Feed and Grain Update

An Expert's View about Cereals, Leguminous Crops, Oil Seeds in Mexico

Last updated: 11 Jul 2011

Excessive heat and continued drought have resulted in reduced expectations for fall/winter grain yields and delayed seeding of spring/summer crops.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 6/20/2011 GAIN Report Number: MX1048 Mexico Post: Mexico Grain and Feed June Update Report Categories: Grain and Feed Agriculture in the Economy Agriculture in the News Climate Change Global Warming Approved By: Allan Mustard Prepared By: Benjamin Juarez Report Highlights: Excessive heat and continued drought have resulted in reduced expectations for fall/winter grain yields and delayed seeding of spring/summer crops. Dry weather conditions in recent weeks have led the Secretariat of Agriculture, Livestock, Rural Development and Fishery (SAGARPA) and private sources to adjust their forecasts for the new crops. Both Post/New corn production forecasts for MY2011/12 and MY 2010/11 have been revised downward from the USDA/Official forecast to 24.0 MMT and 20.9 MMT, respectively. Also, the Post/New MY2011/12 (July/June) wheat production and harvested area estimates have been revised downward, based on updated information from official and private sources. The forecast for marketing year (MY) 2011/12 for sorghum, dry beans and rice supply and demand remains unchanged. General Information: Corn Production The Post/New total corn production volume and harvested area estimates for MY2010/11 (October/September) have been revised downward and upward, respectively, from the USDA/Official estimate, based on updated official data. These estimates are based on the preliminary final results of the 2010 spring/summer crop cycle as well as information from private and official sources who have indicated that yields across areas replanted in Sinaloa following the February 2011 freeze are going to be lower than initially expected (see 2011 GAIN Report MX1017 February Freeze Impacts Marketing Year 2010/11 Crop Production Forecast and MX1012 Hard Freeze Damages Sinaloa Corn and Produce). It should be noted that Sinaloa historically accounts for approximately 70 percent of Mexico?s fall/winter white corn production. Private and official sources have informed Post that several factors have influenced Sinaloa?s 2010/11 fall/winter corn production and yields in the area replanted last February and March. The factors include: Official sources stated that 308,000 hectares, not 285,000 hectares as originally planned, were replanted under the SAGARPA program announced last February. Higher replanting area reduced irrigation water availability for later in the season. Heat stress and pest infestations damaged large areas of corn. Corn plants that survived the February freeze (approximately 75,000 hectares) are producing lower weight/density grains due to the stress. Several areas were planted with seed varieties not suitable to the area. Harvest will stretch into July and August. There is a high risk that rains could occur during harvest season, which could influence yields and grain quality. Because of these factors, corn yields should be lower than initially estimated. Sources report yields will be between 6 to 6.5 metric tons per hectare (MT/Ha), whereas normal yields in Sinaloa average 10.5 MT/Ha. Sources estimate that total Sinaloa corn production could reach between 1.7 to 2.0 MMT, including the area that survived the freezing temperatures. As SAGARPA initially expected Sinaloa white corn production would reach 4.5 MMT during the 2010/11 fall/winter cycle, this implies a reduction of more than 2.5 MMT. The Post/New production forecast for MY2011/12 has been revised downward from the USDA/Official forecast to 24.0 MMT due to expectations that harvested area will be lower than previously anticipated. The MY 2010/11 corn production estimate is reduced further due to impact of drought and the aftermath of the February freeze. Unseasonably dry weather conditions have led SAGARPA and private sources reduce their individual forecasts for the new corn crop. Private sources, for example, pointed out that May 2011 was the driest May of the last 10 years. This has delayed, in turn, seeding in the Bajio region (encompassing the states of Michoacán, Jalisco, and Guanajuato) that will be harvested in the next marketing year (see weather section, below). These sources stated that rains expected in June and July are critical for the development of the 2011 spring/summer crop cycle; which accounts for MX1048 Grain and Feed June Update Page 2 approximately 73 percent of Mexico?s total marketing year production. The production estimates for MY 2008/09 remain unchanged. Consumption The Post/New total corn consumption estimate for feed and residual use for MY2010/11 is identical to USDA/Official data. The estimate has been reduced, however, in comparison with Post/Old estimates based on new information from private sources. These sources stated that feed consumption is expected to shift from corn to sorghum, wheat, and DDGS due to lower-than-previously estimated domestic corn production. Trade In comparison with the USDA/Official estimate, the Post/New import estimate for MY2010/11 has been increased to 8.6 MMT due to needs resulting from lower-than-previously estimated domestic production. Trade sources stated that the pace of corn imports in the first half of this marketing year has been lower than expected as feed corn buyers have substituted domestic sorghum and wheat. The Government of Mexico (GOM) promoted consumption of those grains through the implementation of policy and support measures (see the sorghum and wheat consumption sections, below). Stocks The MY2010/11 Post/New ending stocks estimate was revised upward to 1.5 MMT from USDA/Official estimates, due to higher-than-previously estimated imports. Also, the Post/New ending stocks estimate for MY2011/12 has been revised downward to 2.3 MMT due to lower-than-previously estimated domestic production. Sorghum Production The Post/New sorghum production estimate for MY2010/11 has been revised slightly upward to 6.6 MMT from the USDA/Official estimate based on updated official data from SAGARPA. Private sources indicate that the Sinaloa sorghum crop should be higher than originally estimated (i.e., 210,000 MT), due to some white corn producers shifting area lost in the February freeze to sorghum. Approximately 75,000 hectares of sorghum were planted at the end of February and beginning of March in Sinaloa. The production estimates for MY2009/10 and MY2011/12 remain unchanged. Consumption The Post/New MY2010/11 sorghum consumption estimate for feed and residual use has been revised upwards from 8.9 MMT to 9.0 MMT based on new information from industry sources and reflecting higher-than-previously estimated domestic production. Moreover, private sources stated that the GOM, through ASERCA, has renegotiated the white corn contracts that were reached under the Agricultura por Contrato (forward-contract purchases program) in Sinaloa with the animal feed industry as well as with livestock producers, in order to shift white corn deliveries to the tortilla and corn flour industries. The livestock producers and animal feed industry, in exchange, have been purchasing domestic sorghum. Sources indicate that the method that the GOM is using to convince livestock producers and the animal feed industry to buy domestic sorghum is to threaten withholding of future ?Call? coverage (550 pesos MX1048 Grain and Feed June Update Page 3 per MT) signed under the forward-contract purchases program. As such, trade sources have stated that this is one explanation for livestock producers? and the animal feed industry?s having imported lower volumes of corn over the past few months. Stocks Ending stocks in MY2010/11 have been revised downward to 237,000 MT due to higher-than- previously estimated domestic consumption of feed and residual use for this year. This is reflected in the downward adjustment to MY2011/12 carryout, as well. Wheat Production The Post/New MY2011/12 (July/June) wheat production and harvested area estimates have been revised downward, based on updated information from official sources. As was mentioned in the Corn Production Section, unfavorable dry weather conditions in recent weeks have led SAGARPA and private sources to adjust their forecasts for the new crop balance sheets. Similarly, the Post/New MY2010/11 wheat production and harvested estimates have been revised upward and downward, respectively, based on preliminary final data from SAGARPA. Consumption The Post/New MY2010/11 wheat consumption estimate for feed and residual use has been revised upward by 200,000 MT to 600,000 MT based on new information. The increased consumption estimates reflect information from private sources who have commented that the durum wheat export support program handled by ASERCA has been canceled for calendar year (CY) 2011. Sources stated that due to lower domestic corn production, the GOM is promoting the diversion of durum wheat from export channels to domestic feed milling and pork producers. Reportedly, Sonoran pork producers are increasing their consumption of durum wheat over corn. For the same reason, the wheat consumption estimate for feed and residual use has been revised upward for MY2011/12 to 400,000 MT, considering that at least half of this marketing year is part of CY 2011. Trade The Post/New wheat export forecast for MY2010/11 has been revised downward from USDA/Official data to 550,000 MT as result the higher-than-previously estimated domestic feed consumption and the cancelation of the governmental export support program for durum wheat in CY 2011. Similarly, the Post/New wheat export forecast for MY2011/12 has been decreased from the USDA/Official forecast as Mexico´s livestock producers and animal feed manufacturers are expected to continue substituting wheat for corn in the first part of this marketing year that will, in turn, reduce exportable inventories. The Post/New total wheat import forecast for MY2011/12 has been revised upward from USDA/Official data to 3.5 MMT due to lower-than-previously estimated domestic wheat production. Stocks The Post/New MY2010/11 ending stocks estimate has been increased slightly from the USDA/Official estimate based on new production information. The Post/New wheat stock forecast for MY2011/12 has been increased from the USDA/Official forecast due to higher-than-previously estimated imports. MX1048 Grain and Feed June Update Page 4 Weather Excessive heat and continued drought are of significant concern across Mexico?s grain production areas and have resulted in reduced expectations for fall/winter crop yields and delayed seeding of spring/summer crops. Sources indicate that a drought of this severity has not been seen since 1941 and has affected millions of hectares of farmland. In addition, industry sources have stated that, should the trend continue through June and into July, some areas that normally seed at this time might remain fallow until the next seeding seasons begin in November or December. The following 4 figures, from a recent presentation delivered by Mexico?s National Meteorological Service and the National Water Commission (CONAGUA), demonstrate the extreme heat and the severity of Mexico?s current drought. The figures offer a comparison of heat levels and precipitation in May 2011. Modeling (see Figure 5) suggests that many parts of the country will continue experiencing lower-than-normal precipitation levels through the month of June. As such, timely rains will gain added importance for dryland agricultural areas and be critical for replenishing water tables for irrigated areas. Figure 1. Mexico: May 2011 Average Maximum Temperatures in Degrees Celsius Figure 2. Mexico: May 2011 Extreme Maximum Temperature in Degrees Celsius MX1048 Grain and Feed June Update Page 5 Figure 3. Mexico: Historical Accumulated Precipitation for the Month of May in Millimeters Figure 4. Mexico: Accumulated Precipitation for May 1-26 2011, in Millimeters MX1048 Grain and Feed June Update Page 6 Figure 5. Mexico: Modeled Precipitation Outlook for June 2011 in Comparison with Normal Levels MX1048 Grain and Feed June Update Page 7 Production, Supply and Demand Data Statistics: Table 1. Mexico: Corn Production, Supply and Demand for MY 2009/10 to 2011/12 Corn Mexico 2009/2010 2010/2011 2011/2012 Market Year Begin: Oct 2009 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 6,280 6,280 6,600 7,000 7,350 7,050 Beginning Stocks 3,559 3,559 1,389 1,409 1,489 1,509 Production 20,374 20,374 21,500 20,900 24,500 24,000 MY Imports 8,298 8,108 8,000 8,600 9,200 9,200 TY Imports 8,298 8,108 8,000 8,600 9,200 9,200 TY Imp. from U.S. 8,254 8,108 0 8,600 0 9,200 Total Supply 32,231 32,041 30,889 30,909 35,189 34,709 MY Exports 642 632 100 100 300 300 TY Exports 642 632 100 100 300 300 Feed and Residual 14,200 14,000 13,700 13,700 15,800 15,800 FSI Consumption 16,000 16,000 15,600 15,600 16,300 16,300 Total Consumption 30,200 30,000 29,300 29,300 32,100 32,100 Ending Stocks 1,389 1,409 1,489 1,509 2,789 2,309 Total Distribution 32,231 32,041 30,889 30,909 35,189 34,709 1000 HA, 1000 MT, MT/HA Table 2. Mexico: Sorghum Production, Supply and Demand for MY 2009/10 to 2011/12 Sorghum Mexico 2009/2010 2010/2011 2011/2012 Market Year Begin: Oct 2009 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 1,616 1,616 1,740 1,722 1,750 1,750 Beginning Stocks 1,336 1,336 414 337 264 237 Production 6,250 6,250 6,450 6,600 6,800 6,800 MY Imports 2,528 2,451 2,400 2,400 2,300 2,300 TY Imports 2,528 2,451 2,400 2,400 2,300 2,300 TY Imp. from U.S. 2,528 2,451 0 2,400 0 2,300 Total Supply 10,114 10,037 9,264 9,337 9,364 9,337 MY Exports 0 0 0 0 0 0 TY Exports 0 0 0 0 0 0 Feed and Residual 9,600 9,600 8,900 9,000 8,900 8,900 FSI Consumption 100 100 100 100 100 100 Total Consumption 9,700 9,700 9,000 9,100 9,000 9,000 Ending Stocks 414 337 264 237 364 337 Total Distribution 10,114 10,037 9,264 9,337 9,364 9,337 1000 HA, 1000 MT, MT/HA MX1048 Grain and Feed June Update Page 8 Table 3. Mexico: Wheat Production, Supply and Demand for MY 2009/10 to 2011/12 Wheat Mexico 2009/2010 2010/2011 2011/2012 Market Year Begin: Jul 2009 Market Year Begin: Jul 2010 Market Year Begin: May 2011 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 828 828 686 681 800 720 Beginning Stocks 315 315 520 555 570 584 Production 4,148 4,148 3,650 3,679 4,100 3,750 MY Imports 3,196 3,231 3,500 3,500 3,100 3,500 TY Imports 3,196 3,231 3,500 3,500 3,100 3,500 TY Imp. from U.S. 2,152 2,242 0 2,900 0 3,400 Total Supply 7,659 7,694 7,670 7,734 7,770 7,834 MY Exports 839 839 700 550 800 700 TY Exports 839 839 700 550 800 700 Feed and Residual 500 500 400 600 250 400 FSI Consumption 5,800 5,800 6,000 6,000 6,200 6,200 Total Consumption 6,300 6,300 6,400 6,600 6,450 6,600 Ending Stocks 520 555 570 584 520 534 Total Distribution 7,659 7,694 7,670 7,734 7,770 7,834 1000 HA, 1000 MT, MT/HA Figure 6. Mexico: Weekly Prices for White and Yellow Mexican Corn and U.S. Corn in pesos per metric ton Table 4. Mexico: Annual Average Prices of White and Yellow Corn in Mexico for 2008 to 2011 White Yellow Percent Standard Percent Standard Pesos/MT Change Deviation Pesos/MT Change Deviation 2008 3079.8 257.6 2974.1 202.0 2009 3049.3 -1.0 201.4 2748.3 -7.7 161.5 2010 2985.9 -2.1 201.5 2803.8 2.0 279.4 *2011 4324.5 44.8 582.6 3911.5 39.5 354.5 Source: SFA & GMCA. Note: *Year to Date for 2011. MX1048 Grain and Feed June Update Page 9 Table 5. Mexico: Monthly Exchange Rate Averages for 2009-2011 in Mexican Pesos per U.S. $1.00 2009 2010 2011 January 13.15 12.80 12.13 February 14.55 12.95 12.06 March 14.71 12.59 12.00 April 13.41 12.23 11.73 May 13.19 12.71 11.67 June 13.47 12.72 July 13.36 12.65 August 13.00 13.15 September 13.41 12.84 October 13.24 12.44 November 13.12 12.33 December 12.85 12.39 Annual Avg. 12.33 12.65 11.92 For More Information FAS/Mexico Web Site: We are available at www.mexico-usda.com or visit the FAS headquarters' home page at www.fas.usda.gov for a complete selection of FAS worldwide agricultural reporting. FAS/Mexico YouTube Channel: Catch the latest videos of FAS Mexico at work http://www.youtube.com/user/ATOMexicoCity Report Number Subject Date Submitted MX1043 Grain and Feed May Update -- Sorghum Situation 5/25/2011 MX1033 Grain and Feed April Update 4/29/2011 MX1017 2011 Grain and Feed Annual 3/14/2011 MX1012 Hard Freeze Damages Sinaloa Corn and Produce 2/11/2011 MX1006 January Update for Corn and Rice 1/28/2011 Useful Mexican Web Sites: Mexico's equivalent to the U.S. Department of Agriculture (SAGARPA) can be found at www.sagarpa.gob.mx , equivalent to the U.S. Department of Commerce (SE) can be found at www.economia.gob.mx and equivalent to the U.S. Food and Drug Administration (SALUD) can be found at www.salud.gob.mx. These web sites are mentioned for the readers' convenience but USDA does NOT in any way endorse, guarantee the accuracy of, or necessarily concur with, the information contained on the mentioned sites. MX1048 Grain and Feed June Update Page 10 MX1048 Grain and Feed June Update Page 11
Posted: 11 July 2011, last updated 11 July 2011

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