April 17, 2014
Mexican economic recovery boosts grain and livestock sectors
According to a report from Rabobank- "Mexico Agribusiness Outlook 2014: A positive year but full of challenges", Mexico''s economic growth is gradually improving, but food consumption remains vulnerable to income and price effects.
Following a slow 2013, the Mexican economy is expected to recover gradually in 2014, with Rabobank forecasting 2.9% growth, mostly occurring during the second half of the year. However, sector-specific challenges will continue to affect agribusiness. Grain and oilseed production is expected to be driven by declining prices and margins. Animal and meat prices and margins are expected to increase, although disease is expected to threaten both hog and poultry production.
According to Rabobank analyst Pablo Sherwell, five factors that will drive Mexico''s growth this year are: (a) resumption of exports to the US; (b) increased competitiveness of the Mexican manufacturing sector; (c) higher government expenditure; (d) timely public expenditure; and (e) approval of important legislation allowing for structural reform in key sectors. They also anticipate the peso will appreciate slowly but surely, and current pressures on consumer prices will ease, over the course of the year.
Mexico''s grain production recovered from severe weather events during the past two years, but corn production remains constrained. Rabobank expects domestic grain prices to retain a bearish fundamental tone in 2014-15. Declining prices and margins will be the main drivers for grain and oilseed production.
The animal protein sector is likely to show positive margins as animal and meat prices are expected to be on the upside, while feed costs will remain constrained. Due to health issues, such as porcine epidemic diarrhoea virus (PEDv) in North America, a severe contraction in hog supplies is expected. Poultry market expansion is likely but could be threatened by the return of avian influenza. Beef production remains constrained due to continued contraction of the herd.