Mexico. Corn Annual. Mar 2015 April 12, 2015
Total Mexican corn production MY 2015/16 (October to September) forecast is 23.4 MMT. Harvested area, assuming normal weather conditions, is estimated at 7 million ha. Stronger domestic demand has been a factor in maintaining fairly stable domestic corn production over the last two years, even with lower farm prices. The lower corn prices have resulted in a significant increase in feed use driven mainly by the poultry and livestock sectors.
For MY2014/15, the Post/New total corn estimated production has been revised upward from USDA/Official estimates to 24.0 MMT, due to more complete data from SAGARPA. Corn output was increased due to higher than expected planted area and favorable weather conditions. According to SAGARPA figures, as of January 30, 2015, corn planted area for the 2014/15 fall/winter crop cycle was 18 percent higher than the similar crop cycle a year earlier. This increase in planted area is mainly attributed to higher planted area in Sinaloa. During this crop cycle, Sinaloa farmers planted approximately 100,000 ha more than the same crop cycle a year ago due plentiful water levels in Sinaloa's reservoirs which are used for irrigation purposes. Based on the CONAGUA figures, as of February 18, 2015, water levels in Sinaloa's reservoirs were at 62.5 percent capacity, with the two main water reservoirs, Luis Donaldo Colosio and Miguel Hidalgo, at levels of 76.9 and 72.8 percent of capacity, respectively. With this increase in planted area, corn production is expected to reach approximately 5.0 MMT in Sinaloa instead of 3.7 MMT that was initially forecast by SAGARPA and private sources.
Sinaloa growers regularly plant non-genetically engineered (GE) hybrid corn, which has reportedly shown to increase yields. However, these higher yielding hybrids have not been widely adopted elsewhere in Mexico due to a combination of legal and technical issues.
Sinaloa continues to be the main source for commercial white corn production in Mexico for the fall/winter crop cycle, representing approximately 70 percent of total fall/winter crop production. Also, Sinaloa's corn production, which is almost all irrigated, accounted for nearly 24 percent of total domestic production. Practically all of the corn produced in Sinaloa is consumed in other states. Harvest is expected to occur in May and June. At this point in the season, the estimated average yield for the 2014/15 fall/winter crop cycle is forecast to be 5.481 MT/ha, which is lower than last year's 5.603 MT/ha when weather conditions were even more favorable.
As noted, most of Sinaloa's corn production is white corn. Private sources indicate that despite conversion schemes (i.e. government supports) that SAGARPA tried to implement to attract corn growers to plant more yellow corn or sorghum instead of white corn; so far it appears to be unsuccessful. Reportedly, of the approximately 200,000 ha of white corn production that was planned to be substituted with either yellow corn or sorghum, only 25,000 ha of yellow corn and 26,000 ha of sorghum were planted.
There are many reasons why Mexican corn farmers traditionally prefer to produce white corn over yellow corn, among others, the white corn market pays a premium over yellow corn as it is preferred for tortilla making (the most important source of calories for many Mexicans) in the domestic food market. Moreover, white corn production is relatively less expensive than yellow as farmers have better access to local technology and inputs, such as seeds that have been locally adapted. In the case of Sinaloa, for example, some private and official sources argue that yellow corn yields are lower than white corn yields due to lack of quality yellow corn seed as well as distinctive climate conditions for that particular region that favors white corn. In addition, overall production costs tend to be lower compared to yellow corn production.
Growers also argue that with white corn they have two market options; markets for human consumption and markets for animal feed use, while with yellow corn they only have the option of the animal feed market. Also, smallholders and subsistence farmers can use white corn for self-consumption.
Mexico is the world's sixth largest producer of corn, third largest corn importer, and the sixth largest consumer of corn. In Mexico, corn is by far the most important agricultural commodity, both in terms of production and consumption.
Corn is grown throughout the year during two seasons: spring-summer (April-March) and fall-winter (October-September). Approximately 75 percent of Mexican corn is obtained from the spring-summer season and 65 percent of the corn is produced from dry land farming. The 2014 spring/summer crop (harvested mainly last November and December 2014), has been reported of good quality due to favorable weather conditions.
According to private analysts, the Mexican corn market is different than most, as corn to a relative degree, is considered a food grain rather than a feed grain. Because of this difference, Mexico has developed two distinct corn markets: one for white corn, which is mainly for human consumption (although some goes to feed, especially at the smallholder and subsistence farming levels), and one for yellow corn, which is mainly for feed use although some goes to the starch industry.
The average yield for the MY 2015/16 corn crop in Mexico is forecast at 3.343 MT/ha, assuming normal weather conditions. However, yields continue to vary significantly throughout the country, depending in large part on the level of technology used. For example, on average, Sinaloa has yields similar to those obtained in the United States due to the advanced farming technology methods used by the growers of this state. The overall average yield for the MY 2014/15 corn crop in Mexico is expected at 3.357 MT/ha, which is higher to that obtained in MY 2013/14, again due to favorable weather conditions.
As a result of the lower farm gate corn prices that reduce farmer's purchasing power for crop inputs, some are discouraged from using fertilizers as well as deterred from making other productivity investments. In addition, many corn growers continue to face major marketing obstacles, such as limited access to rural roads, suitable markets for their harvested crop, and the lack of storage, which all result in disincentives to corn production in certain parts of the country. Furthermore, yields are also being impacted by the lack of adoption to new technologies. For example, inefficiencies still exist in much of Mexico's inadequate irrigation infrastructure. There is a notably absence of high-tech farm machinery such as harvesters, only a modest use of hybrid seeds, and the absence of permits issued by the Government of Mexico for commercial production of GE corn.
Regarding GE corn, a Mexican federal judge placed a provisional injunction on all planting activities involving this type of corn in the country in September 2013, due to a collective lawsuit filed by a group of anti-GMO activists. As a result, the Mexican Government suspended the granting of environmental testing permits to developers of GE corn. Despite successful and extensive cooperation in the area of biotechnology between Mexico and the United States, Mexico has continued to stall issuing permits for the commercial domestic cultivation of GE corn. Mexico has no restrictions on the importation of GE corn.
The Post/New forecast of total corn consumption for MY 2015/16 is 33.9 MMT, an increase of approximately 1.2 percent over last year's estimate. The expected increase in total consumption reflects an increase in both feed and human consumption, although the increase in human consumption is very slight. Consequently, the increase in domestic corn consumption is expected to be driven mainly by the expansion in Mexico's livestock and poultry sectors as well as other food industries such cereals, snacks and starch.
In reference to feed consumption, the poultry sector continues to be the major user of feed grains in Mexico. The Mexican poultry sector is expected to continue to expand and modernize. According to the National Union of Poultry Farmers (UNA), the Mexican poultry industry, as a whole, will grow by 2.5 percent in 2015. The UNA also predicted that egg production in Mexico will grow by 2.0 percent during this year. Meanwhile, it's predicted chicken meat production will grow 2.5 percent, reaching 3.0 MMT. The Association noted that in 2014, the Mexican poultry industry grew by 2.8 percent compared to the level obtained in 2013. Last year the poultry sector produced 5.57 MMT tons of food products, of which 3 MMT was poultry meat and 2.57 MMT of eggs. In 2014, production of poultry meat increased 3 percent compared to the level achieved in 2013. Regarding the poultry egg industry sector, it grew 2.5 percent in 2014 compared to the previous year. Globally, Mexico is the seventh largest producer of chicken after United States, China, Brazil, EU, India and Russia. In the same context, Mexico ranks sixth in egg production, behind China, USA, India, Japan and Russia. Mexico is the number one consumer of eggs in the world.
Regarding human consumption, despite the fact that corn continues to be the most important staple crop in Mexico, with consumption of corn and tortillas on average accounting for 7 percent of Mexicans' family budget, Mexico has experienced a decline in human corn consumption over the last few years. According to private sources, the weakening demand for white corn comes from a decline in tortilla consumption which is direct response to price increases. Reportedly, from 2009 to 2013, tortilla prices in supermarkets and from other tortilla makers, increased 96 percent and 32 percent, respectively. This trend has subsequently resulted in a substitution effect where low-income groups are switching from tortillas to other foods, such as bread and crackers. However, for those groups where income is strengthening, such as the middle class, tortilla consumption also drops as they move to more upscale sources of caloric intakes such as pasta.
Despite these trends, private sources estimate that the use of corn flour for human consumption to make tortillas has still remained stable over the last few years. It is expected that corn flour use for human consumption could increase marginally in 2015, assuming relatively lower consumer purchasing power due to the uncertainty in the domestic economy, which could as noted above, revert the substitution effect in low-income groups from tortillas to bread and crackers. To further illustrate, recently Mexico's central bank (Bank of Mexico) reduced its growth forecast for the economy citing a "less favorable" environment due to the drop in oil prices and a potential cut in oil production. The Bank of Mexico estimated GDP growth between 2.5 and 3.5 percent in 2015, a reduction from its earlier forecast of between 3 and 4 percent.
The Post/New total corn import forecast for MY 2015/16 is expected to increase approximately 3 percent, driven by the increased demand from the livestock and starch sectors. In MY 2015/16 Mexico is forecast to export 500,000 MT, the same level as the previous year.
The Post/New corn import estimate for MY2014/15 has been revised downward from USDA/Official to 10.0 MMT due to higher total domestic production than previously estimated and based on private traders information and preliminary official data from SAGARPA and the General Customs Directorate of the Finance Secretariat (SHCP) covering the first four months of the marketing year.
Growth in the use of yellow corn in Mexico has been accelerating over the last two years as the entire domestic corn market has benefited from lower international corn prices, particularly there has been more feed use demand for yellow corn. Consequently, over the last two years, other grains such as sorghum and even wheat played a less active role in feed use. At the beginning of the last decade, feed corn use rose as the animal protein sector went through an important expansion, particularly in the livestock and poultry sectors. Feed corn use reached its highest level in MY 2008 as supplies were abundant and corn prices were lower than other grains. But as international prices began to rise, partly as a result of the boom in the U.S. ethanol industry and as the livestock cattle inventories shrank in Mexico, feed corn use declined. However, since 2012, international corn prices have again declined as a result of abundant international supplies. This has benefited Mexican importers, mainly the livestock and poultry sector. These combined factors will likely strengthen Mexico's demand for imported corn in MY 2015/16.
Traditionally, Mexico imports almost all of its corn from the U.S. due to an economical and logistical advantage over other exporting countries. This trend continues to bode well for future yellow corn imports from the United States.
According to animal feed industry sources, demand for Distiller's Dried Grains with Solubles (DDGS), a co-product of corn-based ethanol production that is used mainly as an animal feed protein supplement, has been decreasing over the last few years. These sources indicated that DDGS was regularly used as a substitute for oilseed meal in feed concentrate formulas. However, as international prices of soybean meal have declined, the Mexican feed industry has increased its use of soybean meal, resulting in a gradual decrease in DDGS imports. It is estimated that this trend will continue in 2015.
Annual imports of main raw materials by the feed industry, 2009-2013* (000 Metric Tons)
Dried distiller grain
Source: Consejo Nacional de Fabricantes de Alimentos Balanceados y de la Nutricion, A.C.
Mexico: Production of FeedIngredients (000 Metric Tons)
Compound Feed Capacity
Total Compound Feed Produced
---- by integrated producers
---- by commercial producers
Marketing Year: (000 Metric Tons) Feed Production by type of animal
Source: National Council of Feed Producers and Animal Nutrition
(Consejo Nacional de Fabricantes de Alimentos Balanceados y de la Nutrición, A.C)
Post/New MY 2015/2016 ending stock position is forecast to decrease approximately 28 percent to 1.9 MMT from the revised estimation for MY 2014/15 due to an increase in domestic consumption and slightly lower domestic production compared to a year earlier. The Post/New MY 2014/15 ending stock estimate has decreased slightly from the USDA/Official estimate, reflecting more recent available information.
According to animal feed industry sources, SAGARPA through to its paying agency "Agency of Marketing Services and Development of Agricultural Markets" (ASERCA), continues to conduct a detailed record of corn, sorghum and wheat stocks in Mexico. Industry sources state the rational for this detailed record is that they manage the Forward Contract Program and therefore must maintain an accurate database of grain and oilseed production and stock levels. However, this information continues to not be published. SAGARPA's Food and Fisheries Statistics Service (SIAP) releases information on grain and oilseed stocks on its website called "Availability-Consumption Balance (ACB). These ACB reports include information on production, imports, exports, and stocks of different commodities. However, this information has not been updated since 2013.
Forward Contract Program
SAGARPA continued to encourage forward contract purchases between farmers and buyers through the "Forward Contract Program", Agricultura por Contrato. In calendar year 2014, forward contract schemes were implemented for producers, traders and other end-users of corn, wheat, sorghum and soybeans. This program is a subsidy system based on market prices and tools that facilitates price stability, merchandising, and marketing for Mexican producers. The Forward Contract Program includes a complex mechanism to purchase input and call options for grains and soybean growers and the processing industry. Moreover, the program mechanism is based on world prices, thereby diminishing the risk of the subsidy system being defined as price distorting. Over the recent agricultural cycles this program has shown an increase in the volume of grains and feed registered, mainly in the fall/winter crop cycles.
According to ASERCA officials, in calendar year 2014 the Forward Contract Program granted supports for the marketing of approximately 20 MMT of different commodities, mainly corn (white and yellow), sorghum, wheat (for bread-making varieties and durum) and soybeans. Nearly 301,488 participants (farmers and companies), 232,924 growers and 68,564 buyers benefited from this program. ASERCA also stated that the Forward Contract Program has become the key instrument to promote more effective marketing of grain and oilseeds, fostering a business culture that includes mechanisms for risk management and grower's income protection.
Starting in January 2014, the new PROAGRO Productive support program was initiated (before known as PROCAMPO). The new program grants direct supports to growers with farms in operation that are appropriately registered in the PROAGRO directory. According to SAGARPA, previously under PROCAMPO guidelines, supports were allocated only under a condition of ownership - not on actual production. However, PROPAGRO Productive aims to promote agricultural production and promote a more productive, competitive and fair implementation for the countryside. Depending on the grower's level of farming operation as well as regional conditions, PROAGRO Productive supports can be channeled to training, technical assistance, mechanization, use of improved seeds or selected Creole seeds, plant nutrition, productive reconversion, crop insurance and price hedging, among others. The main change in the new PROAGRO Productive is that growers must now validate the destination of the support to acquire the concepts outlined above, whereas in the previous program (PROCAMPO) the supports were granted (in pesos per planted hectare) unconditionally..
Under PROAGRO Productive, a flat rate payment for corn, sorghum, wheat, and rice will be provided to growers for 2015 spring/summer and 2015/2016 fall/winter crop cycles. Also, SAGARPA indicated that the supports will be granted based on the size of the production unit as follows:
- Subsistence (up to five hectares of non-irrigated land and 0.2 hectares of irrigated land)
- Transition (greater than 5 hectares and up to 20 hectares non-irrigated land and greater than 0.2 hectares and up to five hectares of irrigated land), and
- Commercial (more than 20 hectares non-irrigated and more than 5 hectares irrigated).
The Subsistence growers will receive a support payment per hectare or portion of 1,300 pesos (86.67 U.S. dollars/ha). If they have three hectares of non-irrigated land and are located in the municipalities served by the "National Program Mexico Without Hunger" Program, they will receive 1,500 pesos (100 U.S. dollars/ha). Growers who fall into the other two categories (Transition and Commercial) will receive 963 pesos per hectare (64.20 U.S. dollars/ha).
Also, responding to demands from various grower organizations about low commodity prices and the need for more assistance at the farm level, on November 28, 2014 SAGARPA announced in Mexico's Federal Register ("Diario Oficial") specific guidelines applicable to the 2014 crop year for two new support programs available in the states of Sinaloa and Tamaulipas for sorghum growers and buyers (as well as rice supports offered in several Mexican states). In addition, on November 27, 2014, ASERCA announced updated price levels associated with the Income Target Price Program.
Mexico Corn Production, Supply and Demand for MY2013/14 to MY2015/16
Market Begin Year
TY Imp. from U.S.
Feed and Residual
1000 HA, 1000 MT, MT/HA