Chicken leg duty could damage US-Mexico trade, says report

By Carina Perkins

- Last updated on GMT

Chicken leg duty could damage US-Mexico trade, says report

Related tags: Meat, Us, Poultry

A Mexican duty on US chicken leg quarter imports would damage the US poultry industry and leave many Mexican consumers unable to afford to eat poultry, according to a new report by Dermot Hayes PhD, professor of Economics and Finance at Iowa State University.

The report has been published ahead of Mexico’s final decision on an anti-dumping investigation, launched last year after Mexican poultry companies accused the US of exporting chicken leg quarters to Mexico at below-market prices. The Mexican government, which has until August to make a decision, has indicated that it is considering imposing duties on US leg quarters in the range of 62.9% to 129.77%. Whole birds would not be subject to the duty.

Hayes concluded that the duties would eliminate 250,000 chicken leg quarters from the Mexican market. He added that, with no other source of inexpensive dark meat available on the international marketplace, Mexico would initially buy more whole birds from the US, which currently sell at a 68% premium to chicken legs. This would lead to a 22.4% increase in poultry prices, increasing the meat consumer price index (CPI) by 7.2%, the food CPI by 1.9% and the overall CPI by 0.4%.

Although Hayes predicted that Mexico could increase domestic production of whole chickens by an estimated 156,000 tonnes (t) within a year, he pointed out that imports of whole chickens from the US would still be 18,000t higher than current levels, resulting in 11.3% higher poultry prices.

He warned that this could have a serious impact on poultry consumption in Mexico and force some consumers to revert to inexpensive plant proteins or processed pork and poultry proteins. “Imported chicken leg quarters are an entry level animal protein for poorer consumers, especially in Northern Mexico. These consumers will bear the brunt of the adjustment,” he said.

Hayes also found that the duties would damage the US chicken industry, which currently exports 0.25million tonnes (mt) of chicken leg quarters to Mexico every year. “The loss of this enormous leg market would clearly damage the US poultry industry. Past experience with the loss of the Russian poultry market also suggests that this outcome would be harmful to the US pork industry,”​ he said. “The most likely outcome in the US is that the legs that were exported to Mexico will be discounted and sold to dark meat markets, such as Hong Kong, or sold on the US domestic market.”

The report, which used the FAPRI international model to study the impact of the duty, has been welcomed by the US chicken industry. National Chicken Council president Mike Brown said: “The negative ramifications of imposing these duties are clear, for the US chicken industry and for Mexican consumers. US-Mexican trade relations should be strengthened by encouraging trade to expand, not diminish.”

The Mexican Unit of Foreign Trade Practices (UPCI) has scheduled a public hearing about the anti-dumping case in Mexico City on 15-16 May. Both US exporters and Mexican importers will take part.

Related topics: Meat

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