1 THE MEXICAN POULTRY INDUSTRY AND THE NAFTA Cesar de Anda Cesar de Anda Cancún, México May 6 - 7, 2004 FIRST ANNUAL NORTH AMERICAN AGRIFOOD MARKET INTEGRATION WORKSHOP

2 Performance of Poultry Industry 1.Situation before NAFTA 2.Transition period 3.Free Trade 4.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 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 1.Situation before NAFTA 2.Transition period

6 Clear rules Obligations for both countries Trade and more trade Dispute mechanism What means NAFTA ?

7 CHICKEN MEAT PRODUCTION Transition period Million Tons

8 SHELL EGG PRODUCTION Transition period Million Tons

9 TURKEY MEAT PRODUCTION TONS Transition period

10 Transition period

11 Considering all those factors, Mexico is: – T he fourth producer of chicken meat worldwide –The sixth producer of shell egg worldwide Transition period

12 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 Transition period

13 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 % 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 Imports

14 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 % 90% of imports belong to fertile egg In 2003 only 17 tons of fresh egg were imported Imports

15 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 % –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. Imports

16 Performance of Poultry Industry 1.Situation before NAFTA 2.Transition period 3.Free trade

17 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 Free Trade Facts

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 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 RELATIONSHIP WITH THE US INDUSTRY

20 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 Free Trade

21 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 Free Trade

22 Performance of Poultry Industry Situation before NAFTA Transition period Free trade Conclusions

23 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 Conclusions

24 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 Conclusions

25 THANKS