Mexico’s poultry industry growing despite uncertainty

The Mexican National Poultry Producers Association estimates the country’s poultry industry will grow in 2019. Its broiler market is expected to grow by 3% and its egg market will grow by 2.5%.

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(Benjamín Ruiz)
(Benjamín Ruiz)

The Mexican National Poultry Producers Association estimates the country’s poultry industry will grow in 2019. Its broiler market is expected to grow by 3% and its egg market will grow by 2.5%.

Along with the prospect of steadily growing production, the Mexican industry faces unknowns related to legal and economic uncertainty, exchange rate fluctuations, changes in public policy in respect to transportation of domestic crops and the management of foreign trade, among others.

However, the association, known by its acronym in Spanish as the UNA, sees positives in spite of everything.

"In the end, if you talk to any poultry producer, you'll see it is a pretty optimistic industry,” UNA Executive President Arturo Calderón said.

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Arturo Calderón, Mexican National Poultry Producers Association (Unión Nacional de Avicultores) | Photo by Benjamín Ruiz

International trade, the USMCA and Brazil

In respect to international trade, Calderón is concerned with U.S. dumping of leg quarters and that authorities are not collecting anti-dumping duties. He said dumping affects domestic production because without it, chicken production could grow by 5 or 6 percent in 2019 instead of the projected 3 percent.

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Mexican poultry production is expected to grow by about 3 percent in 2019.

In regards to the new, U.S., Mexico and Canada agreement (USMCA), the negotiations are over but the treaty is not yet ratified by the country’s congresses. So, it’s still too early to pass judgement.

The expected outcome would be good for the food and agriculture sector, because it does not alter market access, does not impose tariffs nor does it impose trade administration or tariff controls. Moreover, the treaty would add trade simplification and chapters about sanitary and phytosanitary measures, but it is necessary to know the final details of the deal in order to make use of them.

Mexico’s trade policy, in addition to not charging compensatory duties for dumping, is to keep open quotas. Brazil’s quota, for instance, is about to be filled. Mexican poultry producers do not welcome poultry negotiations with the South American country.

“The fear that we have is that the volume will be expanded, since it does not expire until December 2019,” Calderón said.

A change in government  

In December 2018, Mexican President Andrés Manuel López Obrador took office and began to establish a new government promising new, different policies for the second-most-populous nation in North America. On the political side, the poultry industry is facing change. But at the moment, the expectation is to get to know what the new approach will be.

Any public policy influencing the food supply will have a direct effect on the poultry industry’s final product. There has never been a specific public policy for the Mexican poultry industry, as there has been for the livestock sector or other agricultural sectors. Nevertheless, the industry has benefited indirectly from the commercialization support the Mexican government offers for its sorghum and corn crops.

The problem with insecurity

In terms of production, the challenge is insecurity. Calderón is concerned because uncertainty brings a strong effect on investment projections. But, the insecurity is also legal and economic.

In addition, there are things that can get out of control such as the sanitary or climatological variables, and other things that can happen unexpectedly like the outbreak of avian influenza or Newcastle disease. With the current issue of Newcastle in the U.S., the Mexican industry is on high alert because it relies on the U.S. for poultry genetics.

On the legal front, Calderón spoke about the formation of new public policies, the certainty given to investments and the ease of creating a new poultry insurance fund. In fact, that fund is already created but is not yet in operation. It is in an administrative process within the country’s treasury and is expected to begin operations soon.

Eggs as a basic consumer good

Among the new institutions created by the new government is the Food Security Agency, known by its acronym in Spanish as Segalmex. Since eggs and chicken represent 60% of the animal protein consumed by Mexicans, the possibility of adding eggs as basic consumer goods is being considered.

César Quesada, chairman of the UNA’s Board of Directors, recently spoke with Segalmex Director Ignacio Valle to explain the advantages of the poultry industry and in particular the egg sector. Eggs do not require the same rigorous temperature conditions for storage and transport as chicken. They are also much easier to transport although transportation across long distances is expensive.

The interest in integrating eggs into the country’s basket of basic consumer goods – which is not, by the way, the same basic consumer goods list used to estimate inflation – is a window of opportunity for Mexican egg producers. The country’s basket of basic consumer goods is part of the country’s social development program for dealing with extreme poverty.

The UNA does not see including eggs among basic consumer goods as a risk for price control. Instead, Calderón said, he hopes for national purchasing mechanisms like Mexico has for milk. In negotiations of this kind, there is a purchase commitment which gives certainty of delivering a product at a certain price. However, it will only be known once this policy is implemented.

Animal welfare and alternative production

Beyond politics and economics, the other two issues keeping UNA’s attention in 2019 are animal welfare and organic production mechanisms.

Calderón said it would be a good idea to standardize the issues of animal welfare and raising birds in alternative systems to avoid deceiving the customer. It’s not about making anything compulsory but rather establishing rules for fair competition, given that any standardization comes with respective verification instruments. Mexico does not yet have a voluntary standard for cage-free egg production.

In regards to animal welfare, UNA approached several global non-governmental organizations in order to work in conjunction on the issue. Calderón said the UNA is open to informational exchange and the opportunity to work together so the supply of animal protein is not affected.

As for organic production, there is already a regulation requiring certification for brands sold as organic. In that sense, Mexico is lagging behind the U.S. or Europe, but it is on the right track. In 2019, for the first time, the UNA will be registering organic production and cage-free egg production for the first time.

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