April 15, 2009

Mexican soy production is expected to remain unchanged in marketing year (MY) 2009-10 (August-September) at 150,000 tonnes as the decline of international soy prices may prevent growers from increasing planted area this year, according to a US Department of Agriculture attache report posted Tuesday (April 14) on the Foreign Agricultural Services Web site.

However, Mexico's total demand for oilseed is forecast to decline approximately 0.5 percent in MY 2009-10 due to a poor macroeconomic scenario, which should diminish the consumer purchasing power. Likewise, total oilmeal demand is forecast to decrease 1.7 percent during the same marketing year due to the bearish demand from the livestock sector. Meanwhile, consumption of vegetable oils for MY 2009-10 is expected to increase only one percent, driven by population growth.

Similar to other countries, Mexico's economy has been significantly affected by the international financial crisis, which has reduced all growth possibilities for 2009. Although the growth domestic product (GDP) increased 1.3 percent in 2008, the most recent economic data shows serious symptoms of deterioration. Several private analysts and the GOM have forecast that Mexico's GDP could decline three percent due in part to domestic and foreign trade volumes continuing to decrease for the major part of 2009 as well as the recession that hit the hardest during the fourth quarter of 2008. Under this recessive macroeconomic performance, consumer purchasing power should be adversely affected in 2009. Domestic demand for meat products will retreat because higher prices will force middle and lower-income consumers to substitute meat and poultry for less expensive protein sources. At the same time, Mexican consumers will reduce their consumption of products containing vegetable oils, such as soy and canola oils, as stagnant incomes could discourage demand for convenience foods and other vegetable oil products. Therefore, the total demand for oilseed is forecast to decline approximately 0.5 percent in MY 2009-10. The total consumption of vegetable oils for MY 2009-10 is expected to increase one percent, influenced basically by population growth. Oilmeal demand is forecast to decrease 1.7 percent during the same period.

Mexican soy production is expected to remain unchanged in MY 2009-10 (August-September) at 150,000 tonnes as the decline of international soy prices may prevent growers from increasing planted area this year. Total production and planted and harvested area estimates for MY 2008-09 have been revised upward based on updated official data, which reflects favourable weather conditions during much of the 2008 spring/summer crop cycle, sufficient water supply and better inputs.

Despite the forecast that US exports of oilseeds are expected to remain unchanged in MY 2009/10, the United States should maintain its overall share in the Mexican market due to geographic proximity as well as effective promotional and marketing efforts.

Total meal imports are expected to decline in MY 2009-10 due to reduced demand for livestock products in the domestic market, which continues its downward trend that started in the current marketing year. The Mexican livestock industry has also been hurt by the financial crisis and a weakening peso that has increased the imports of feed ingredients. Similarly, the consumption of all meat products is expected to decline in MY 2009. For MY 2009-10, total oil imports are forecast to increase slightly driven basically by population growth. Soyoil continues to represent the majority of these imports with approximately 73 percent, while the rest includes rapeseed and sunflower oils. Total US soyoil imports are expected to reach 230,000 tonnes in MY 2009-10, which is similar to the import estimate of MY 2008-09.