Mexico Dairy And Products Annual 2007

By the USDA, Foreign Agricultural Service - This article provides the dairy industry data from the USDA FAS Dairy and Products Annual 2007 report for Mexico. A link to the full report is also provided. The full report includes all the tabular data which we have been ommited from this article.
calendar icon 5 October 2007
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USDA Foreign Agricultural Service

Report Highlights:

Imports of dairy products have grown dramatically over the past decade, a trend that is expected to continue over the long term given tariff elimination under the NAFTA, as well as population and income growth in Mexico. Mexico’s domestic milk production is expected to increase at a moderate rate for the foreseeable future, but not enough to satisfy increasing domestic demand. Thus, Mexico will continue to be the most important export market for U.S. dairy products in the near term.

Situation And Outlook

Mexico continues to be a major market for U.S. non-fat dry milk (NFDM) butter, cheese, and fluid milk. After a significant decline in 2006, precipitated by a price shock and changes to Mexican federal policies, U.S. exports of non-fat dry milk to Mexico are expected to rebound in 2007. In addition to milk powders, Mexico has become a major importer of U.S. dairy blends, lactose, and whey powder. In fact, U.S. whey powder exports to Mexico from January to August 2007 are up by nearly 97 percent relative to the same period in 2006.

Representatives from major dairy product importers, as well as representatives from several of Mexico’s larger dairy product producers, have commented that because of non-TRQ imports and over-quota import authorizations, the Mexican dairy sector is already competing in a virtually open market in North America. Consequently, importers are cautiously optimistic that the final phase-out of tariff-rate quotas (TRQs) on NFDM, which coincides with the full NAFTA implementation on January 1, 2008, will happen smoothly and with relatively few complaints from the domestic industry. Nevertheless, the government and other interested parties will be carefully monitoring the effects of more open trade on producers and prices in coming years.

Data included in this report is not official USDA data. Official USDA data is available at:

Narative on Supply, Demand, Policy and Marketing

Fluid Milk


In Mexico milk production is segmented by the type of operation. There are three principal systems of milk production; the confined production system, the semi-confined production system, and the dual purpose system. Dairy farms range from large modern operations, located mainly in northern Mexico, to medium, small, and backyard operations more commonly found in central and southern Mexico. Low yielding dual-purpose operations account for two-thirds of cows in milk. The total number of dairy cows has remained essentially unchanged since 2000, at just over 6.8 million head. This figure is composed of 2.2 million head of dairy cows, the remaining 4.6 million head being dual purpose cows. More sophisticated producers continue to make modest productivity gains through improved genetics and herd management practices. A description of the three milk production systems in Mexico is as follows.

Confined Production System - Confined production systems are used in the northern states and are similar to the confined systems used in the U.S. The cows (95 percent Holstien) are grain-fed 20-22 lbs./day) and produce larger quantities of milk than cows in other systems. Given the scarcity of water in these states, feeding efficiency is especially important.

Dairy producers in this category were initially impacted by a ban on imports of U.S. and Canadian replacement heifers and bulls after the detection of BSE in both countries. As a result heifer and bull exports from New Zealand and Australia were able to gain market share in Mexico, as dairy producers looked to other markets for livestock supply. In October of 2006 the Mexican government changed their import rules and allowed for the entrance of U.S. replacement heifers. However, since this time relatively few head of replacement heifers have been exported to Mexico from the U.S. because of the strict conditions imposed on the industry under the new import protocol. In CY 2006 the United States exported to Mexico a total of 797 head of replacement heifers. Through June of 2007 U.S exports to Mexico have reached 1,966 head. New Zealand and Australia are still the leading exporters of dairy cattle to Mexico. In CY 2006, New Zealand exported to Mexico 25,084 head, while Australia exported 11,260 head. Through June of 2007 Australia has exported 6,197 head and New Zealand has exported 18,725.

Semi-Confined System - Semi-confined systems, which include many subsistence producers, exist primarily in the central states. Cows in these operations are fed a mixture of grains and grasses (11-13 lbs./day). These operations are more productive than the dual-purpose systems, but significantly less productive than the confined production systems.

Dual-Purpose System - Dual-purpose systems are most common in the south of Mexico, where animals feed on cultivated pastures or native grasses. Producers in this system respond to prices in both the dairy and beef markets. Approximately 75 percent of Mexico’s cows are in this system, and produce around 30 percent of the country’s milk.

Leche Industrializada CONASUPO (LICONSA), the parastatal company charged with distributing milk to lower income Mexicans, is currently attempting to decrease its dependence on NFDM imports, and is making an effort to source more domestically produced fluid milk. Industry sources indicate that this policy is starting to prove beneficial to some of Mexico’s smaller scale fluid milk producers. In 2007 LICONSA expects to purchase around 500 million liters of domestically produced fluid milk. Currently LICONSA is paying 4.00 pesos per liter from producers.

Fluid milk production for CY 2008 (Jan.-Dec.) is forecast to increase slightly, reaching 10.35 MMT, or about 0.86 percent above the previous year’s unchanged estimate. Though this growth is rather modest, it is still being realized in the face of significantly higher feed costs and retail milk prices. Mexico’s milk production is anticipated to increase at a moderate rate for the foreseeable future, but not enough to satisfy increasing domestic demand.


The CY 2008 consumption estimate for fluid milk consumption in Mexico will increase only very slightly relative to CY 2007. Direct consumer consumption of fluid milk is expected to remain basically even with CY 2007, while factory use is expected to increase by one percent. Currently Mexico’s five principal dairy processors are engaged in fierce competition to supply quality dairy products to consumers. As a result, competitive pricing and an evergrowing variety of dairy products are expected to spur demand in the medium term. Health conscious consumers are also increasing their consumption of low fat and skim dairy products as the quality and variety of these products improves.

Consumer prices in Mexico are currently averaging $8.80 pesos per liter for pasteurized milk (U.S. $0.78) and $9.62 per liter of UHT milk (U.S. $0.86). LICONSA is distributing approximately 3.3 million liters of subsidized milk per day at the current price of $4.00 pesos per liter (U.S. $0.36 per liter). Although LICONSA has increased utilization of domestic fluid milk significantly, its social program continues to rely mainly on NFDM imports. In CY 2006, LICONSA is estimated to have used 420 million liters of domestically produced raw fluid milk, 51 percent more than in CY 2005. This, however, represents only 7.8 percent of LICONSA’s total milk usage. Consumption of fresh fluid milk continues to be hampered by problems with sanitation, transportation, and processing capacity, but supplies and quality are improving.


Fluid milk imports for CY 2008 are forecast to remain even with the revised CY 2007 estimate. This lack of growth in imports is primarily attributable to a nearly one percent increase in domestic production. As in previous years, most fluid milk imports will go to the border cities in northern Mexico. Opportunities for sales beyond the border are limited by the cost of transporting to other areas in Mexico. The CY 2007 fluid milk import estimate was revised downward due to increased production and sales of domestically produced fluid milk. Imports for CY 2006 reflect official data.

Further Reading

       - You can view the full report, including tables, by clicking here.

List of Articles in this series

To view our complete list of 2007 Dairy and Products Annual reports, please click here

November 2007

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