December 8, 2009

 

Mexican 2009-10 soy output revised lower

 

 

The MY 2009-10 soy production estimate has been revised downward to 105,000 tonnes due to adverse weather conditions. Soy production has been affected by the early season drought in north Mexico, mainly Tamaulipas, and heavy rains in Chiapas, which lowered yields and affected the original production estimate by approximately 30 percent. As a result, the MY 2009-10 soy import estimate was revised upward to 3.5 million tonnes (MT).

 

The soy oil production estimate for MY 2008-09 was also revised upward to 626,000 tonnes as a result of increased crushing and an increase in US soy imports. Regarding sunflower and rapeseed and their by-products, FAS/Mexico is maintaining previous forecasts for MY 2009-10 based on available information from the Secretariat of Agriculture (SAGARPA), the Secretariat of Economy (SE), and the National Association of Oils, Fats and Shortening (ANIAME), according to a US Department of Agriculture attache report posted Monday on the Foreign Agricultural Services Web site.

 

Due to adverse weather conditions, yields were adversely affected. In addition, soy production was affected by the early season drought, mainly in Tamaulipas, which also lowered yields. Both factors cut the original production estimate by approximately 30 percent and depressed expected soy yields from 2 to 1.46 tonnes per hectare for the 2009 spring/summer crop cycle. Planted and harvested area estimates for MY 2009 have been revised upward to reflect updated official data from SAGARPA. As a result of the decline in estimated production, the MY 2009-10 import estimate increased to 3.5 MT or 1.45 percent higher than the previous estimate. Similarly, for MY 2008-09 the import estimate has been adjusted upward slightly to 3.3 MT based on World Trade Atlas data. Despite this slight increase, total imports for MY 2008-09 declined seven percent compared to the previous year due to the economic crunch, which forced lower and middle-income consumers to substitute meat and poultry for less expensive protein sources.

 

The domestic consumption estimate for MY 2008-09 has been revised upward reflecting private industry information. Due to an unanticipated increase in imports, MY 2008-09 ending stocks were revised upward to 36,000 tonnes. The ending stocks estimate for MY 2009-10 also increased due to higher-than-previously anticipated total imports.

 

The soymeal production estimate for MY 2008-09 increased slightly, reflecting updated industry information. The MY 2008-09 soymeal import estimate also increased based on official information from the Secretariat of Economy (SE).

 

The Feed Waste Domestic Consumption estimate for MY 2009-10 has been adjusted upward based on information from the Mexican Feed Producers Association, which assumes a better performance from the poultry industry. Mexican poultry production is forecast to grow through MY 2010, despite facing its first reduction in CY 2009. As a result, the ending stocks estimate for MY 2009-10 has been revised downward. The ending stocks estimate for MY 2008-09 has been adjusted upward reflecting higher-than-previously estimated imports.

 

Total oil production has been revised upward for MY 2008-09 due to an increase in crushing. The production estimate for MY 2009-10 remains unchanged. Soy oil imports for MY 2008-09 and MY 2009-10 have been revised downward based on official SE data for the first year and industry sources for the second year, which reflects a more than previously estimated weaker demand. The export estimate for MY 2009-10 remains the same and is based on official data from the SE.

 

Total oil consumption figures for MY 2008-09 and 2009-10 have been revised downward compared to MY 2007-08 consumption. Despite an increase in MY 2007-08 consumption, the revised figures from MY 2008-09 and 2009-10 shows a declining trend in consumption and reflects deterioration in consumer purchasing power as well as an increase in domestic vegetable oil prices. In order to face the sluggish domestic vegetable oil demand, some oil companies started exporting their product to the United States. For example, Ragasa, which packages and markets retail vegetable oil, recently established an agreement this past October to supply various Wal-Mart stores with its product throughout the United States. According to various sources, Ragasa has high expectations that its product will be successful in the United States, especially considering its promotion of zero trans- fats.

 

Ragasa anticipates having its product in nearly every Wal-Mart store in the United States. Policy Secretary of Agriculture Francisco Mayorga recently announced that SAGARPA will promote planting oilseeds in Mexico through different incentive programmes, such as forward contracts and the Target Income Programme. SAGARPA also plans on promoting the use of genetically modified seeds in order to influence production patterns. The Target Income Programme provides payments to cover the difference between the market price and the "target income". The maximum amount that SAGARPA pays is defined as the difference between the market price and the "target income" while forward contracts ensure purchases between farmers and buyers. SAGARPA's objective is to reduce Mexico's oilseed imports, which represent 95 percent of total domestic consumption.

 

Mayorga recently stated that SAGARPA has been analyzing regions of the country where oilseed production could be developed. He noted that 20 years ago, Mexico was a strong producer of soy, mainly in Sonora and Sinaloa, but due to the infestation of white fly and incentives to cultivate corn, the crop practically disappeared. Mayorga indicated that its main challenge will be for growers to stop planting corn, wheat and sorghum and substitute with soy. Currently, there are commercial plantings of: safflower in the north of the country (mainly in Sonora), palm in Chiapas, Veracruz and Oaxaca, canola in Zacatecas and Mexico, GM soy in Campeche and Chiapas as well as jatropha for biodiesel in Chiapas.