UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended December 31, 20112012

OR

OR

Date of event requiring this shell company report ____________

For the transition period from ____________ to ___________

Commission File Number: 333-7480

INDUSTRIAS BACHOCO, S.A.B. DE C.V.

(Exact name of Registrant as specified in its charter)

Bachoco Industries

(Translation of Registrant’s name into English)

The United Mexican States
(Jurisdiction of incorporation
or organization)

Avenida Tecnologico No. 401

Ciudad Industrial C.P. 38010

Celaya, Guanajuato, Mexico.

(Address of principal executive offices)

Daniel Salazar Ferrer

Avenida Tecnologico No. 401

Ciudad Industrial C.P. 38010

Celaya, Guanajuato, Mexico

Telephone: (+011-52-461-618-3555)

Facsimile: (+011-52-461-611-6502)

Email: inversionistas@bachoco.net

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None

Indicate the number of outstanding Shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Series B Capital Stock: 600,000,000 Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨      Nox

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes xNo¨

Note:     Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x      No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes xNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other has been checked in response to the previous question, indicate by check mark which financial statements item the registrant has elected to follow:

Item 17¨      Item 18 x¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨      Nox

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 23 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court.

Yes ¨      No¨

TABLE OF CONTENTS

Introduction

Industrias Bachoco, S.A.B. de C.V. is a holding company with no operations other than holding the stock of its subsidiaries. Our principal operating subsidiary istwo main subsidiaries are Bachoco, S.A. de C.V. (“BSACV”), which ownslocated in Mexico, and Bachoco USA, LLC, located in the principal operating assets of IndustriasUnited States (or U.S.). Bachoco S.A.B. de C.V. and accountedUSA, LLC is a subsidiary we formed on March 2, 2012 to serve as the holding company for 81.37% of consolidated total assets on December 31,O.K. Industries, Inc., the American poultry company we acquired in November 2011.

References herein to “Bachoco,” “we,” “us,” “our,” “its” or the “Company” are, unless the context requires otherwise, to Industrias Bachoco, S.A.B. de C.V. and its consolidated subsidiaries as a whole.

Additionally, references herein to “OK Industries” or “OK Foods” are, unless the context requires otherwise, to Bachoco, USA LLC and its consolidated subsidiaries as a whole.

We are incorporated under the laws of the United Mexican States (“Mexico”), but we have operations in both in Mexico and in the U.S.United States. Our principal executive offices are located in Mexico at Avenida Tecnologico No. 401, Ciudad Industrial, C.P.zip code 38010, Celaya, State of Guanajuato, Mexico, and our telephone number is +52(461)618-3555.+52 (461) 618 3555.

Presentation of Information

We publish our financial statements in Mexican pesos and present our financial statements in accordance with Mexican Financial Reporting Standards (“Mexican FRS”). Information from the years 2008 to 2011, does not include the recognition of the effects of inflation, while financial information is presented in constant pesos as of December 31, 2007, based on the Mexican National Consumer Price Index (NCPI) published by Banco de Mexico (the “Central Bank”).

Mexican FRS B-10 supersedes Bulletin B-10 Recognition of the effects of inflation on the financial information and its five amendment documents as well as the related circulars and Interpretation of Financial Reporting Standards. The principal considerations established by this FRS are:

Recognition of the effects of inflation – An entity operates in (a) an inflationary economic environment when cumulative inflation over the immediately preceding 3-year period is equal to or greater than 26.0%; and (b) a non-inflationary economic environment, when inflation over the aforementioned period is less than 26.0%. For more detail, see Note 2-d) in our Audited Consolidated Financial Statements.

With respect to (a) above, similarly to the superseded Bulletin B-10, the comprehensive recognition of the effects of inflation is required. For case (b), the effects of inflation are not recognized; however, at the effective date of this FRS and when an entity ceases to operate in an inflationary economic environment, the restatement effects determined through the last period in which the entity operated in an inflationary economic environment (in our case 2007), must be kept and shall be reclassified on the same date and using the same procedure as that of the corresponding assets, liabilities and stockholders' equity. Should the entity once more operate in an inflationary economic environment, the cumulative effects of inflation not recognized in the periods where the environment was deemed to be non-inflationary should be recognized retrospectively.Currency

Except as otherwise indicated, all data in the financial statements included below in Item 18 (which together with the attached notes constitute our “Audited Consolidated Financial Statements”) and the selected financial information included throughout this Form 20-F (this “Annual Report”) have been presented in millions of nominal pesos forunless otherwise indicated. References herein to “pesos” or “Ps.” are to the years ended December 31, 2008 through 2010, except for year 2007 that is expressed in constant pesos for the year ended December 31, 2007.lawful currency of Mexico.

Mexican FRS differs in certain respects from generally accepted accounting principles inReferences herein to “dollars”, “U.S. dollars”, “U.S.$” or “$” are to the lawful currency of the United States (“U.S. GAAP”). For a discussion of certain significant differences between Mexican FRS and U.S. GAAP as they apply to us, together with a reconciliation of consolidated operating income, consolidated net income, consolidated stockholders’ equity to U.S. GAAP, and a consolidated statement of cash flows under U.S. GAAP, see Note 23 to our Audited Consolidated Financial Statements. The effect of price-level restatement under Mexican FRS has not been reversedAmerica, except that "$" is also used for pesos in the reconciliation to U.S. GAAP. See Note 23 to our Audited Consolidated Financial Statements.

This Annual Report contains translations of certain peso amounts into dollars at specified rates solely for the convenience of the reader. Unless otherwise indicated, such dollar amounts have been translated from pesos at an exchange rate of Ps 12.87 to $1.00 dollar, the exchange rate on December 31, 2012, according to theBanco de Mexico (or the “Central Bank”).

Accounting Practices

In January 2009, the MexicanComision Nacional Bancaria y de Valores (Mexican Banking and Securities Commission (Comision Nacional Bancaria y de Valores,or “CNBV”) published certain amendments to the Rules for Public Companies and other participants in the Mexican Securities Market (Disposiciones de Caracter General Aplicables a las Emisoras de Valores y a otros Participantes del Mercado de Valores – the “Rules”) that require public companies to report financial information in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), effective as of January 1, 2012.

OnFollowing these amendments, on January 1, 2012, we adopted IFRS, meeting the CNBV requirements. The Company must release its first quarter, 2012 unaudited results under IFRS, no later than May 2, 2012. IFRS differs in certain significant respectsAt the same time, our financial statements as of and for the fiscal year ended December 31, 2011, and the opening balance as of Janua ry 1, 2011, were converted from Mexican FRS. See Note 22Financial Reporting Standards (MFRS) to IFRS to make them comparable to our financial statements for fiscal year 2012.

Our Audited Consolidated Financial Statements for a descriptionincluded elsewhere in this Annual Report have been prepared in accordance with the International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

Bachoco prepared its opening statement of financial position under IFRS as of January 1, 2011, following the principal differences amongguidance set forth by IFRS 1, First time adoption (“IFRS 1”). The options selected by Bachoco in the migration to IFRS and Mexican FRSthe effects on its opening statement of financial position as they applyof January 1, 2011, according to us.

References hereinIFRS 1, as well as the effects on its statement of financial position as of December 31, 2011, and its statements of comprehensive income for the year ended December 31, 2011, as compared to “U.S. dollars,” “U.S. $” or “$”Bachoco’s previously reported amounts under MFRS, are described in note 33 to the lawful currency of the United States of America, except that "$" is also used for pesos in theour Audited Consolidated Financial Statements. References herein to “pesos” or “Ps.” are to the lawful currency of Mexico. This Annual Report contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenienceStatements included elsewhere in this annual report.

The rules and regulations of the reader. Unless otherwise indicated,Securities and Exchange Commission, or SEC, do not require foreign private issuers that prepare their financial statements on the basis of IFRS (as published by the IASB) to reconcile such financial statements to U.S. dollar amounts have been translated from pesos at an exchange rate ofPs 13.97GAAP. As such, while Industrias Bachoco, S.A.B. de C.V. has in the past reconciled its consolidated financial statements prepared in accordance with MFRS to US $1.00,U.S. GAAP, those reconciliations are no longer presented in Bachoco’s filings with the exchange rate on December 31, 2011.SEC.

Other References

As used herein, theBachoco’s production volume is measured in “tons”, which term “tons” refers to metric tons of 1,000 kilograms, (equalequal to 2,204.6 pounds) andpounds; the term “billion” refers to one thousand million (1,000,000,000). One square meter

Non-GAAP Financial Measures

The body of generally accepted accounting principles is commonly referred to as “GAAP.” For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission (the “SEC”) as a numerical measure of a company’s historical or financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of comprehensive income, statement of financial position or statement of cash flows (or equivalent statements) of the company; or includes amounts, or is subject to 10.764 square feet.adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

The Company discloses in this Annual Report the so-called non-GAAP financial measures, EBITDA result, Adjusted EBITDA result, EBITDA margin, Adjusted EBITDA margin and Net debt. EBITDA result is defined as profit before income tax expense (benefit), comprehensive financial income (expense), net and depreciation and amortization. Adjusted EBITDA result is defined as profit before income tax expense (benefit), comprehensive financial income (expense), net, depreciation and amortization and other expense (income), net. EBITDA margin is defined as EBITDA result divided by total net revenues. Adjusted EBITDA margin is defined as Adjusted EBITDA result divided by total net revenues. Net debt is defined as long-term debt (including the current portion) minus cash and cash equivalents. The non-GAAP financial measures of EBITDA result, Adjusted EBITDA result, EBITDA margin and Adjusted EBITDA margin are not a substitute for the GAAP measure of net income. Rather, these measures are provided as additional information to complement the GAAP measure of net income by providing further understanding of the Company’s results of operations from management’s perspective. Additionally, the non-GAAP financial measure of Net debt is not a substitute for the GAAP measure of Total debt. Rather, this measure is provided as additional information to contemplate the GAAP measure of Total debt by providing further understanding of the Company’s debt obligations. Accordingly, they should not be considered in isolation nor as a substitute for an analysis of the Company’s financial performance, liquidity or debt obligations.

Company management believes that disclosure of these non-GAAP measures are an important supplemental measure of the Company’s operating performance and debt obligations because investors, financial analysts and other interested parties frequently use EBITDA, Adjusted EBITDA and Net debt in the evaluation of other companies in the same industry in which the Company operates.

Market Data

This Annual Report contains certain statistical information regarding the Mexican chicken, beef, egg and balanced feed (or “feed”), turkey and swine markets and our market share. markets. We have obtained this information from a variety of sources, including the producers’ associations but not limited to;Union Nacional de Avicultores (the National Poultry Union or the “UNA”), theConsejo Nacional Agropecuario (the National Agricultural Council or “CNA”de Fabricantes de Alimentos Balanceados y de la Nutricion Animal, A.C. (or “CONAFAB”); , the U.S. Department of Agriculture (or “USDA”), and theBanco the Mexico, among others.

Other sources of statistical information used by the Company includeConsejo Mexicano de Porcicultura (the Mexican Pork Council or “CMP”), as well as Banco de Mexico (the Central Bank), Secretaria de Agricultura, Ganaderia, Desarrollo Rural, Pesca y Alimentos (“Ministry of Agriculture, Livestock, Rural Development, Fishing and Food” or “SAGARPA”) and publications of the U.S. Department of Agriculture (“USDA”). , among others.

The producers’ associations rely principally on data provided by their members. Information for which no source is cited was prepared by us on the basis of our knowledge of the Mexican chicken, egg, feed, turkey and swine markets and the wide variety of information available regarding these markets. The methodology and terminology used by different sources are not always consistent, and data from different sources are not readily comparable.

Forward-LookingForward-looking Statements

We may from time to time make written or oral forward-looking statements in our periodic reports to the Securities and Exchange Commission (or “SEC”)SEC on Forms 20-F and 6-K, in our annual report to stockholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by one of our officers, directors or employees to analysts, institutional investors, representatives of the media and others.

Examples of such forward-looking statements include, but are not limited to: (i) projections of revenues, income (or loss), earnings (or loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios; (ii) statements of our plans, objectives or goals or those of our management, including those relating to new contracts; (iii) statements about future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve inherent risks and uncertainties, and a number of unexpected changes could cause actual results to deviate from our plans, objectives, expectations, estimates and intentions. We recognize that the accuracy of our predictions and our ability to follow through on our intentions depend on factors beyond our control. The potential risks are many and varied, but include unexpected changes in: economic, weather and political conditions; raw material prices; competitive conditions; and demand for chicken, eggs, turkey, balanced feed, beef and swine.

PART I

ITEM 1. Identity of Directors, Senior Management and Advisers

Not applicable.

ITEM 2. Offer Statistics and Expected Timetable

Not applicable.

ITEM 3. Key Information

The financial information set forth below is derived from our Audited Consolidated Financial Statements, which are included in Item 18. We provide details on the figures and year-to-year changes in our Audited Consolidated Financial Statements.

In preparing our Audited Consolidated Financial Statements, we followed Mexican FRS, which differ in certain respects from U.S. GAAP. Note 23 to our Audited Consolidated Financial Statements provides a description of the main differences between Mexican FRS and U.S. GAAP as they apply to us, a reconciliation from Mexican FRS to U.S. GAAP of total stockholders’ equity, net income, and a condensed statement of cash flows under U.S. GAAP as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009.

The table settables below presentspresent our key financial information.information for the fiscal years indicated. Except as otherwise indicated, the amounts are presented in millions of nominal pesos, except per share amounts, which are presented in pesos in accordance with IFRS.

Other Indicators

The tables set below present key indicators for the fiscal years ended December 31, 2008 through 2011,to 2012.

Gross Domestic Product, Inflation Rate and in constant pesos for the year ended December 31, 2007.

(6) For the years 2007 and 2008 the cash and cash equivalents amount includes primary financial instruments.CETES

The chart below includes Mexican gross domestic product (“GDP”) and Inflation Rate data from 20072008 to 2011, as provided by the Central Bank,2012, and the average interest rates on 28-day Mexican treasury bills (“CETES”), as provided by the Central Bank.

On April 17, 2012,2013, the 28-day Cetes28 day CETES rate was 4.33%3.81%.

Exchange Rates

In 2007, the Mexican peso remained reasonably stable in its peso-dollar exchange rate. According to the U.S. Federal Reserve Bank, the peso depreciated with respect to the U.S. dollar by 1.1% at year-end. The average value of the Mexican peso was 0.2% lower than the average of 2006.

In 2008, the exchange rate of the peso against the U.S. dollar was highly volatile. While during the first half of the year, the Mexican peso strengthened its position with respect to the U.S. dollar, the Mexican peso experienced a steep depreciation during the second half of the year and the peso-dollar exchange rate at year-end had depreciated by 21.0% with respect to December 31, 2007.

During 2009, although the Mexican peso-dollar exchange rate depreciated during the first half of 2009, the peso stabilized and strengthened its position in the second half of 2009, leading the Mexican peso-dollar exchange rate to appreciate 5.4% in 2009 with respect to the exchange rate in effect on December 31, 2008.

In 2010, the Mexican peso strengthened its position during the year as compared to the dollar, appreciating approximately 5.3% since the end of 2009, while the inflation rate for 2010 was 4.40%.

During the first half of 2011, the exchange rate of the peso to the dollar was stable, showed an average rate of Ps.11.89 per one dollar. This stability changed drastically during the second half of the year, were we observed a higher average rate peso-dollar of Ps.12.97, with a final depreciation of 13.0% by the end of the year with respect to year-end of 2010.

In 2012, the Mexican peso strengthened its position during the year as compared to the U.S. dollar, according to the U.S. Federal Reserve Bank, with the average peso-dollar exchange rate being Ps. 13.15 and appreciated with respect to the U.S. dollar by 7.1% at year-end (or 7.9% according withBanco de Mexico’ statistics).

The following table sets forth the high, low, average and year-end exchange rates for the purchase and sale of US dollars (presented in each case as the average between such purchase and sale rates) for periods indicated:

⁽¹⁾ The exchange rates are the noon buying rates in New York City for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York, (the “noon buying rate”).for periods indicated:

⁽²⁾ Average of month-end rates for each period shown.

⁽³⁾ The exchange rate for the year end for the Banco de Mexico was Ps.13.97 per one dollar.

On April 13, 2011,17, 2013, the exchange rate for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York was Ps.13.1460Ps. 12.23 per $1.00 US dollar.

Not applicable

Not Applicable

The Company is exposed to a wide range of risks. Note that the order in which the below risks are described does not necessarily reflect the effect that any of the below risks would have on the Company.

Risks Related to Economic, Political and Regulatory Conditions

MexicanBachoco’s core businesses are performed in Mexico and in the United States; therefore its performance depends among other factors, on the economic conditions prevailing in those countries, and otherparticularly in Mexico. The Company's risk exposure related to economic conditions includes risks related to economic performance, exchange rates, interest rates, as well as other political, economic and market conditions in other countries,social events that may negatively affect the Company's performance.

Unfavorable economic conditions in Mexico or the United States, such as a recession or increases in interest and inflation rates could have an adverse effect on our business, results of operations and the market value of our securities.financial performance.

If the Mexican economy experiences decreased output inor U.S. economies experience a high inflation rate, recession or if inflation or interest rates significantly increase,economic slowdown, consumers may not be able to purchase our products. Theseproducts as usual, especially in Mexico, where these factors have a direct impact on the consumers, and other effects could have adverse consequences onas a consequence our business, financial condition and results of operations.earnings may be adversely affected.

High interest rates in Mexico or in the U.S. could adversely affect our costs. Ourcosts and our earnings may also be affected by changes in interest rates due to the impact those changes have on our variable-rate debt instruments and may benefit from the interest we earn on our cash balance.

Our market value (throughA strong variation in the tradingexchange rates between the peso and dollar could negatively affect our financial results, as a greater percentage of our shares listed onsales are made in pesos, and a large percentage of our raw material purchases are made in dollars.

Furthermore, the Mexican Stock Exchange (or “BMV”) and our American Depositary Shares (or “ADSs”), listed at the New York Stock Exchange (or “NYSE”), mayCompany could be adversely affected by negative economic and market conditions arisingprevalent in anythe U.S. or other countries. Evencountries, even when economic conditions in such countries may differ significantly from economic conditions in Mexico, as investors’ reactions to developments in any of these other countries may have an adverse effect on the Mexican securities.our Securities. Consequently, the market value of our securities may be adversely affected by events taking place outside of Mexico.Mexico or the U.S.

Political events and regulatory changes in México, including transition to a new presidential administration, could affect Mexican economic policyconditions and as a consequence, negatively affect our operations.

The Company has operations in both Mexico and the U.S., but is incorporated under the laws of Mexico, and a greater percentage of our sales are made in Mexico. Accordingly we foresee an impact mainly from negative developments in the political, regulatory and economic conditions in Mexico.

In July 2012, we will havehad presidential elections.elections, and as a result, the leadership party of Mexico changed. We cannot predict theany impact of this event inthe election results on future business conditions in México. Presidential electionsMexico. A new administration may result in governmentregulatory gridlock and political uncertainty,or on the contrary, it could result in a major regulatory change, which could have an adverse effect on Mexican economic policy and as a result, to affect our business, financial position and results of operations.

Depreciation or fluctuationAlthough the recent U.S. presidential election did not result in a change of the peso relative tonations' leadership, any political or regulatory change in the U.S. dollar could adversely affect our financial conditions, results of operations and the market price of our shares and ADSs.

The largest component of our cost of sales is the balanced feed. The main components of the balanced feed are corn and soybean meal. We buy an important percentage of grains in the U.S., priced in U.S. dollars.

In addition, the price of grain we purchase inregarding Mexico, may be influenced by U.S. commodity markets.

In addition, severe devaluation or depreciation of the peso may also result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert pesos into U.S. dollars for the purpose of making timely payments of interest and principal on our indebtedness and some accounts payable.

Therefore, if the peso falls relative to the U.S. dollar, the cost of our balanced feed, some accounts payable due and our debt payments would increase.

Furthermore, currency fluctuations will probably continue to affect our revenues and expenses.

Finally, fluctuations in the exchange rate between the peso and the U.S. dollar will also affect the U.S. dollar equivalent of the peso price of our shares (the “shares” or “Serie B Shares”) in the BMV and the price of American Depository Shares (“ADSs”) on the NYSE.

Because we pay cash dividends in pesos, exchange rate fluctuations will affect the U.S. dollar amounts received by holders of American Depository Receipts (“ADRs”) upon conversion of such cash dividends by The Bank of New York Mellon, our Depositary Bank.

U.S. and Other Economies Worldwide

Events affecting the U.S. economy may adversely affect our business, results of operations, prospects financial condition and our market value.

Economic conditions in Mexico are heavily influenced by global economic conditions, mainly the U.S. economy. This is due to various factors, such as the commercial trade pursuant to the North American Free Trade Agreement (“NAFTA”). Events and conditions affecting the U.S. economy may adversely affect our business, results of operations, prospects and financial condition.

U.S. economy slowdown may also negatively affect the results of our U.S. operation, since the demand and prices of chicken product in U.S. market depends partially on the global economic growth.

Investor’s reactions to economic conditions present in other economies worldwide, even when economic conditions in those countries may differ significantly from economic conditions in Mexico and, as a consequence, affect our financial performance.

Government regulations in Mexico and the U.S. could cause a material increase in the Company's costs of operations and thus could have a negative impact on our results of operations.

Every region that Bachoco operates is subject to extensive federal, state and foreign laws and regulations that govern the production, packaging, storage, moving and marketing in the food industry and the poultry industry in particular, including several provisions relating to the discharge of materials into the environment.

We may be subject to fines, closures of our facilities, asset seizures, injunctions or criminal sanctions if we are held by a court of competent jurisdiction to be non-compliant with any of the applicable laws and regulations.

The adoption of new regulations or changes in the prevailing regulatory environment governing the food industry may entail restrictions in the daily operation of our Company, or increases in our expenses or production costs, conditions that could negatively affect our financial results.

Additionally, the imposition of new taxes or changes in the existing tax rates in Mexico or the U.S. could have an adverse effect inimpact on our stock. Consequently,operations and, as a result, negatively affect our market value may be adversely affected by current events in other countries.financial results.

Risks Related to Bachoco and the Poultry Industry

Risks Relating to the Food Industry

Future cyclicality excess supply and downturns within the chicken industry may adversely affect our results.

The chickenpoultry industry in Mexico and the U.S., as well as the chicken industry in other countries has been characterized by a long-term decline in prices in real terms. The industry has undergone cyclical periods of higher prices and profitability, followed by overproduction, leading to periods of lower prices and profitability.

The market that we serve is subject to volatility with respect to supply and raw material prices, which affects our product prices. We cannot assure you that future cyclicality, excess supply, andincreases in main raw materials prices, or downturns in real prices will not adversely affect our financial results.

Increase in the price of feed ingredients and its volatility may adversely affect or margins and results of operations

The largest single component of our cost of sales is the cost of ingredientsgrains used to prepare balanced feed, including:including sorghum and corn, and some other ingredients such as: soybean meal corn, fish meal, meat meal and for certain chicken products, marigold extract, among others.

Increase or volatility in main raw materials prices may adversely affect or operating and financial results.

The price of most of these raw materials is subject to significant volatility resulting from weather conditions, the size of harvests, governmental agricultural policies, currency exchange rates, transportation, storage costs, and other factors.

Given the long-term declining trends in real chicken prices, we may experience difficulty or delays in passing through any increase in grain costs to our customers. Accordingly, increases in the prices of the main raw materials used in the preparation of feed may have a material adverse effect on our margins and results of operations.

Furthermore, the cost of corn in the U.S. may be affected by an increase in the demand of ethanol, which can reduce the supply of corn in the U.S. market, adversely affecting our operations in the U.S.

High prices or volatility in main raw materials, could adversely affect our production costs and as a consequence our financial results.

Excess in supply or downturns in product prices may adversely affect our operating and financial results.

Excess in chicken or eggs supply coupled with a weak demand for our products in the markets we operate may result in a downturn in prices for these products, and as a result, our operating margins and financial results could be negatively affected.

Raising animals and meat processing involve animal health and disease control risks, which can have an adverse impact on our results of operations.

Our operations in Mexico and in the U.S. depend on raising animals and meat processing, which are subject to risks such as diseases (like different types of influenza) and contamination.contamination during production, packaging, storage or distribution processes.

Live chickens and swine are susceptible to infections by a variety of microbiological agents. In the past we have experienced outbreaks of various diseasesagents that have resultedmay result in higher mortality rates, thanaffecting our average mortality rates.earnings and financial results.

Chicken,Our chicken, turkey, beef and eggs products are subject to contamination during its processing, packaging, distribution or distribution. To reduceconservation. Potential contamination we use specialized feedstock and nutritional supplements that have been approved by the competent authorities and meet international industry standards, among some other measures. However, potential contaminationof our products during processing, however, could affect a larger number of our products, which may have a significant impact on our results.

Additionally, our sales are entirely dependent on consumer preferences, and the loss of consumer confidence in the products sold by meat and egg producers as a result of disease, contamination or other reasons, even if not related to our own products, could have a material adverse effect on the results of our operations.

Hurricanes or other adverse weather conditions may result in additional losses of inventory and damage to our plants and equipment.

Natural disasters could significantly damage our facilities. Our facilities in Mexico are susceptible mainly to earthquakes and hurricanes. Our facilities near Mexico’s coast are most vulnerable to the risk of severe weather. Our U.S. facilities are located in Arkansas and Oklahoma, a region vulnerable to being hit by tornadoes. Extensive damage to these facilities could affect our ability to conduct our regular production, as a result, reduce our operation results.

Our growth through mergers, acquisitions or joint ventures may be impacted by challenges in integrating significant acquisitions.

We have made in the past, and may make in the future, certain acquisitions in order to continue our growth. Acquisitions involve risks, including, among others, the following: failure of acquired businesses to achieve expected results; inability to retain or hire key personnel of acquired businesses; inability to retain the same client and supplier base; and inability to achieve expected synergies and/or economies of scale. If we are unable to successfully integrate or manage our acquired businesses, we may not realize anticipated cost savings and revenue growth, which may result in reduced profitability or losses.

Increased competition may adversely affect our performance.

Both in Mexico and in the U.S. weWe face significant competition from other chicken producers in all of our geographic markets and product lines.

According to the UNA, we are Mexico’s largest chicken producer, but we face competition from other producers in all of the markets in which we sell our products. Each of the two other majorproducts, these chicken producers in Mexico hasalso have substantial financial resources and operating strengths in particular product lines and regions.

Our operations in the U.S. face significant competition from other chicken producers in all ofto directly compete with our geographic markets and product lines. According to the WATTPoultry USA ranking of U.S. poultry companies for 2010(©Copyright 2012 WATT Publishing Co. all rights reserved), our U.S. operations produced 2.1% of the total ready to cook pounds produced in the U.S. The top two companies in the U.S. produced 38.5% and the top ten produced 74.5%. Each of the top two companies in the U.S. has substantial financial resources and strengths in particular product lines and regions. We also face competition from other companies in the markets in which we sell our products.

Company. We expect to continue to face strong competition in every market, as our existing or new competitors are likely to broaden their product lines and extend their geographic markets. Accordingly, we cannot assure you that our performance will not be adversely affected by increased competition.

Elimination of tariff barriers may adversely affect our performanceperformance.

Since 2003,U.S. producers may increase exports to Mexico as chicken, (excluding leg quarters for which the Mexican government imposed some temporary restrictions), eggs and swine are free of import quotas were eliminated throughto Mexico according to the NAFTA.North American Free Trade Agreement (“NAFTA”). Poultry producers in the United States have developed extremely low-costlow cost production methods and have been successful in exporting primarily frozen and value-added poultry to other countries, especially in periods of overcapacity in the United States. As tariff barriers decline under NAFTA, U.S. producers can be expected to increase exports to Mexico, whichStates a condition that could have a material adverse effect on our performance.performance in Mexico.

Regulations on animal health and environmental changes in Mexico, could affect Mexican poultry industry conditions and as a consequence negatively affect our Company.

On January 1, 2008,Our processes are subject to several animal health and environmental regulations that include animal raising, transportation, packaging, storage and distribution regulations. Drastic changes in any of these regulations could negatively affect our daily operations and inability to supply our products, and as a consequence affect our financial results. It also may include the restrictions for leg quarters were phased out. At present there are no restrictions on exporting these productsimplementation of new processes or equipment to Mexico.comply with the new regulations, condition that may negatively affect our liquidity, as our capital investments could increase.

Our inability to maintain good relationships with our work force and its labor union, may affect our processes and as a consequence our financial results.

In February 2011, the Mexican SecretariaIf we are unable to maintain good relations with our employees and with our labor union we may be faced with significant work stoppages as a result of Economy initiated an antidumping investigation focusing exclusively on imports of leglabor problems, condition that may affect our processes and thigh meat for human consumption from the United States of America to Mexico. This investigation was requested by Bachoco and by two other Mexican poultry companies.our operating results.

On January, 2012 the Mexican Ministry of Economy (or “Ministry of Economy”) issued a preliminary ruling on the anti-dumping process regarding chicken leg quarters imported to Mexico from the United States. On its press releases the Ministry of Economy stated the following:

As of the date of this report, we do not have any further information regarding this matter.

Risks Relatingrelating to InvestorsBachoco’s investors and its American Depositary Receipts (or ADRs)

The Robinson Bours family owns 82.75% of our total shares outstanding and their interests may differ from other security holders.

The Robinson Bours family has established two Mexican trusts, which they control (“Control Trusts”), that together held 496,500,000Shares outstanding as of December 31, 2011. With that percentage they hold the power to elect a majority of the members of our Board of Directors and have the power to determine the outcome of certain other actions requiring the approval of our stockholders, including whether or not dividends are to be paid and the amount of such dividends.

The Company trades its ADR’s on the New York Stock Exchange (“NYSE”) with each ADR representing twelve common shares.

The prevailing market prices for the ADS’sADRs and the Shares could decline if the Robinson Bours family sold substantial amounts of their Shares, whether directly, or indirectly, through thetwo Mexican trusts through which they hold their Shares, or if the perception arose that such a sale could occur.

See Item 7 for more details about the Company’s trusts.

The market value of our securities may be affected by economic and market conditions prevailing in any other country, although economic conditions in such countries may differ significantly from economic conditions in Mexico, Investors’ reactions to developments in any of these other countries may have an adverse perception and consequently, the market value of our securities may be adversely affected by events elsewhere.

Payment of cash dividends may be affected by the exchange rate of the peso versus the dollar.

Because we pay cash dividends in pesos, exchange rate fluctuations will affect the U.S. dollar amounts received by holders of ADRs upon conversion of such cash dividends by The Bank of New York Mellon, who acts as our Depositary Bank.

The protection afforded to minority stockholders in Mexico is different from that in the United StatesStates.

Under Mexican law, the protection afforded to minority stockholders is different from those in the United States. In particular, the law concerning fiduciary duties of directors is not well developed, there is no procedure for class actions or stockholder derivative actions, and there are different procedural requirements for bringing stockholder lawsuits. As a result, in practice it may be more difficult for the minority stockholders of Bachoco to enforce their rights against us or our directors or our controlling stockholder than it would be for stockholders of a U.S. company.

Our bylaws restrict the ability of non-Mexican stockholders to invoke the protection of their governments with respect to their rights as stockholdersstockholders.

As required by Mexican law, our bylaws provide that non-Mexicannon Mexican stockholders shall be considered as Mexicans with respect to their ownership interests in Bachoco and shall be deemed to have agreed not to invoke the protection of their governments in certain circumstances. Under this provision, a non-Mexicannon Mexican stockholder is deemed to have agreed not to invoke the protection of its own government by asking such government to interpose a diplomatic claim against the Mexican government with respect to the stockholder’s rights as a stockholder, but is not deemed to have waived any other rights it may have, including any rights under the U.S. securities laws, with respect to its investment in Bachoco. If you invoke such governmental protection in violation of this agreement, your Shares could be forfeited to the Mexican government.

Our bylaws may only be enforced in MexicoMexico.

Our bylaws provide that legal actions relating to the execution, interpretation or performance of the bylaws may be brought only in Mexican courts. As a result, it may be difficult for non-Mexican stockholders to enforce their stockholder rights pursuant to the bylaws.

It may be difficult to enforce civil liabilities against us or our directors, officers and controlling personspersons.

We are organized under the laws of Mexico, and most of our directors, officers and controlling persons reside outside the United States. As a result, it may be difficult for investors to affect service of process within the United States on such persons or to enforce judgments against them. This pertains also to any action based on civil liabilities under the U.S. federal securities laws. There is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.

Non-Mexican stockholders may not be entitled to participate in future preemptive rights offeringsofferings.

Under Mexican law and our bylaws, if we issue new Shares for cash as part of a capital increase, we must grant our stockholders the right to purchase a sufficient number of Shares to maintain their existing ownership percentage in the Company (“preemptive rights”). We can allow holders of ADSsADRs in the United States to exercise preemptive rights in any future capital increase only in one of the following two circumstances: (i) we file a registration statement with the Securities and Exchange Commission with respect to that future issuance of Shares; or (ii) the offering qualifies for an exemption from the registration requirements of the Securities Act.

We make no promises that we will file a registration statement with the Securities and Exchange Commission to allow holders of ADSsADRs in the United States to participate in a preemptive rights offering. As a result, the equity interests of such holders in the Company may be diluted proportionately. In addition, under current Mexican law, it is not practicable for the depositary to sell preemptive rights and distribute the proceeds from such sales to ADSADR holders.

Corporate disclosure and accounting in Mexico may differ from other countriescountries.

There may be less, or different, publicly available information about issuers of securities in Mexico than is regularly published by or about issuers of securities in other countries with highly developed capital markets. In addition, due to country-by-country differences in accounting and other reporting principles and standards, our corporate disclosures may differ in content from disclosures made under other principles and standards, such as U.S. GAAP. However, we adopted IFRS starting January 1, 2012.standards.

ITEM 4. Information of the Company

Our legal name isThe Company was legally formed in Mexico as Industrias Bachoco, S.A.B. de C.V., and we frequently refer to ourselves commercially as Bachoco. We are a holding company, and our principal operating subsidiary is Bachoco, S.A. de C.V. We were incorporated in Mexico on April 17, 1980, in Obregon, State of Sonora, Mexico, and is frequently referred to as Bachoco.

We are incorporated under the laws of the United Mexican States, (“Mexico”.)

but we have operations in both Mexico and the U.S. Our headquartersprincipal executive offices are located in Mexico at Avenida Tecnologico No. 401, Ciudad Industrial, zip code 38010, Celaya, State of Guanajuato, Mexico, and our telephone +52(461) 6183500number is +52 (461) 618 3500 and +52(461) 6183555. Our main product lines are: chicken, table egg, balanced feed.

We have production facilities and sales in México and, more recently, in the U.S. Until November 2011, our business and sales were domestic, with a very small portion of exports to Asia. Now with the integration of the new business of O.K. Industries, Inc. (or “O.K. Industries”), we are now also present in the U.S. market, with sales of chicken products under the O.K. brand.+52 (461) 618 3555.

Our current investor relations agent since July 1, 2011 in the United States is I-adize Corporate Communications, located at 82 Wall Street, Suite 805 in New York, New York.

Our main business lines are: chicken, table egg and balanced feed products.

Important events in the development of the Company’s business

We were founded in 1952. It has grown from a small commercial table egg operation in the state of Sonora, to be a vertically integrated Company and the leader poultry company in Mexico and we believe one of the most important poultry companies worldwide.

In 1963, we started operations in the cities of Navojoa, Los Mochis and Culiacan, producing just table eggs. In 1971, we commenced the production of chicken in the operationan operating facility that we opened in the city of Culiacan.

In 1974, we established a new complex in Celaya, a city located in the agricultural region of centralGuanajuato, Mexico. Our products were widely accepted in that region, which led us to open offices and distribution centers in Mexico City.

Our management recognized the potential for growth in Mexican chicken consumption, as well as the advantages of a large, vertically integrated company; as a result, we began to seek opportunities for geographic expansion and to increase production capacity and market.

In 1993, we moved out headquarters from the Obregon to Celaya city, and opened a new complex in the city of Techamalco, in the Southeast of Mexico.

In 1994, we continued expanding our coverage, this time with a new complex in Lagos de Moreno city, in the Western Mexico. By 1994, we had four productive complexes strategically located throughout Mexico and an important presence in the Mexican poultry market share.

In September 1997, we began trading on the BMVMexican Stock Exchange (or “BMV”) and on the NYSE, with 600 million shares outstanding and a free float of 17.25%, the remaining 82.75% is held since that year by the Robinson Bours Family though thethrough two Control trusts.

Furthermore, in December, 1999, we acquired Campi. With this acquisition we entered the chicken market in the South of Mexico, starting a new business line selling balanced feed to third parties. In 2001, we established our sixth productive complex in Gomez Palacio city, located in the Northeast of Mexico.

In December 2006, we acquired most of the assets and inventories of Del Mezquital to start a new complex in Hermosillo city, located in Northern Mexico, close to the border with the United States. In 2007, through a business agreement with Grupo Libra and Grupo Agra we entered in a new business, the sales of turkey and beef value added products, and increased our production capacity of table eggs. Both Companies are located in Northeast Mexico.

In 2009, we made diverse business agreements with a companies located at the Northeast of Mexico; to improve capacity and efficiency in our Northeast production complex headquartered in Monterrey, we; (i) acquired the assets of a balanced feed mill and a soybean processing plant from Productora de Alimentos Pecuarios de Nuevo Leon (ii) acquired the assets of a chicken processing plant from Avi Carnes Monterrey (iii) entered into agreements to rent breeder farms and egg incubation plants from Reproductoras Asociadas, and one-day-old breeder capacity farms and egg incubation plants from Produccion Avicola Especializada; and (iv) made arrangements with contract growers to acquire their inventories.

In 2011, the Company carried out two acquisitions: In August 20, 2011, we acquired Trosi de Carnes, S.A. (“Trosi”(or “Trosi”) business; this facility is located in Monterrey, Nuevo Leon in Northern Mexico. Trosi produces and sells processed beef and chicken. With this acquisition we expect to increase our sales of beef value added products.

On November 1, 2011, the Company entered the U.S. market and increased its export business with the acquisition of the American poultry company, O.K. Industries, Inc. thisOK Foods. This company accounts with operations across the River Valley area in Arkansas and Oklahoma. It supplies grocery retailers, food service distributors and commodity customers throughout the U.S. as well as foreign markets. Our U.S. subsidiary, Bachoco USA, LLC, is the holding company of OK Foods.

In December 2011, the Company carried out a transaction to buy certain property assets ofMercantil Agropecuaria Coromuel, S.A. de C.V.(or “MACSA”C.V. (or “MACSA”), with which,whereby, the Company enteredreinforced its presence in the State of Baja California in Mexico, with 3three distributions centers.

Capital Expenditures

OverDuring the past threelast two years we have financed most of our capital expenditures with resources generated by our operations.

In 2009, we madeFollowing is a summary of the capital expenditures of Ps. 944.1 million,incurred by the Company during the last two years with which we entered into two main projects: (i) increased chicken production capacity in Chiapas, Sonora and Yucatán, and updated our transportation fleet (ii) improved production capacity in the Monterrey Complex.

In 2010, we made capital expenditures of Ps. 517.3 million, with which we increased capacity for live chicken in Merida and Tecamachalco facilities; increased egg production capacity in the Mexicali facility; conducted productivity projects in the Tecamachalco and Merida processing plants, as well as adjusted production process to export requirements for the export of chicken claws to Asia; and updated our transportation fleet.amounts having been computed under IFRS.

In 2011 we made capital expenditures of Ps. 707.5 million, to implement new technologies in the processing plants located in Coatzacoalcos, Culiacan and Celaya. InAdditionally, in Celaya we built a water treatment plant and we also updated our transportation fleet.

In 2012, we made capital expenditures of Ps. 951.8 million, that are used for the replacement of our transportation fleet, the completion of certain expansion projects and the implementation of productivity projects across all of our facilities in both the U.S. and Mexico.

At present, as part of its regular course of business, the Company continues with its replacement of equipment and productivity projects.

Description of the Company

General

Bachoco owns and manages more than a thousand facilities, organized in nine production complexes and 64 distribution centers in Mexico, and one production complex in the United States.

We participate in the food industry in Mexico and in the U.S., mainly in the poultry industry.

We are a vertically integrated Company dedicated to the productionleader in the Mexican poultry industry, and commercializationone of chicken, table eggs, balanced feed, swine and value added products of turkey and beef in Mexico. Recently in November 2011, wethe largest poultry producers globally. We recently entered the U.S. chicken market.market through our acquisition of OK Foods.

In Mexico, our core business is chicken products, but we also produce and sell a wide range of other products such as eggs and balanced feed. We also operate a number of other segments which we refer to as “other business lines” that include among others; the production and selling of live swine, beef and turkey value-added products as well as a laboratory that produces vaccines for the poultry industry. These other business lines are grouped together as their sales on an individual basis do not represent more than 1.0% of our total sales.

In the United States, our sole business line is chicken products.

In the recent years, we have had nonot experienced material changes with productin the development or production of our products.

Principal Markets

We operate mainly in Mexico and in the recent years.U.S. In Mexico we compete mainly in the chicken, egg and balanced feed markets, and in the chicken industry in the U.S.

^{(1 )} Includes only sales subsequent toWe estimate that we are the acquisitionbiggest producer of O.K. Industries.chicken products in Mexico. Based on our internal estimates, we currently account for approximately 35.0% of the Mexican chicken market and are the second largest producer of eggs with an estimated market share of approximately 5.6%. We currently estimate that we have a 3.3% market share in the balanced feed products.

As noted previously, in the U.S. we produce and distribute chicken products only. Based on our internal estimates, we currently account for approximately 2.0% of this market.

The following table sets forth, for each of the periods indicated, our net revenues by main product lines as a percentage of total net revenues, as of December 31, 2012 and 2011:

Our chicken, eggs and balanced feed are our largest business lines in terms of revenues and thus they are described in more detail in the following paragraphs.

Overview of the Chicken Business LineIndustry in Mexico

We basically competeAccording to the UNA, chicken products are the main source of protein consumed in two different markets:Mexico. Mexico is among the Mexican andten main chicken producers worldwide, with an estimated production of 2,945.4 thousand tons of chicken meat in 2012, with a per capita consumption of 25.7 kilograms a year, a slight increase when compared to 25.6 kilograms for the U.S. chicken markets.year 2011.

The Characteristics of Mexican Chicken Market and Competition

Mexico is the fifth largest producer of poultry worldwide. Fresh chicken is the leadingmost popular meat consumed in Mexico. According to the UNA for 2011 the annual per capital consumptionmore than 90% of chicken was an estimated of 25.6 kilograms. Chicken is sold fresh, and just a central ingredient in many traditional Mexican dishes. Differently than in the U.S. chicken industry, value-added chickensmall percentage is sold frozen and with value added (marinated, breaded, partially cooked and fully cooked, among others). These products such as heat-and-serve products, frozen dinners, chicken nuggets and other similar foods, have found limited acceptance among Mexican consumers due to historical consumer preferences for fresh chicken. Mexican consumers traditionally prefer chicken with pronounced yellow skin pigmentation.

Based on market demand, fresh chicken rather than frozen will continue to be a preference within the Mexican market. Furthermore, we believe that consumer demand for value-added fresh chicken products, such as rotisserie chicken, supermarket broilers and chicken parts, will increase over time. Accordingly, we continue to focus primarily on producing fresh chicken, including value-added fresh chicken products.

According to the UNA,We estimate that we are Mexico’s largest chicken producer; In 2011 we producedproducer with around 35.0% of the total chicken produced in Mexico. We face significant competition from other producers in all of the markets in which we sell our chicken products. Whenmarket share, and when combined with our two largest vertically integrated competitors in Mexico, we account for approximately 59.0% of total Mexican poultry production; the remaining 41.0% is distributed among approximately 179 small and medium-sized integrated and non-integrated producers.production.

The three major poultry producersMexico is a main destination for U.S. chicken exports. Chicken imports from the U.S. have increased from 204.1 thousand tons in Mexico, including Bachoco, have substantial cost advantages and financial resources over smaller, non-integrated producers arising from economies of scale and control of feed preparation. We believe, however, that we have substantial competitive strengths over our competitors, including a broader range of chicken products and broader geographic coverage.

Furthermore, there are considerable barriers to entry into large-scale chicken production and distribution in Mexico, including, among others, the consumer preference2008 (when restrictions for fresh chicken, the weaknesses of the transportation infrastructure and varying regional consumer preferences among the various product categories. The channels for distribution of chicken products, in particular, are highly specialized and varied, and they call for in-depth experience in market practices.

Poultry producers in the United States have developed low-cost production techniques and have been successful in exporting primarily frozen and value-added poultry to other countries, especially in periods of overcapacity in the United States. As tariff barriers have declined under NAFTA since 2008, we have experienced increased competition from U.S. poultry producers. According to the UNA, in 2011, total imports of chicken products increased 8.1% in volume over imports in 2010, 77.6% of the totalleg quarters imports were chicken leg quarter.phased out in January 2008) to 311.5 thousand tons in 2011. This increase was due to lower price levels in the U.S. and other foreign markets. Chicken imports from the U.S. have increased around 52.6% since restrictions for leg quarters imports were phased out in January 2008.

The chicken industry worldwide is characterized by a long-term decline in real prices in real terms in conjunction with cyclical periods of higher profitability leading to overproduction followed by periods of lower prices and lower profitability.

Chicken products in Mexico are classified into six main categories: live, public market, rotisserie, supermarket broiler, chicken parts and value-added products. Bachoco operates in all these categories. A

For a better understanding of the chicken market in Mexico following is a brief description of each category is provided as follows:

of chicken products:

Chicken volume sold by category in the Mexican industry and by Company in 2009:

^{(1) According with the UNA in Mexico}

Chicken volume sold by category in the Mexican industry and by Company in 2010:

^{(1) According with the UNA in Mexico}

Chicken volume sold by category in the Mexican industry and by Company in 2011:

⁽¹⁾According with the UNA in Mexico

The U.S. Chicken Market Description

Chicken is the most popular meat produced in the United States. In 2011, the total meat production in the U.S. was 42.1 million tons. U.S. production of chicken meat was 16.9 million tons or 40.2% of the total U.S. meat production. The U.S. broiler industry exported 3.1 million tons of chicken or 18.4% of the total U.S. production.

On a retail weight basis U.S. per capita consumption of chicken is estimated to be 37.8 kilograms. Most of the chicken produced in the U.S. is sold in either a cut-up or a further processed form. Only 10.9% is sold in whole-bird form, with or without giblets, and 8.8% is cut up into 8 or 9 pieces for the KFC-type (Kentucky Fried Chicken) market. A further 51.5% is sold as bone-in pieces, primarily parts, by supermarkets or as leg quarters for export markets. Finally 28.8% of production is represented by deboned breast and dark meat for value added further processed meat.

Over the last thirty years the industry has experienced a constant trend toward greater integration and consolidation between companies. In 1980, the five largest companies in the industry processed 30.5% of all birds produced. In 2010, the five largest companies processed 59.6% of all birds processed. The pace of consolidation has slowed in recent years due to economic difficulties associated with higher ingredient costs. However since 2009, there has been significant investment by overseas poultry companies in U.S. broiler production and these companies now own approximately the 36% of U.S. production capacity.

Bachoco’s Chicken Marketing and Distribution

As previously stated, weWe operate in all of the sixthese chicken categories; our product mix varies from region to region, reflecting different consumption and distribution patterns.

Overview of the Chicken Industry in the U.S.

According to the USDA and the UNA, chicken is the main protein consumed in the U.S., but unlike in Mexico, the cuts are mainly sold frozen and with value-added (more than 85%). This is due to a large increase in demand for the three main components of chicken: the breast, wing, and left quarters, respectively.

The U.S. is the world’s largest producer of chicken. Its annual production is estimated at 16.8 million tons (or 37 billion pounds), and its per capita consumption is also one of the highest worldwide, per annum, estimated at 43.6 kilograms (around 96.0 pounds).

The U.S. chicken industry is more consolidated and vertically integrated. Most producers of chicken use state-of-the-art technology in its processes. It is estimated that the main four chicken producers account for 52% of the total chicken production in the U.S.

Another characteristic of the chicken industry in the U.S. is the use of contract growers, with more than 85% of chicken produced by contract growers. Such production consists of in providing the growers with chickens, balanced feed, vaccines, medicines and training required for the growing of chickens. The grower supplies its facilities and labor required in order to bring the chickens to slaughter-ready weight. The contract grower is then paid based on the productivity and efficiency of its flock.

Brazil and the U.S. are the main exporters of chickens worldwide, and their main destinations are Mexico, China, Russia and the Middle East, among other countries. We have developedestimate that our market share is around 2.0% in the U.S..

Overview of the Egg Industry in Mexico

According to the UNA, Mexico has the largest per capita consumption of eggs (or “table eggs”) in the world. There is an extensive distribution system. We use various distribution channelsestimated per capita consumption of around 22.5 kilograms for 2012, compared to 22.4 kilograms in every major product category2011. Mexico’s 2012 annual egg production is estimated at 2,538.1 million tons.

When compared to service different market segments.other protein sources, eggs are among the cheapest sources of protein in Mexico. The egg industry is more fragmented than the chicken industry.

Table eggs in Mexico are classified in three main categories: bulk, packaged and processed.

Bachoco participates in the bulk and packaged categories of eggs but does not participate in the processed market.

We estimate that we are the second largest producer of table eggs in Mexico. In 2012, we produced 5.6% of the total eggs produced in Mexico in terms of tons. We sell both brown and white eggs. We estimate that we are the largest producer of brown eggs in Mexico, and the largest marketer of packaged eggs with brand identification.

In 2012 and 2011, the volume sold by table eggs category in the Mexican industry and in the Company was:

Overview of the Balanced Feed Market in Mexico

According to theConsejo Nacional de Fabricantes de Alimento Balanceado y de la Nutricion Animal, A.C.(or ”CONAFAB”), Mexico is among the ten biggest producers of balanced feed worldwide. According to CONAFAB, it is estimated that 28,759 thousand tons of balanced feed were produced in Mexico in 2012, a slight increase from 28,333 thousand tons of balanced feed produced in 2011.

Producers of balanced feed are classified as commercial and integrated; commercial manufacturers produce for the market while integrated manufacturers mostly produce for themselves and occasionally for other producers.

The production mix between commercial and integrated producers has not changed much in the past years as it remains in the following proportion: 37% to 40% of commercial producers and 60% to 63% of integrated producers.

The following table sets forth, for each of the periods indicated, our net volume sold of balanced feed:

(1) According to CONAFAB, balanced feed produced by commercial producers in Mexico.

Seasonality Effects

The poultry industry worldwide is characterized by cyclical periods of higher profitability leading to overproduction followed by periods of lower prices and lower profitability and is very susceptible to price changes in main raw material, such as; corn, soybean meal and sorghum.

Our sales are moderately seasonal in Mexico. In general, we experience the highest levels of sales in the second and fourth quarters due to higher chicken consumption during the holiday seasons.

As for our sales in the U.S., there is slightly less seasonality but breast meat prices are typically higher in the second and third quarters and wings are more in demand in the fourth and first quarters.

Pricing for chicken and eggs products

Chicken and eggs are considered a commodity item. Changes to the supply or demand, and changes in raw material prices can directly impact in sale prices, and as a result affect the profitability of main producers. Another factor that impacts chicken pricing mainly in U.S. is the international demand.

Main Raw Materials and Sources of Supply

As a vertically integrated company our processes start in our main business lines with production of balanced feed, as well as with the buying of grandparent breeder flocks.

Our production of chicken processes starts with the purchasing of one-day birds called “grandparent” birds. These birds are raised to maturity in our farms where fertile eggs are produced to continue through our production processes. Grandparent birds are bought in Mexico and the U.S. from genetic bird firms.

The largest single component of our cost of sales is the cost of grain (corn and sorghum), as well as soybean meal used to prepare balanced feed. We operate our own feed mills to produce balanced feed for both individual business consumption as well as to sell to third parties.

The prices of these ingredients are subject to significant volatility resulting from weather, the size of harvests, transportation and storage costs, governmental agricultural policies, currency exchange rates and other factors. The Company engages in hedging of its feed costs in order to assure more stable cost of grains.

In Mexico, domestic crops are limited, therefore a large percentage of our raw materials are imported from the U.S. In 2012, we bought approximately 47.0% of our total grain from the domestic market and the rest from the U.S.

Marketing Channels Used by the Company

Marketing and Distribution of Chicken Products in Mexico

We have developed an extensive distribution system to participate in all the existing distribution channels of chicken and eggs products. We consider our distribution system one of the Company’s strengths, where we have developed wide expertise and knowledge of the business.

We participate and operate in all the following marketing channels:

We use our own fleet to transport the majority of rotisserie chickens, supermarket broilers and other chicken products to our customers in Mexico. We try to cooperate with existing distribution channels and do not compete with wholesale distributors, except in areas where we supply our own distribution capacity where needed for market penetration.

We distribute products from our processing plants located in: Celaya, Culiacan, Tecamachalco, Lagos de Moreno, Coatzacoalcos, Merida, Gomez Palacio, Monterrey and Hermosillo to our cold-storage facilities and warehouses, which serve as a midpoint in distribution to wholesalers and local customers. From our cold-storage facilities, we service wholesalers, (who in turn deliver to their customers), retailers and transport certain products directly to supermarkets and food-service operations. Our distribution infrastructure includes 63more than 64 cold-storage warehouses and facilities and a large fleet of vehicles. The decentralized sales force permits us to remain attuned to developments in the regions we serve and to develop close relationships with customers.

Table Eggs Business Line

The Mexican Table Eggs Market and Competition

According to the UNA, Mexico has the largest per capita consumption of table eggs in the world with 22.4 kilograms per capita consumed in 2011. We believe this level of consumption is due in part to the fact that eggs are among the cheapest sources of protein in Mexico.

The Mexican table egg industry is more fragmented than the chicken industry. According to the UNA, in 2010 the nine largest producers of table eggs in Mexico account for approximately 44.0% of the market.

We estimate that we are the second largest producer of table eggs in Mexico, in 2011, we produced 5.2% of the total eggs produced in Mexico. We sell both brown and white eggs. We estimate that we are the largest producer of brown eggs in Mexico. Our marketing efforts for egg products focus on increasing our brand recognition.

Table eggs in Mexico are classified in three main categories: bulk, packaged and processed.

The tables below sets forth the volume of the table eggs sold within the Mexican industry and volume and sales, recorded by us for each year indicated,

In 2009, the volume sold by table eggs category in the Mexican industry and in the Company was:

(1)Source: UNA

In 2010, the volume sold by table eggs category in the Mexican industry and in the Company was:

(1)Source: UNA

In 2011, the volume sold by table eggs category in the Mexican industry and in the Company was:

(1)Source: UNA

Bachoco’s Marketing and Distribution of Table EggsChicken Products in the U.S..

Our U.S. operations which lie across the River Valley area in Arkansas and Oklahoma, produce only chicken products. Those plants mainly supply grocery retailers, food service distributors, national accounts and commodity customers throughout the U.S. The U.S. complex also services the foreign market and exports to several countries including those in Asia, Russia and Mexico itself. Our distribution line through this plant is handled mainly through third parties.

Marketing and Distribution of Eggs Products in Mexico

Eggs are mostly sold packaged with brand identification. We sell white and brown eggs; the branded carton of brown eggs is a premium product in the Mexican market, because consumers perceive them to be of higher quality. Brown eggs command a small premium over white eggs.

In some regions, however, we have reallocated part of our production from brown eggs to white eggs due to local market preferences. Our marketing strategy in the eggs business is to gradually move from bulk to packaged white eggs. Packaged eggs are less vulnerable to price fluctuation and create brand loyalty.

We have designed our egg distribution system to transport eggs from our laying farms at Celaya, Los Mochis, Obregon, Mexicali, Tecamachalco, Merida, Saltillo and La Laguna regions to customers in all sales regions. We sell packaged eggs directly to all of the principal supermarket chains in Mexico, with daily deliveries directly to their outlets. Our marketing strategy for this business line is to lead sales of package branded eggs.

Marketing and Distribution of Balanced Feed Business Linein Mexico

The Mexican Balanced Feed Market and Competition

According to theConsejo Nacional de Fabricantes de Alimento Balanceado y de la Nutricion Animal, A.C. (or ”CONAFAB”) Mexico is among the ten biggest producers of balanced feed worldwide. In 2010, totalOur production of balanced feed in Mexico was 28.1 million tones, representingto third parties, accounts for a cumulative increasewide range of 5.8% from 2007 to 2010. CONAFAB estimates that Mexican production ofproducts; we produce balanced feed for 2011 will be 29.4 million tons,products mainly in the poultry industry, but we also produce in other markets such as dogs, cattle, swine and Mexico will account with 420 feed mill plants and a production capacity of 35 million tons.

Local production is composed of commercial and integrated manufacturers. Commercial manufacturers produce for the market, while integrated manufacturers mostly produce for themselves and occasionally forfish, among other producers. In 2010, integrated producers accounted for approximately 63.0% of total production. Imports of feed come almost entirely from the United States.species.

We estimate our market share in thesell balanced feed product line is approximately 3.1%.

Bachoco’s Marketing and Distribution of Balance Feed

We have benefited from economies of scale and synergies derived from producing feed both for our own internal consumption and for sale to third parties, we sellproducts mainly to small livestock producers and through a network of small distributors located mainly in central and southern Mexico. Currently, we have 4 feed plants dedicated to producing balanced feed to third parties.

We estimate that in 2010, our balanced feed business comprised approximately 3.1% of the market share of the commercial (non-integrated) balanced feed business in Mexico, a small reduction from the 3.4% market share in 2009. The decrease in our balanced feed sales volume is due to a reduction in our production levels as we improve our sales mix.

Patents, Licenses and Other Business LinesContracts

This item comprises sales of swine and turkey and beef value-added products. The Company sells live swine to small packers.

We purchase breeder swine live from the United States and breed them at facilities in the state of Sonora. We then raise swine to maturity at our farms in Celaya and three other locations in Mexico. Mature swine is sold on the hoof to Mexican swine meat packers for the production of pork products.

TheMexican swine industry is highly fragmented and our market share within this market is not significant.

The Mexican marketCompany’s operations are not dependent on the existence of turkey and beef value-added products is a small but onepatents or licenses or contracts signed with a large growth potential.customers or suppliers.

Material Effects of Government Regulations on the Company’s Business

In 2007, we entered into two new product lines: turkey and value-added beef and pork products. We do not raise either turkey or cattle; we only process these products.

Each of these business lines represented less 1.0% of our total sales. However, we see opportunities to grow these businesses by taking advantage of our distribution network.

Seasonality of Our Company

Our sales are moderately seasonal in Mexico, with the highest levels of sales, in general, in the second and fourth quarters due to higher chicken consumption during the holiday season. As for our sales in the U.S., there is slightly less seasonality but breast meat prices are typically higher in the second and third quarters and wings are more in demand in the fourth and first quarters.

Main Raw Materials

We purchase our breeding stock for broilers and layers from high-quality suppliers. All of our breeder swine currently come from one supplier, but we have changed suppliers from time to time and have numerous alternative sources of supply.

The largest single component of our cost of sales is the cost of ingredients used to prepare balanced feed, including: sorghum, soybean meal, corn, fish meal, meat meal and, for certain chicken products, marigold extract, among some others.

The price of these ingredientsEvery region where Bachoco operates is subject to significant volatility resulting from weather,extensive federal, state and foreign laws and regulations, which can have a material effect on the size of harvests, transportationCompany. Such laws and storage costs, governmental agricultural policies, currency exchange ratesregulations include among others, the following:

Import and other factors. To reduce the potential adverse effect of grain price fluctuations, we vary the composition of our feed to take advantage of current market prices for the various types of ingredients used.

Under NAFTA, corn tariffs were eliminated on January 1, 2008. This new condition has been positive for the Company, allowing us more flexibility in our cost of production as the cost of our ingredients more closely tracks prices in the international commodity markets.

To mitigate the effects of increases in grain prices, we are always seeking lower-cost feed ingredients from Mexican sources when available. The use of local feed ingredients allows us to save on transportation costs and import duties. However, because southern Mexico domestic crops and feed ingredients are limited in some cases our complexes use imported grain.

In 2011, we bought approximately 44.6% of our total grain in the domestic market and the rest from the U.S. We believe that the quality of local feed ingredients, particularly sorghum, is superior to that of imported feed ingredients. The Company engages in hedging of its feed costs in order to assure more stable cost of grains.

Mexican Regulation

Mexican Import Regulation

As required by NAFTA, the Mexican government eliminated all permanent quotas and tariffs on poultry, table eggs and swine in January 2003. With certain specific exceptions described below, there are now no quotas or tariffs on imports of poultry, eggs and swine from the United States. We expect the elimination of these trade protections to stabilize the level of imports over time and to permit improved private control over imports, which may result in increased competition from importers.Export Regulations

Effective January 1, 2008, there is a free chicken market between Mexico and the U.S. This allows U.S. producers to export any amount of chicken (mainly leg quartersquarters) free of tariffs to Mexico.

In additionThe U.S. chicken exports to NAFTA, Mexico has entered into free trade agreements with severalhave substantially increased since applicable restrictions on such imports have recently phased out. However, this development does impact the Mexican market for chicken because neither we, nor any other countries including Chile, Bolivia, Colombia, Venezuela and Japan andMexican chicken producer, is yet able to export similar products to the European Union. Although such agreements may result in lower tariffs over our own products, we believe that imports from such countries will not increase substantiallyU.S. Our production complex in the future dueU.S. exports chicken products to high transportationseveral countries such as Russia, China and distribution costs.Mexico, among others, and therefore it is subject to various laws and regulations that apply in each of these countries.

Antitrust Regulations

TheIn Mexico, theLey Federal de Competencia Economica (“(“Mexican Economic Competition Law” or “CFC”), which took effect on June 22, 1993, regulates monopolies and monopolistic practices.

Under this law, all companies, (including Bachoco)including Bachoco are required to notify theComision Federal de Competencia (“Federal Competition Commission”) CFC of all proposed transactions exceeding specified threshold amounts as set forth in the Mexican Economic Competition Law. The Federal Competition CommissionCFC can impose conditions on, and prevent or unwind, any such transactions by Mexican companies.

We have complied with all requirements under this law.

In December 2009, Mexico’s Federal Commission of Economic CompetitionCFC published a notice announcing an investigation of the Mexican poultry sector regarding possible monopolistic business practices. No specific companies have beenwere cited as conducting business in this manner. We, along with other companies, were required to provide information to the commission.commission during 2010 to 2012. As a result the CFC determined the following:

In 2010both cases, we disagreed with CFC’s resolution and 2011have appealed both resolutions according to the Federal Commissionprovisions of Economic Competition continued withMexican law, to assert our rights as a company that contributes to the investigationdevelopment of the country and requested information from several poultry companies. to a free market.

As of the date of this document we have not received further comments from this investigation.Annual Report, these files remain open; the CFC is evaluating our impugnation and is expected to release a response in the upcoming months.

Antidumping Regulations

Since 2003, chicken (excluding leg quarters for which the Mexican government had imposed certain temporary restrictions), eggs and swine import quotas were eliminated by virtue of the NAFTA. Poultry producers in the United States have developed extremely low-cost production methods and have been successful in exporting primarily frozen and value-added poultry to other countries, including Mexico, especially in periods of overcapacity in the United States.

On January 1, 2008, the restrictions previously imposed for leg quarters were phased out. At present there are no restrictions on exporting these products to Mexico.

In February of 2011, theSecretaria Mexicana de Economia (or “Ministry of Economy”) initiated an antidumping investigation focusing exclusively on imports of leg quarters from the U.S. to Mexico. This investigation was requested by Bachoco and by two other Mexican poultry companies.

As a result of this investigation, in January of 2012, the Ministry of Economy issued a preliminary ruling on anti-dumping procedures and confirmed dumping conditions on chicken leg quarters imported from the United States, including margins ranging from 62.90% to 129.77%, stating that such practices damaged the Mexican poultry industry.

The Ministry of Economy had the authority to impose anti-dumping duties, but did not proceed as the interested parties expressed the desire to reach an agreement. The companies involved provided new arguments.

Consequently, on August 7, 2012, after examining all final arguments, the authorities confirmed the existence of dumping conditions that caused harm to the domestic poultry industry. The Ministry of Economy imposed anti-dumping duties on imports of chicken leg quarters from the United States, but stated that such penalties would not be applied immediately, as the poultry industry was being affected by the presence of avian flu type H7N3 in the estate of Jalisco. It is worth noting that, the Company´s facilities were not affected by this outbreak of influenza.

As of the date of this report, we do not have any further information regarding the application of such duties.

Environmental and Sanitary Regulation

Our operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment. The principal laws areLey General de Equilibrio Ecologico y Proteccion Ambiental(General Law of Ecological Balance and Environmental Protection) andLey de Aguas Nacionales(National Waters Law). TheSecretaria del Medio Ambiente y Recursos Naturales (Ministry of Environment and Natural Resources or “Semarnat”) administers the Environmental Law, andComision Nacional del Agua(“National Water Commission”) administers the National Waters Law.

The Environmental Law regulateschicken industry is subject to government regulation in the health and environmental safety areas, including provisions relating to water pollution,and air pollution and noise controlcontrol. Below is a description of the principal laws and hazardous substances.Semarnatadministrative authorities in these areas in Mexico and the U.S.:

All of these laws or regulations can bring administrative and criminal proceedings against companies that violate environmental and safety laws and regulations, and after certain administrative procedures, it also hassuch violations can result in the power to closeclosure of non-complying facilities. Every company in Mexico is required to provideSemarnatwith periodic reports regarding compliance with the Environmental Law and the regulations thereunder.

The levelCompany provides information to these authorities on a regular basis or whenever required, to assure the Company’s compliance thereof. Our Mexican and U.S. subsidiaries are also in compliance with all current regulations and are constantly monitored to ensure compliance in case of environmental regulationany changes in Mexico has increased every year, and enforcement of the law is improving. We expect this trend to continue and to intensify with international agreements between Mexico and the United States.regulatory environment.

In particular, Mexican environmental laws set forth standards for water discharge that are applicable to poultry processing operations. Our processing plants have water treatment facilities that comply with Mexican environmental standards. We are implementing other investment projects in anticipation of stricter environmental requirements in the future. We do not expect that compliance with those Mexican federal environmental laws or Mexican state environmental laws will have a material effect on our financial condition or performance.

In 2008;2008 the Company voluntarily entered in an audit program through the OfficeProcuraduria de Proteccion al Ambiente (Office of Environmental Protection (“Propaeg”or “Propaeg”) of the Government of Guanajuato. As a result, in October 2011, the Company invested over Ps. 52.0 million in the building of water-treatment plant for its poultry processing plant located in Celaya, Guanajuato. Onon February 29, 2012, the Company received the Certificate “Clean Company” delivered by Propaeg.

This Certificate confirms that the Company meets all environmental standards on its production processes and that is friendly to the environment. Thus, this certification is a clear example of the Company’s environmental commitment with the community and the in general with the country.

The production, distribution and sale of chicken, eggs and swine are subject to Mexican federal and state sanitary regulations. The principal legislation isLey General de Salud (“General Health Law”) andLey Federal de Sanidad Animal(“Federal Animal Health Law”). The Federal Animal Health Law was enacted in 1993, and, since then, we have been working closely with Mexican authorities to develop regulatory standards and inspection methods for chicken processing. Currently, Mexican authorities do not monitor production or inspect products to the same degree as sanitary authorities in other countries, such as the USDA in the United States. However, we believe that we are in compliance with all applicable sanitary regulations.

U.S. Regulations

In our U.S. operations we are subject to regulations from federal agencies such as the USDA, the U.S. Food and Drug Administration (or “FDA”), the U.S. Environmental Protection Agency (or “EPA”), the U.S. Department of Homeland Security (or “DHS”), and the U.S. Department of Labor (or “DOL”),as well as state regulatory agencies in the states where we conduct business. Our U.S. subsidiary is in compliance with all current regulations and constantly monitors for any changes in those regulations.

Industrias Bachoco, S.A.B de C.V. is a holding company with no operations other than holding the stock of its subsidiaries. Our main operating subsidiaries most ofare Bachoco, S.A. de C.V. and Bachoco USA, LLC (the holding company for OK Foods), which are incorporated in Mexico. Our principalown our main operating assets.

For the fiscal year 2012, our subsidiary is BSACV, which owns our principal operating assets, and whichBachoco, S.A. de C.V. accounted for 81.37%71.9% of consolidated total assets asand 73.0% of December 31, 2011,total consolidated sales and 85.5%our subsidiary Bachoco USA, LLC, accounted for 12.3% of our consolidated revenues for the year ended December 31, 2011. total assets and 20.8% of total consolidated sales.

All of our subsidiaries are directly owned by us in the percentagepercentages listed below.

The following table shows our main subsidiaries as of December 31, 2009, 20102012 and 2011: