Report Highlights:

Post/New MY 2015/2016 total Mexican cotton production is forecast to decrease approximately 19 percent due to an expected decrease in planted area. Total domestic cotton consumption in MY 2014/15 is forecast to increase slightly from the previous year to 1.95 million bales (each bale weighs 480 pounds). The Government of Mexico (GOM) postponed the removal of protective duties for textile and other products until 2018. The GOM also implemented various programs aimed at supporting the growth of the Mexican textile industry. The United States should continue to remain the main supplier of cotton to Mexico which accounts for about 100 percent of Mexico's total cotton imports.

Executive Summary:

The Post/New MY 2015/16 total Mexican cotton production is forecast to decrease approximately 19 percent due to an expected 17 percent decrease in planted area. The decrease in planted area is mainly due to an expected increase in planted area for alternative crops like sorghum and corn that will be used for livestock feed as growers see less attractive prices for cotton.

Industry sources estimate that MY2014/15 yields will reach an average of 7 bales per hectare (ha), as a result of Genetically Engineered (GE) cotton seed use, varieties that permit high density planting, combined with favorable weather conditions. The MY 2014/15 domestic consumption is expected to increase slightly to 1.95 million bales. The Mexican textile industry remains competitive and is expected to grow with the implementation of various supports initiated by the GOM, including favorable custom, tax and financial measures.

Production:

The Post/New MY 2015/16 Mexican cotton production is forecast to decrease to 1.02 million bales due to a reduction in the expected planted area compared to the previous year estimation. The reduction in planted area is the result of an expected increase of production areas for other feed crops like sorghum and corn, mainly due to less attractive prices for cotton compared to livestock feed crops.

Mexico: MY2014/15 Forecast Cotton Production by State/Region

Region

Planted

Area (Has)

Yield

(Bales/Ha)

Production

(Bales)

Sinaloa

1,000

4.5

4500

Sonora

1,200

5.07

5,400

Mexicali, BC

33,681

7.2

243,429

Ascension, Chihuahua

55,292

6.7

370,456

Juarez, Chihuahua

29,815

6.7

193,798

Ojinaga, Chihuahua

36,470

7.72

281,781

Meoqui, Chihuahua

5,372

6.0

32,232

La Laguna / Durango and Coahuila

15,974

7.5

119,805

Tamaulipas

2,000

4.5

9,000

TOTAL

180,804

6.98

1,260,398

The Post/New MY 2014/15 total Mexican cotton production estimates have been revised slightly upward from the USDA/official estimate to 1.26 million bales, based on updated figures from the Confederation of Mexican Cotton Associations (CMCA). The CMCA attributes the increase in cotton production to higher yields due in part to the adoption of GE seeds, varieties of seed that permit higher density planting, combined with good weather conditions.

The 2013/14 total cotton production and harvested area estimates have been revised slightly upward from the USDA/official estimate to 933,000 bales in a harvested area of 123,000 hectares (ha), based on updated figures from the Secretariat of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA).

In Mexico, cotton is grown throughout the year during two seasons: the main growing season is spring-summer (planted mainly from April –July and harvested August – January and fall-winter (which is planted in November-January and harvested mainly in April to May).

Cotton yields vary significantly among the major producing areas in Mexico. Average cotton yields for MY 2015/16 and MY 2014/15 are estimated at almost 7 bales/ha. The highest yielding area is expected to be in the region of Ojinaga, Chihuahua with 7.7 bales/ha, while the lowest yielding areas are located in Tamaulipas and Sinaloa with 4.5 bales/ha. Although, most cotton growers in Mexico have adopted the use of GE seed varieties and high density planting, other factors, such as weather and use of technology can explain differences in production levels. For example, in Tamaulipas all cotton production is in non-irrigated areas, which significantly reduces yields.

On January 22, 2015 SAGARPA, through the National Health Service, Food Safety and Quality Service (SENASICA), gave official recognition to the state of Chihuahua for reaching the status of "free zone of pink worm in cotton". SAGARPA also recognized USDA for their support and assistance in the Binational Program for the Eradication of Pink Bollworm and Boll Weevil. Control actions were taken to successfully eradicate these pests by using integrated pest management, genetic engineered seeds and applying the sterile insect and pheromone mating disruption techniques. Both techniques used biological material provided by USDA. Bt genetic engineered cotton directed against the pink bollworm has been used in Mexico since 1996. As a result of these actions, according to SENASICA, 85 percent of Mexico's cotton producing area is now free of pink bollworm and 70 percent of boll weevils are depleted. According to SENASICA officials, from 1996 to date, farmers from Chihuahua saved 30 percent on their production costs. For example, most Chihuahua cotton growers have reduced from 18 to one the number of insecticide applications needed, while at the same time increasing their yields from 3.7 to 7.7 bales of cotton per hectare. In Mexico, GE cotton seed use covers about 85 percent of the planted area throughout the country.

Regarding the quality of cotton fiber, CMCA officials expect that more widespread use of GE cotton varieties will allow producers to obtain not only better yields but significantly improve the quality of domestic cotton production. National Textile Industry Chamber of Mexico (CANAINTEX) representatives stated that standardization in cotton quality is of extreme importance for the continued stability of domestic consumption. Harvesting methods also have an influence on cotton quality and this is variable by region. In La Laguna, for example, the cotton harvest is picked by hand and is considered the region with better fiber quality.

Consumption:

Total domestic cotton consumption in MY 2015/16 is forecast to reach 1.97 million bales (each bale weighs 480 pounds), mainly because of GOM's various support programs as well as their actions taken related to global competition. The domestic cotton consumption estimate for MY 2014/15 has been revised slightly higher by 4 percent from USDA official estimates based on updated data from the textile industry. According to officials from the Secretary of Economy, apparel and textile protective duties will be maintained until 2018.

In 2015, due mainly to the implementation of various government support programs and other measures taken by the GOM, the Mexican textile and clothing industries are expected to grow between 10 and 12 percent. If this growth rate is achieved, it would be considered a record growth year, according to the National Chamber of Textile Industry (CANAITEX) and the National Chamber of the Clothing Industry (CANAIVE), and for the future outlook this growth rate makes for a much more confident industry as a whole. The GOM's supports are expected to increase consumption of cotton and other fibers by approximately 1 to 2 percent in 2015.

Trade:

The Post/New MY 2015/16 total cotton import forecast is expected to hold at 1 million bales. However, the Post/New revised estimate for MY 2014/15 has been increased by 10 percent. The increase is due mainly to the higher than previously estimated domestic consumption. The United States should remain the main supplier to Mexico which accounts for about 100 percent of total cotton imports.

The Post/New total cotton import estimates for MY 2013/14 have been revised slightly upward from the USDA/Official estimate to 1.07 million bales, reflecting updated data available from the Global Trade Atlas (GTA).

The Post/New Mexican cotton export forecast for MY 2015/16 is expected to be reduced to 150,000 bales, mainly because of an expected increase in domestic consumption. However, export data from MY 2014/15 and MY 2013/14 have been revised upward from USDA/Official data based on recently released information from GTA.

Stocks:

The Post/New MY 2014/15 and MY 2013/2014 ending stock estimates have been revised upward from USDA/Official estimates. The upward revision is due to higher-than-previously anticipated production. The MY 2015/2016 is forecast to decline to 630,000 bales, due to an expected reduction in production.

Domestic Cotton Prices:

The price for cotton future contracts at March 2015 is US$314.85 per bale according to the Agency of Marketing Services and Development of Agricultural Markets (ASERCA), which is in charge of publishing the cotton future prices shown in table.

Cotton Future Prices

Cotton Future Prices(March 6, 2015)

US Cents / Pound

Variation

US Dollars / Bale

May 2015

62.97

-0.260

314.85

July 2015

63.37

-0.120

316.85

October 2015

63.96

-0.210

319.80

December 2015

64.57

-0.170

322.85

March 2016

64.57

-0.250

322.85

Policy:

The new PROAGRO Productive support program was initiated in January 2014, (before known as PROCAMPO). PROAGRO Productive aims to promote agricultural production of various crops, including cotton. This program attempts to promote a more productive, competitive and fair implementation for the countryside. Depending on the level of farming operation of the grower as well as regional conditions, PROAGRO Productive supports can be channeled to training, technical assistance, mechanization, use of improved seeds, plant nutrition, productive reconversion, crop insurance and price hedging, among others.

The GOM continues to encourage forward contract purchases between farmers and buyers through the Forward Contract Program, Agricultura por Contrato. The program is designed for producers, traders and consumers of corn, wheat, sorghum, soybean, cotton, coffee, orange juice and livestock products (beef and pork), and recently added cocoa and coverage for agricultural and fishing inputs such as fertilizers, natural gas (and derivatives), and diesel. Industry sources stated that this program is a novel subsidy system based on market prices and tools that facilitates price stability, merchandising, and marketing for Mexican producers of many agricultural products. For cotton, it has been extensively used by producers as well as by the traders.

In January 2015, the Ministry of Economy (SE), in coordination with the Ministry of Finance and Public Credit (SHCP), implemented a comprehensive support strategy for the textile and clothing industries. In general, the strategy aim is to enhance and ensure employment for 450,000 families belonging to Mexico's textile and clothing sectors and to promote the productivity and competitiveness of these enterprises as well as ensuring the legality and fairness of global competition. The GOM's three specific areas of focus are:

  1. Industrial policy that supports innovation in Mexico's textile and clothing companies, including the creation of a National Center for Textile and Clothing Innovation (CENITV) in the state of Hidalgo.
  2. Customs issues to avoid unfair competition.
  3. Obtaining credit from Development Bank and Finance Industry to include a credit outlay of 450 million pesos (approximately $30 million).

Measures already established by the GOM to support the textile and clothing industries:

  1. A sectorial register of importers that identifies and measures the risk of their operations.
  2. Required minimum 5 day automatic advance notice for imports to Mexico of textiles and clothing to the Tax Administration Service (SAT).
  3. Continuous audit program established by SAT for importers of goods and their customers.
  4. Pilot program that splits tariff lines to be more descriptive.
  5. Suspended until 2018, tariff reduction to 80 fractions of imported cotton and other materials. Therefore, the tariff rate will remain at 25 percent for those countries with which Mexico has no free trade agreements.
  6. Warranty prices on imports of raw and convertible material.
  7. SAGARPA, through ASERCA, supports for the purchase of cotton from Mexican farmers as part of the GOM's assistance to the textile industry and to encourage the integration of the industry value chain.

For Mexico to meet the global competition generated by imports, a new National Center for Innovation and Fashion for Textile Industries and Apparel (CENITV) is currently under construction in Pachuca, Hidalgo. The Center is expected to open by the end of 2015. Public and private sources stated that the new National Center reportedly received investments from the Federal Government and the Textile Industry worth 56 million pesos (approximately 3.7 million U.S. dollars). The objective of the new National Center is to provide support to the Mexican textile industry, including professional advice on design, fabric types, etc., as well as helping to improve industry services in order to achieve a higher level of global competitiveness.

In February 2015, various Mexican institutions and textile and clothing industries came together with the aim to establish an industry and researcher partnership. An objective of the partnership is to help promote the development of the CENITV. Partnership representatives then formed an interagency group responsible for training programs at CENITV according to the needs of the Industry. The group recently visited numerous research centers, universities and leading institutions in the textile and garment industry in the United States. The Mexican delegation consisted of representatives from Mexico's various national industry chambers and officials from federal and state governments. The delegation visit also included stops to meet with executives of the College of Textiles at the University of the State of North Carolina, the Fashion Institute of Technology, Cotton Inc. and the Center for Innovation Textile and Clothing Technology Corporation, and other institutions engaged in research and development in order to learn more about these industries and the potential to apply certain applications to Mexico's industry.

Mexico: PSD for MY 2013/14 through 2015/16

Cotton Mexico

2013/2014

2014/2015

2015/2016

Market Year Begin: Aug 2013

Market Year Begin: Aug 2014

Market Year Begin: Aug 2015

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

130

185

150

Area Harvested

119

123

180

180

148

Beginning Stocks

646

646

575

597

732

Production

924

933

1220

1260

1023

Imports

1040

1071

900

1000

1000

MY Imports from U.S.

1040

1070

900

1000

1000

Total Supply

2610

2650

2695

2857

2755

Exports

160

178

150

175

150

Use

1850

1850

1850

1925

1950

Loss

25

25

25

25

25

Total Dom. Cons.

1875

1875

1875

1950

1975

Ending Stocks

575

597

670

732

630

Total Distribution

2610

2650

2695

2857

2755

1000 HA, 1000 480 lb. Bales, PERCENT, KG/HA