Production

The Post/New total sorghum estimate for MY 2015/16 (October-September) is forecast at 7.7 MMT, 5.5 percent higher than previous year's revised estimate. This increase is due to an expansion in planted area in Mexico's sorghum producing regions and the expected slight growth in feed use demand from the poultry sector. According to private analysts and official sources, higher sorghum prices likely will encourage Mexican growers to increase planted area next MY 2015/16. Moreover, they noted that sorghum needs less water to grow than corn, and in general, seed costs are cheaper.

Sorghum production in Mexico is spread throughout the country. The largest sorghum producing states in 2015 are Tamaulipas, Guanajuato, Michoacán and Sinaloa. The states of Guanajuato, Michoacán, and Jalisco in West Central Mexico make up the "Bajio" region, where the bulk of the fall harvest is produced. For MY 2014/15, official sources estimate that the "Bajio" region will account for approximately 36 percent of total production, while Tamaulipas should produce 43 percent of the total.

As of January 30, 2015 SAGARPA data estimated sorghum production reached 3.75 MMT in 2014 spring/summer crop cycle, which is 3 percent lower than the same crop cycle of 2013. The 2014 spring/summer crop cycle will account for approximately 51 percent of total sorghum production whereas the remainder of the crop will come from the 2014/15 fall/winter cycle.

SAGARPA continues to encourage sorghum forward contract purchases between farmers and feed millers through the Forward Contract Program for 2014/15 fall/winter in the state of Tamaulipas. Private sources state that approximately 75 percent of the expected harvest has been forward contracted in Tamaulipas through this program as of February 26, 2015. The harvest season is expected to start the last week May and finish around the end of June. Overall crop conditions are reportedly very good in Tamaulipas due to the favorable weather conditions and sufficient soil moisture. Therefore, a high quality crop is expected. The expectation is that the state of Tamaulipas could produce approximately 2.6 MMT during the 2014/15 fall/winter crop cycle.

Consumption

The forecast for sorghum consumption in MY 2015/16 is expected to increase slightly to 7.6 MMT. Traders and buyers indicate that as result of higher sorghum prices, poultry and hog producers may decide to use more corn from domestic production and yellow corn imported from the U.S., while sorghum use should stay mostly stable. These sources pointed out that it is expected corn prices will continue to be affordable in MY2015/16 and consequently the use of sorghum in feed could increase -but only marginally -and mainly by the poultry sector during the harvest season when feed prices traditionally are more affordable for producers. The poultry industry continues to be the largest consumer of sorghum in Mexico and uses the crop primarily in the form of mixtures and feed concentrates.

Trade

Total sorghum imports for MY 2015/16 is forecast to remain unchanged at 100,000 MT due to the bearish demand from feed millers and poultry and hog producers. Industry sources stated that demand for imported sorghum is likely to remain mostly steady provided sorghum prices continue to be higher priced relative to corn. These sources expect stable sorghum feed use and relatively affordable corn prices, which should encourage expansion in the poultry and hog sectors.

Traditionally, sorghum, with duty-free access to the Mexican market, has rivaled with corn as the leading feed grain imported by Mexico. However, in the last few years, due to more affordable international corn prices, Mexican livestock producers have mainly preferred imported yellow corn over sorghum. Moreover, Mexico's corn imports (mainly from the U.S.) have fluctuated greatly since 2008, without exhibiting a clear upward or downward trend, while Mexico's sorghum imports have been on the decline for more than a decade.

There are many factors behind these developments including; periods of drought that adversely affected crop and livestock production in multiple regions of Mexico over the past 5 years; the use of large quantities of U.S. grown corn as an ethanol feedstock and the consequent expansion of Mexico's DDGS imports, and a partial shift by Mexican livestock producers from sorghum feed use to corn, especially since the initiation of duty-free U.S. corn exports to Mexico as part of the North America Free Trade Agreement (NAFTA) in 2008. Another factor has been a bullish 2014 international sorghum market, motivated by the stronger China demand. Therefore, sources stated that sorghum, corn and eventually wheat will all continue competing with each other, in some degree, to meet Mexican feed demand, and ultimately all will depend on the market price situation.

Stocks

Post/New ending stocks for MY 2015/16 are forecast to increase to 743,000 MT due to the expected increase in domestic production. Meanwhile, ending stocks estimate for MY 2014/15 remains unchanged.

Mexico Sorghum Production, Supply and Demand for MY2013/14 to MY2015/16

Sorghum

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Mexico

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

2,073

2,073

1,800

1,800

0

1,900

Beginning Stocks

281

281

643

643

0

543

Production

8,500

8,500

7,300

7,300

0

7,700

MY Imports

162

162

100

100

0

100

TY Imports

162

162

100

100

0

100

TY Imp. from U.S.

162

162

0

100

0

100

Total Supply

8,943

8,662

8,043

8,043

0

8,343

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

8,200

8,200

7,400

7,400

0

7,500

FSI Consumption

100

100

100

100

0

100

Total Consumption

8,300

8,300

7,500

7,500

0

7,600

Ending Stocks

643

643

543

543

0

743

Total Distribution

8,943

8,943

8,043

8,043

0

8,343

1000 HA, 1000 MT, MT/HA