March 21, 2012

Drought hits Mexico's agriculture

How drought will affect Mexico's demand for US feed grains is hard to assess, but the impact is likely to be felt for two to three years, according to Julio Hernandez, who directs market development programs in Mexico for the US Grains Council.

The drought, part of the same weather system that devastated Texas and nearby states last year, is Mexico's worst in 70 years, according to Ignacio Rivera, the country's undersecretary for rural development. Rivera predicted it will lower corn production for the current year to only 780 million bushels, compared to 830 million bushels in the 2010-11 calendar year.

Current grain shortages could push Mexico's imports this year above 9.5 million tonnes (374 million bushels) of corn and sorghum above three million tonnes (118 million bushels), Hernandez said. Mexico is already the second-largest customer for US feed grain exports and a leading buyer of distiller's dried grains with solubles.

Problems began last year when severe frost damaged Mexico's corn crop. That forced Mexico's tortilla manufacturers to look for other sources of white corn," Hernandez said. "In an attempt to minimize these losses with replanting, the government sent additional water from the reservoirs. Now Mexico is suffering because it doesn't have enough water in the reservoirs for this year's crop."

While crop losses are likely to create more demand for US exports, the drought-related losses in the livestock sector are a potential offset. Mexico's ministry of agriculture estimates that 60,000 cattle have died and an additional 89,000 have been culled by producers.

Livestock producers say it will take as much as three years for herds to recover.