Mexico Announces Additional Supports for Sorghum and Rice Jan. 13, 2015
On November 28, 2014, Mexico’s Secretariat of Agriculture, Livestock, Rural Development, Fisheries and Foodstuffs (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. On November 27, 2014, SAGARPA’s agency of Commercialization and Agriculture Markets Development (ASERCA) announced updated price levels associated with the Income Target Price Program.
On November 28, 2014, Mexico’s Secretariat of Agriculture, Livestock, Rural Development, Fisheries and Foodstuffs (SAGARPA) announced in the Mexican Federal Register (Diario Oficial) specific guidelines 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, all applicable to the 2014 crop year. Also, on November 27, 2014 SAGARPA’s agency of Commercialization and Agriculture Markets Development (ASERCA) announced updated price levels associated with the Income Target Price Program.
Introduction: This report summarizes two announcements from SAGARPA published in Mexico’s “Diario Oficial” (Federal Register) on November 28, 2014. Also, summarizes an announcement from ASERCA published on its website on November 27, 2014.
Disclaimer: This summary is based on a cursory review of the subject announcements and therefore should not, under any circumstances, be viewed as a definitive reading of the regulations in question, or of its implications for U.S. agricultural export trade interests. In the event of a discrepancy or discrepancies between this summary and the complete regulation or announcement as published in Spanish, the latter shall prevail.
Executive Summary: On November 28, 2014, SAGARPA announced two new government supports by which this Secretariat will provide economic support in specified states for rice and sorghum during the 2014 agricultural year, due to the decline of the prices of these commodities.
In the First Announcement SAGARPA states the following:
From October 2011 to date, rice prices have registered a downward trend on the Chicago Board of Trade (CBOT). While in October 2011 rice prices registered more than U.S. $400.00 per metric ton (MT), compared to January 2012 when the price of rice dropped to U.S. $300.00 per MT. This represented a decrease of 25 percent. Then, in August, 2012, the price of rice recovered to U.S. $350.00 per MT. Thereafter, rice prices have been declining settling again at less than U.S. $300.00 per MT in August-September 2014;
In addition, from 2013 to date, Mexico has recorded increased milled rice imports from Vietnam, Thailand and Pakistan (35,000 MT in 2013 and almost 80,000 MT to August 2014). These milled rice imports were made at prices below international market prices, which have caused a downward impact of sales prices paid to Mexican farmers;
Sorghum reference prices from September 2012 to date have registered a sharp decrease of more than 100 percent on the CBOT; declined from U.S. $333.00 to $142 per MT, which was reflected in the sorghum, farm gate prices paid to Mexican farmers;
This situation has negatively impacted the profitability of both sorghum and rice growers in certain states. Rice growers were negatively impacted during the 2013/2014 fall-winter crop cycle and the irrigated areas during the 2014 spring-summer crop cycle. Sorghum growers in Sinaloa faced the same negative profitability impact for the same agricultural crop cycles as for rice. As a result, SAGARPA’s agency of Commercialization and Agriculture Markets Development (ASERCA – a decentralized administrative body within SAGARPA providing commercial supports to farmers) will provide support payments that allow mitigation of the adverse impact on the income of rice and sorghum growers.
The Second Announcement states in the General Operational Regulations - REGLAS -(that SAGARPA published for several support programs on December 18, 2013 and later modified on August 1st and September 9, 2014), that as part of the program called “Component of Market Incentive” these supports were included to provide support payments for storage, freight and financial costs.
Also, it states that to secure and strengthen the income of Tamaulipas sorghum growers during the 2013/14 fall-winter crop cycle, it is necessary to implement the support payment for storage, freight and financial costs. The purpose of these subsidies is to cover the cost of the recall due to the temporary surplus of Tamaulipas’ sorghum, allowing for the crop to be marketed at another time and to facilitate maritime transport to other domestic destinations that are traditionally grain importers or exported to foreign markets.
Titles of the Announcements:
1. Notice to publicize the incentives to solve specific marketing problems of rice and sorghum for the 2014 crop year to the states listed, Component of Market Incentive.
2. Notice to publicize the incentive for storage, freight and financial costs of sorghum for the 2013/14 fall/winter agricultural crop cycle from the State of Tamaulipas, Component of Market Incentive.
Type of Regulation: Operational
1. Publication Date: November 28, 2014
2. Effective Date: November 29, 2014
Eligible Commodities: Rice and Sorghum
Other important features of the Announcements:
First Announcement: The objective is to release the supports (incentives) to solve specific marketing problems for rice and sorghum, during the 2014 crop year to the states listed. The aim is to advocate that the defined “target population” can market their crops with better certainty.
The “target population” of this Announcement is defined as “growers, directly or through their organizations that have produced and marketed rice during the 2013/14 fall-winter crop cycle and the 2014 spring-summer crop cycle (irrigated area) in the states listed below. This Announcement also includes sorghum growers of Sinaloa.
-rice volume that has been supported by hedging
-sorghum that has been supported through compensation bases under the government’s Forward Contract Program.
The total amount subsidized by the First Announcement will be:
• 64,000 MT of rice, with a direct grower support of 200 pesos per metric ton (U.S.$14.40/MT)
• And up to 325,000 MT of sorghum, with a direct grower support of 207 pesos per metric ton (U.S. $ 14.90/MT)
The lists of states supported are as follow:
Veracruz (Early Irrigation)
2013/14 Fall-Winter & 2014 Spring-Summer
According to SAGARPA figures, rice production in the 2013/14 fall-winter crop cycle is estimated to reach 50,167 MT; while Veracruz rice production for the 2014 spring-summer crop cycle is expected at 22,952 MT in the irrigated area.
Regarding sorghum production, SAGARPA’s estimation states that Sinaloa’s sorghum growers will produce approximately 1.3 million MT during the two crop cycles (i.e. 2013/14 fall-winter and 2014 spring-summer), a huge increase of 160 percent compared to previous year. Reportedly, this increase was a result of the conversion schemes (i.e. government supports) promoted by SAGARPA, to entice corn growers to plant more yellow corn or sorghum instead of white corn.
Second Announcement: The objective of the ASERCA announcement is to unveil supports (incentives) to those who incurred storage, freight and financial costs related to sorghum. These supports only apply to the state Tamaulipas and only for the 2013/14 fall-winter crop cycle.
The “target population” of this Announcement is defined as buyers directly or through their organizations that have sorghum volume from purchase agreements aligned with the 2013/2014 crop cycle in Tamaulipas. The purchase agreements must show proof that they were registered and validated in Tamaulipas’ ASERCA office (Northeast Regional Directorate in Reynosa) during the period June 23 - August 4, 2014, for the “Forward Contract Program”, pursuant to notices published on ASERCA website on July 9 and July 21, 2014.
The total amount subsidized by the Second Announcement is up to 550,000 MT of sorghum from Tamaulipas in the 2013/14 fall-winter crop cycle, with a direct grower support of 182 pesos per metric ton (U.S.$185.90/MT) with respect to:
a. Storage and financial costs during the period July-September, 2014. As of October 1, 2014 the buyer may dispose of sorghum for purposes that he/she decides, or;
b. Storage and financial costs during the period July-August, 2014. As of September 1, 2014, an incentive for freight will be awarded for the buyer to mobilize sorghum only from the Altamira Port, Tamaulipas, for shipment to foreign markets or for maritime transportation to the port of Progreso, Yucatan, to market it in its area of control.
For a support payment, the “target population” applicant must also provide proof of payment to the grower to a minimum reference price of U.S. $182.96 dollars/MT of sorghum.
SAGARPA’s rationale for providing these supports specifically to rice growers in various states and sorghum produced in the states of Sinaloa and Tamaulipas is in response to demands from various grower organizations about low commodities prices and the need for more assistance at the farm level. In addition, the Mexican government’s recognition that it must help the sorghum sector overcome logistical and infrastructure limitations in marketing such large commercial volumes of fall/winter sorghum production that, although produced principally in Tamaulipas, is marketed, processed and consumed in other states. It should be noted that sorghum production reached 3.1 MMT in the 2013/14 fall/winter crop cycle, which is considered historical by official sources. According to the Rural Development Secretary of Tamaulipas, this harvest is the second largest in the state since 1980. Tamaulipas is the main sorghum producing state for the fall/winter crop cycle.
Also, as part of these efforts by the Mexican government to assist select growers impacted by low commodity prices, on November 27, 2014 ASERCA announced that it had updated the levels of the Target Income Program.
ASERCA stated that due to current market prices of grains and oilseeds, which directly impact farm gate prices at the expense of their profitability and expected income in several regions, along with the current production costs (i.e. seeds, diesel, fertilizers, etc.), this represents a risk to Mexico’s agriculture. Therefore, ASERCA will implement a supplementary Target Income incentive, under its Marketing and Market Program.
Following are the crops and new target prices that are included in the “Target Income” Program
Crystalline Wheat (durum)
Exchange Rate (December 2,, 2014) US $1.00 = 13.82 pesos