Boston, MA -- (ReleaseWire) -- 03/31/2014 -- Overall, the long-term outlook for the Mexican agriculture sector looks less optimistic than previous years. Consumer demand growth is largely slowing, particularly in key areas like sugar and corn where per capita consumption is already high. Competitiveness is also an issue, particularly in the sugar, grains, and livestock sector. Although we forecast a rebound in production for key sectors like corn and meat, we have a largely subdued production outlook for these sectors, as cheap US imports, lower prices, and distortions due to government intervention reduce production incentives. We see the strongest growth potential in the poultry and coffee sectors, as Mexico remains a key coffee exporter and poultry consumption looks to show the strongest growth. However, even our coffee production forecasts have been downgraded recently due to disease concerns.
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- Corn production growth to 2017/18: 11% to 24.5mn tonnes. We have revised down our production growth estimates for corn, as we believe the area dedicated to corn is unlikely to grow significantly in the coming years and use of genetically modified seeds remains limited. The strong five-year growth figure is owing to base effects.
- Sugar consumption growth to 2018: 8% to 5mn tonnes. We believe sugar consumption growth will slow over the long term due to high base effects and increasing health consciousness in the country in the wake of high obesity rates.
- Coffee production growth to 2017/18: 35% to 5mn bags. Agricultural techniques have improved in recent years, and local and national government programmes are helping to improve infrastructure and education, which are likely to help to boost production. However, growth is largely due to base effects.
- 2014 real GDP growth: 4.1% (up from 1.5% in 2013; predicted to average 3.8% to 2018).
- Consumer price inflation (average): 4.1% year-on-year (y-o-y) in 2014 (compared to 3.8% in 2013).
Industry Trends And Developments
We continue to forecast an improvement in Mexican milk production for the 2013/14 season, as improved breeding techniques and stable herd sizes lead to increased output. Dairy cattle herds are expected to remain stable, as there are fewer dairy cattle being sent to slaughter than in recent years. Unlike many large developed-world dairy markets, many dairy cattle in Mexico are used for both milk and meat production.
With the Mexican dairy herd remaining stable, improved genetics (and ultimately higher yields) are expected to see fluid milk production increase slightly in 2013/14. The sector will also benefit from lower prices for grains, as feed, according to local sources, represents 75% of total costs.
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