November 5, 2008


USDA attaché; Mexico's 2008-09 corn production revised


Mexico's MY 2008/09 corn production estimate has been increased based on the latest Mexican government data and improved weather conditions, according to a US Department of Agriculture attache report posted Tuesday, 4 November 2008 on the Foreign Agricultural Services Web site.


As a result of the current economic situation, the corn consumption estimate for MY 2008/09 has been revised upward to 16.2 million tonnes. Due to higher expected inflation, private economists estimate that consumer purchasing power could be less in calendar year (CY) 2009 forcing many consumers to increase purchases of corn, dry beans and rice.


Based on the latest Mexican government data, the marketing year (MY) 2008/09 production estimate has been increased due to better weather conditions. The government foresees that strong rain that has fallen in some states of the country, for example in Guanajuato, will increase yields for corn. The Under Secretary of Rural Development in the Ministry of Agriculture (SAGARPA), Antonio Ruiz, stated that atypical rains have pushed production higher in Aguascalientes, Chihuahua, Durango, Jalisco, Michoacan, Nayarit, San Luis Potosi, Sinaloa, Zacatecas and Nuevo Leon. As a result, official and private sources anticipate larger production for the 2008 spring/summer corn crop cycle. The Secretary of Agricultural Development in Guanajuato recently stated that if it does not rain any more, their state will have a significant increase in production since they have already passed their average rain fall of 650 milliliters a year.


The MY 2007/08 production estimate has been increased to reflect the most recent official information issued from SAGARPA. The import estimate for MY 2008/09 was adjusted downward due to the impact of higher estimated domestic production.


The MY 2008/09 forecast for domestic feed consumption has been reduced to 16.3 million tonnes. The use of corn for feed should decline due to the expected sluggish demand from livestock producers. Several sources anticipate a recession in the economy and higher inflation as a result of the world financial crisis. Due to higher expected inflation and an adverse economic climate, private economists estimate that consumer purchasing power could be lesser in CY 2009. However, the food consumption estimate for MY 2008/09 has been revised upward to 16.2 million tonnes since the domestic demand for meat products should decrease due to high prices, which will force low-and middle-income consumers to find less expensive protein sources, such as tortillas.


The ending stock estimates for MY 2008/09 have been adjusted downward due to lower-than-previously estimated imports. Similarly, the estimated MY 2007/08 ending stocks were revised upward due to higher-than-previously estimated production.


FAS/Mexico maintains its previous forecast of production and area harvested based on normal weather conditions, average planted area, the progress of the 2007/08 sorghum crop, and official information.


Regarding the MY 2008/09 import estimate, it has been increased to 1.5 million tonnes assuming more affordable prices for sorghum. Similarly, the consumption estimate for MY 2008/09 was revised upward based on updated information from the industry, which reflects an expected substitution of corn for sorghum, mainly by the poultry industry. The poultry industry continues to be the major consumer of sorghum in Mexico.


The MY 2007/08 production forecast figures are unchanged at 3.59 million tonnes. Likewise, the Mexican wheat production forecast for MY 2008/09 remains at 3.89 million tonnes. As previously reported, the expected production of more than 2 million tonnes of crystalline or durum wheat, will be used for semolina and pasta with a smaller amount for feed use. The increase in production for MY 2008/09 is due to expanded area planted, which has been aided by the implementation of a GOM project intended to increase production and take advantage of high international prices. All of this is supported by the implementation of forward contracts within the sector in order to promote wheat production.


MY 2007/08 imports have been revised downward. As previously reported, this decrease was driven by the GOM's intention to increase the production of soft wheat, which is more suitable for baking. The MY 2008/09 import forecast was revised to 3 million tonnes, 2.8 percent lower than the previous year's revised figure due to the expected increased production of Soft Red Winter in the Bajio area. This confirms the GOM's intention to use forward contracts to promote bringing idle wheat lands back into production.


The export figures for MY 2007/08 and MY 2008/09 were revised upward to reflect recently updated official data. FAS/Mexico estimates that Mexico will continue increasing its production of crystalline, or durum wheat, to maintain similar export levels.


The MY 2007/08 and MY 2008/09 feed consumption figures were lowered based on the fact that due to high international prices, producers decided to export part of their production for feed use. The FSI consumption for both MY 2007/08 and MY 2008/09 were revised downward since Mexico is struggling in foreign markets and encountering direct competition from imported high added-value products in the domestic market.


Despite all these facts, the US and Canada will continue to be the main wheat suppliers to Mexico where prices, undoubtedly, will play a large role in deciding the source and amount of imports.

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