Production

The Post/New total Mexican wheat production for MY 2015/16 (July to June) is forecast at 3.7 million metric tons (MMT), approximately 0.8 percent higher than the previous year's revised estimate. Higher harvested area and favorable weather conditions in the key fall/winter wheat production areas of Northwest Mexico (Sonora and Baja California) are the main reasons for the slight increase.

Official and industry contacts stated that this year's wheat production has benefited from favorable weather conditions and sufficient water availability in the reservoirs and dams used for irrigation purposes in Mexico's main producing wheat states. In Sonora, for example, according to the National Water Commission (CONAGUA), at the beginning of the sowing season in November, 2014, the Alvaro Obregon dam, which caters to the agricultural area in the Yaqui Valley, recorded 91.4 percent of capacity, while the Adolfo Ruiz Cortines dam which irrigates farmland in the Mayo Valley, registered 106.7 percent capacity (1.01 million cubic meters).

Sonora continues to be the main wheat producing state with approximately 46 percent of total wheat production, followed by Baja California, which contributes 16 percent, and Guanajuato with 15 percent. Durum wheat continues to be the principal crop in Sonora and Baja California.

The majority of the wheat grown in the north and northwestern states of Baja California and Sonora is produced using advanced technology methods similar to those used in the United States. According to Secretariat of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA), nearly 89 percent of the nationwide wheat planted area is irrigated.

In the fall/winter 2014/15 crop cycle, a larger portion of durum wheat plantings took place in Sonora and Baja California due to the favorable farm prices registered from the previous season and that durum tends to have higher yields as well as being more resistant to disease. In addition, private analysts noted that another factor that has favored the planting of more durum wheat has been the use of the "Forward Contract Program".

In Sonora, for example, official sources stated that of the total wheat area planted, approximately 85 percent was durum variety (or "cristalino"), which is intended for the production of pasta and animal feed. The remaining 15 percent was soft wheat for the production of wheat flour. Sonora growers planted approximately 312,000 hectares (ha.) of wheat, up 5 percent from initially estimated in the 2014/15 fall/winter crop cycle. The ideal date for sowing wheat in Sonora is mid-November (although in 2014, some growers began planting during the third week of November), with all plantings concluding in December. The wheat harvest takes place the following May and June. The average yield expected in Sonora initially was 6.3 MT/ha. Private sources stated that some producing areas in Sonora have registered unusually high levels of humidity which could adversely affect grain quality levels, but not production levels. However, they noted that it will not be until the harvest season when a better assessment of the wheat quality can be made. Other wheat producing areas like Baja California (e.g. Mexicali) did not report any quality problems.

The Post/New total wheat production and harvested area estimates for MY2014/15 (July/June) have been revised slightly upward from USDA/Official, based on updated official data from SAGARPA.

Consumption

Mexico's total consumption for MY 2015/16 is expected to increase slightly compared to MY 2014/15, in part due to the growing popularity throughout Mexico of bread products and the continued interest among consumers for other types of wheat-baked goods. Private analysts stated that despite the fact that historically Mexican consumers have preferred corn tortillas over bread, this trend has been gradually reversed in the last few years. This growing trend is due to the relative improvement of consumer purchasing power and the higher price of corn tortillas, which has increased the share of wheat consumption over corn even more. According to the Mexican Millers Association (CANIMOLT), wheat consumption in Mexico is expected to grow in the next two decades, driven mainly by population growth and higher per capita consumption.

Based on most recent data from CANIMOLT, Mexico has 88 different millers located across the country that process approximately 8.21 MMT of wheat and produce 4.7 MMT of flour each year. In 2013, for example, the milling industry consumed 6.2 MMT of wheat, which was used to manufacture 4.7 MMT of flour and meal and 1.6 MMT of bran (a byproduct of wheat milling process). The remaining byproducts are consumed by the livestock sector. The millers have a capacity of approximately 9.0 MMT of production. CANIMOLT stated the wheat milling industry has continued to consolidate in the last few years through the acquisitions and fusions of some millers. Moreover, 53 percent of the installed milling capacity is located in or around Mexico City, Toluca and Puebla metropolitan areas - where slightly more than 50 percent of the Mexican population is located

CANIMOLT information indicates that flour production is distributed as follows: 68 percent for breads, cakes and biscuits (artisan and industrial bakeries); 9 percent to elaborate cookies; 11 percent for pasta soup, 7 percent for wheat tortillas and 5 percent for other products such as pizzas, snacks, etc.

Mexico boasts approximately 53,000 industrial bakeries, of which 39,956 are artisan bakeries, concentrating their efforts on the production of white bread, sugarloaf, wheat tortillas and cakes, while 8,034 are non-industrial type bakeries; 6,673 tortilla makers and 1,193 are facilities concentrated on elaborating a single product such as donuts, biscuit, cakes, pastries, etc.

Trade

Post/New total wheat imports for MY 2015/16 are forecast to decline to 4.2 MMT, due to an increase in domestic production and lower demand for imported feed wheat. Private analysts indicate that the slightly higher domestic production, compared to the previous year, should result in a decrease in overall wheat imports. Price and quality will decide the import source. However, many Mexican millers continue to acquire U.S. wheat due to its transportation advantages. In light of this fact, Post/New MY2015/16 wheat imports from the U.S. are expected to increase just slightly to 3.25 MMT.

Post/New MY2015/16 wheat exports are forecast to remain unchanged at 1.3 MMT, assuming a relatively neutral to slightly bullish international wheat market.

Post's wheat export estimate for MY 2014/15 has decreased to 1.3 MMT from the USDA/Official estimate. These figures are based on private traders' information and preliminary official data from the official government statistics covering the first seven months of the marketing year.

Stocks

For MY 2015/16, the Post/New ending stocks forecast is estimated to decrease to 290,000 MT, due primarily to an increase in domestic consumption. The Post/New MY 2014/15 stock estimate has been increased from USDA/Official estimate to 540,000 MT due to lower-than-previously estimated exports.

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

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Mexico

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

638

638

692

696

0

700

Beginning Stocks

278

278

319

319

0

540

Production

3,377

3,377

3,660

3,671

0

3,700

MY Imports

4,636

4,636

4,600

4,600

0

4,200

TY Imports

4,636

4,636

4,600

4,600

0

4,200

TY Imp. from U.S.

3,153

3,153

0

3,200

0

3,250

Total Supply

8,291

8,291

8,579

8,590

0

8,440

MY Exports

1,322

1,322

1,500

1,300

0

1,300

TY Exports

1,322

1,322

1,500

1,300

0

1,300

Feed and Residual

350

350

300

300

0

250

FSI Consumption

6,300

6,300

6,450

6,450

0

6,600

Total Consumption

6,650

6,650

6,750

6,750

0

6,850

Ending Stocks

319

319

329

540

0

290

Total Distribution

8,291

8,291

8,579

8,590

0

8,440

1000 HA, 1000 MT, MT/HA