November 5, 2008

              

 

Mexico's marketing year (MY) 2008/09 soy import estimate has been revised downward to 3.6 million tonnes, reflecting decreased demand from the feed industry, according to a US Department of Agriculture attache report posted Tuesday, 4 November 2008 on the Foreign Agricultural Services Web site.

 

Similarly, the total soy consumption estimate for MY 2008/09 has been reduced to 3.685 million tonnes due to the anticipated poor macroeconomic performance in calendar year (CY) 2009. The soy oil production estimate for MY 2008/09 has been revised downward to 640,000 million tonnes, as a result of lower imports of US soy and reduced crushing. FAS/Mexico forecasts no changes to the PS&D update from September for rapeseed and rapeseed meal.

 

The MY 2008/09 planted and harvested areas have been revised upward and downward, respectively, reflecting updated information from the Ministry of Agriculture. The production estimate for this marketing year remains unchanged at 100,000 million tonnes. However, the production level continues to represent less than three percent of total domestic consumption.

 

The MY 2008/09 soy import estimate has been revised downward to 3.6 million tonnes reflecting the expected contraction in domestic demand for livestock products. As a result of the slowdown in the Mexican economy and the international financial crisis, Mexican imports of US soy will likely be adversely affected by decreased demand from the feed industry.

 

Similarly, the total soy consumption estimate for MY 2008/09 has been reduced to 3.685 million tonnes. This reduction is due to the forecast poor macroeconomic performance in CY 2009. The Government of Mexico (GOM) was forced to revise its 2009 budget proposal in October because of the global credit crisis as well as decreased forecasts for economic growth. The GOM cut its CY 2009 economic growth forecast from three percent to 1.8 percent.

 

The soy meal production estimate for MY 2008/09 has been revised downward based on updated information from the private sector. These sources indicate that as result of lower soy imports, meal production should decrease in MY 2008/09. The soy meal import estimate for MY 2008/09 has been revised downward approximately four percent from our previous estimation, reflecting reduced demand from the feed industry.

 

The market for finished livestock products is beginning to be contracted and the cost of production continues to increase. As a result, industry contacts report that domestic demand for soy and soy meal should decrease in MY 2008/09. Another factor for an expected decline in the growth of US soy and soy meal exports to Mexico is the weakening of the Mexican peso relative to the US dollar, which will create relatively more expensive exports of these products. Mexico's peso has been plummeting since Tuesday, October 7 2008 and the Central Bank (Banxico) has taped nearly 15 percent of its reserves to rescue the peso. Banxico has sold nearly $13 billion worth of US dollars since that date and purchased pesos in an effort to rescue the vale of the peso.

 

The estimated MY 2008/09 ending stocks for soy meal were revised downward due to lower-than-previously estimated production and imports.

 

The oil production estimate for MY 2008/09 has been revised downward to 640,000 million tonnes, as a result of expected lower imports of US soy and reduced crushing. Similarly, the production estimate for MY 2007/08 has been revised upward reflecting SAGARPA's official information. Oil crushing sources have indicated that crushing margins could be reduced next year due to the unfavorable outlook of the Mexican economy and it could be more profitable to import crude oil rather than beans. Therefore, the oil import estimates for MY 2008/09 have been revised upward. The consumption estimate for MY 2007/08 has been adjusted upwards to 870,000 million tonnes based on official information from SAGARPA.

 

The estimated MY 2008/09 soy oil ending stocks were revised downward due to lower-than-previously estimated production. However, the ending stock figure for MY 2007/08 has been revised upward, reflecting higher-than-previously production.

 

Based on available information from SAGARPA and the Secretariat of Economy (SE), FAS/Mexico forecasts no changes to the PS&D update from September for rapeseed and rapeseed meal. It should also be noted that the rapeseed meal import estimate for MY 2007/08 remains unchanged. There is a difference between preliminary official Mexican data issued by the SE and US Census data.