November 16, 2009

Mexico's MY (marketing year) 2009-10 corn production estimates has been revised downward because of drought and lower-than-previously estimated harvested area. As a result, the MY 2009-10 import estimate for corn increased to 9.7 million tonnes, according to a US Department of Agriculture attache report posted Friday (November 13) on the Foreign Agricultural Services Web site.

The projected corn production estimate of 23 million tonnes (MT) for marketing year MY 2009-10 (Oct-Sept) has been lowered three percent to 22.3 MT due to more complete data issued from private sources and the Secretariat of Agriculture, Livestock, Rural Development, Fishing and Food (SAGARPA). Corn output for the 2009 spring/summer harvest was reduced sharply due to the drought, which reduced harvested area. Preliminary data from experts indicates that 1.25 million hectares of planted area out of a total of 6.6 million hectares was damaged by the drought. The main states adversely affected were: Puebla, San Luis Potosi, Zacatecas, Guanajuato and some areas of Jalisco and Michoacan. Due to discrepancies from industry sources, SAGARPA officials continue to monitor the impact of the drought on corn and other grains. They have stated that in some states, corn growers overestimated the area damaged in order to access supports granted by the Climate Contingency Support Program (PACC). This August, the former Secretary of Agriculture, Alberto Cardenas, stated the GOM would implement support mechanisms to combat dry weather conditions. One of these measures was the PACC, which is a direct support payment to municipalities. SAGARPA has been working with the National Weather Commission (CONAGUA) to determine the areas that were negatively affected by the drought due to reduced average yields. They expect to have a better estimation of these areas by the end of November. As a result, SAGARPA temporarily stopped publishing the information of the planted area damaged by drought until they can properly determine the drought. They expect this will cut down on payments to unaffected areas. Official sources have also stated that SAGARPA's original production figure for the 2009 spring/summer crop cycle (19.2 MT) was inflated due to political reasons.

Reportedly, Cardenas, the former Agriculture Secretary, established that 30 MT should be the annual production goal for the end of the current administration (2012). The national average for the past five years has been 22.2 MT and there is no possibility that production would even be close to the 30 MT goal. The MY 2007-08 harvested area and production estimates were revised downward reflecting official data issued by SAGARPA.

The projected corn consumption for MY 2009-10 remains unchanged. Both, private and government sources, continue to expect a bearish demand for feed consumption due to a continual weakening for poultry, pork and beef in Mexico, largely because of reduced consumer purchasing power.

The MY 2008-09 import estimate was revised upward to 7.64 MT reflecting final official data from the Secretariat of Economy (SE) as of August 31, 2009, and preliminary data from SAGARPA for September. Similarly, for MY 2009-10, the import forecast for corn increased from our previous projection to 9.7 MT. This outlook is based on expectations of a contraction in domestic production.

Export estimates for MY 2008-09 have been revised upward to 153,000 tonnes based on World Trade Atlas data.

The MY 2009-10 estimated ending stocks were revised downward, due to lower-than-previously estimated domestic production. Similarly, the ending stocks estimate for MY 2008-09 was revised downward as result of lower-than-originally estimated production and higher exports.