexico has become the world's largest user of sorghum for animal feed. Mexico soybean imports also continue to grow significantly.

The Mexican poultry industry, represented by the Union Nacional de Avicultores (UNA), is trying to get some agreement with US counterparts so that Mexican chicken production is not adversely affected by the 2003 deadline.

In 2001, UNA helped form an association called the NAFTA Partnership, comprising US and Mexican poultry interests working together voluntarily to see if they can make the transition smooth. The US partners in this association include the USA Poultry & Egg Export Council, the National Chicken Council, the National Turkey Federation, and the United Egg Producers. Canadian poultry industry groups will soon be invited to take part in the association, thus creating a true North American partnership.

UNA executive director Sergio Chavez is very positive about the NAFTA Partnership and thinks the US industry is listening and is aware of Mexico's concerns. While Chavez says he thinks the US side will act in a positive manner, there are no binding agreements. …

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