USGC: Mexico's Drought Raises U.S. Corn Export Prospects

March 16, 2012 03:01 AM
 

The U.S. Grain Council (USGC) says severe drought in Mexico not only raises U.S. corn export prospects for the near-term, but it will take two to three years for the country to recovery. Ignacio Rivera, the country’s undersecretary for rural development predicted it will lower corn production for the current year to only 780 million bu., compared to 830 million bu. last season.

Current grain shortages could push Mexico’s imports this year above 9.5 million metric tons (MMT) (374 million bu.) of corn and sorghum above 3 MMT (118 million bu.), said Julio Hernandez, who directs USGC's market development programs in Mexico.

"My impression is that the large commercial operations took steps to buy corn from other parts of Mexico like Oaxaca and Chiapas. That was not enough, so there were additional imports of grain. Now we are seeing more purchases again. Companies are buying corn and sorghum in January or February instead of April or May," Hernandez explained. "It will be really hard to tell exactly what consequences this will have. If you ask the feedlots, they are doing a lot to recover, but we will be missing some cattle numbers for the next two to three years."

Problems began last year when severe frost damaged Mexico’s corn crop. "That forced Mexico’s tortilla manufacturers to look for other sources of white corn," Hernandez said. "In an attempt to minimize these losses with replanting, the government sent additional water from the reservoirs. Now Mexico is suffering because it doesn’t have enough water in the reservoirs for this year’s crop."

While crop losses are likely to create more demand for U.S. exports, the drought-related losses in the livestock sector are a potential offset. Mexico’s ministry of agriculture estimates that 60,000 cattle have died and an additional 89,000 have been culled by producers.


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