Voluntary Report - Public distribution

**Date:** 12/4/2007

**GAIN Report Number:** MX7085

MX0000

**Mexico**

**Grain and Feed**

**DRY BEANS UPDATE**

**2007**

**Approved by:**

![](media/image1.wmf)Suzanne Heinen

U.S. Embassy

**Prepared by:**

Benjamin Juarez

**Report Highlights:** The elimination of tariffs on dry beans under
NAFTA is not expected to have a major impact on the Mexican dry bean
market as sufficient Mexican stocks and higher international prices are
expected to limit demand for imported beans. The forecast for Mexico\'s
MY 2007/08 dry bean production has been lowered due, in part, to
successful conversion programs that help farmers switch to more
profitable crops. Despite this lower production figure, increased
production in MY 2006/07 increased October stocks to 163,000 MT,
allowing the MY 2007/08 import estimate for dry beans to be reduced to
110,000 MT, slightly lower than the previous year's level.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Mexico City \[MX1\]

\[MX\]

  -------------- ---------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ---------- -----------
  **PSD Table**                                                                                                         

  **Country**                                                                        **Mexico**                         

  **Commodity:                                                                       (1000                              
  Beans**                                                                            HA)(1000                           
                                                                                     MT)(MT/HA)                         

                 USDA\      Post\      Post\       USDA\      Post\      Post\                    USDA\      Post\      Post\
                 Official   Estimate   Estimate\   Official   Estimate   Estimate\                Official   Estimate   Estimate\
                                       New                               New                                            New

  **Market Year             10/2005    10/2005                10/2006    10/2006                             10/2007    10/2007
  Begin**                                                                                                               

  Area Harvested 0          1296       1296        0          1680       1700                     0          1640       1590

  Beginning      0          448        448         0          65         65                       0          65         163
  Stocks                                                                                                                

  Production     0          874        874         0          1260       1360                     0          1230       1180

  MY Imports     0          117        117         0          110        111                      0          135        110

  TY Imports     0          117        117         0          110        111                      0          135        110

  TY Imp. From   0          113        0           0          105        105                      0          125        105
  U.S.                                                                                                                  

  Total Supply   0          1439       1439        0          1435       1536                     0          1430       1453

  MY Exports     0          14         14          0          10         13                       0          5          5

  TY Exports     0          14         14          0          10         13                       0          5          5

  Feed           0          0          0           0          0          0                        0          0          0
  Consumption                                                                                                           

  FSI            0          1360       1360        0          1360       1360                     0          1380       1380
  Consumption                                                                                                           

  Total          0          1360       1360        0          1360       1360                     0          1380       1380
  Consumption                                                                                                           

  Ending Stocks  0          65         65          0          65         163                      0          45         68

  Total          0          1439       1439        0          1435       1536                     0          1430       1453
  Distribution                                                                                                          

  Yield          0          0.674383   0.674383    0          0.75       0.8                      0          0.75       0.742138
  -------------- ---------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- ---------- -----------

#### DRY BEANS

**Production**

The production and harvested area estimates for MY 2007/08 have been
revised downward and are now estimated at slightly less than 1.2 million
tons. The change is due to a reduction in planted area, primarily
attributed to a shift from dry beans to corn production, due to higher
corn prices. Although this shift was expected to some degree, it is now
reported to be higher than originally estimated. An additional factor in
the reduction of planted area has been the continuation of a Government
of Mexico (GOM) conversion program, which works to move less productive
hectares into forage crops as well as malting barley (see MX7024). In
Zacatecas, for example, growers planted 561,570 hectares of dry beans in
the 2007 spring/summer crop cycle, which is seven percent lower than the
same cycle a year ago or approximately 41,000 hectares. The possibility
of better monetary returns has spurred the shift to other crops. In the
case of barley, gross returns are approximately 9,240 pesos/MT (U.S.
\$847/MT), considering yields of 3.3 MT/ha and a farm-gate price of
2,800 pesos/MT. It compares positively to black bean production, where
Zacatecas growers are receiving 650 pesos/MT and yields are
approximately 0.69 MT/ha, which would produce a gross return of 4,485
pesos/MT (U.S. \$412.00/MT). For MY 2006, FAS/Mexico has raised the
estimates for production and harvested area based on the most recent
SAGARPA data.

Zacatecas is Mexico\'s largest producer of black beans which are
consumed primarily in the southern third of the country. Much of the
production in Zacatecas is grown on small plots, with approximately
80,000 farmers growing beans on only 4-10 hectares. According to
official sources, Zacatecas production is expected to reach 296,000 MT
in the 2007 spring/summer crop cycle and is broken down into
approximately 80 percent blacks and the rest, colored beans ("flor de
mayo" and "flor de junio"). However, bean quality has been reported as
less than average due dry conditions, which have stressed the bean crop.
Given the importance of the state's production, there are a number of
programs in place in Zacatecas to assist producers, not only through the
conversion program, but also aimed at improving the varieties and
efficiency of those producers who continue to plant dry beans. Official
sources have stated that in the last couple of years, more than 100,000
hectares of dry beans have been "converted" to other crops in Zacatecas.
As a result of this GOM conversion program, dry bean production is now
moving into the eastern regions of the state and into San Luis Potosi,
which has surpassed Chihuahua as the third largest production state in
Mexico. In terms of better production practices, a number of examples
assist, such as SAGARPA providing a new variety of black beans, called
"Black Zacatecas". This variety is expected to replace "black bola" in
the next crop season and is similar to the T-39 hybrid variety.
Reportedly, SAGARPA, through the Agricultural Research Institute
(INIFAP), is also working on a better black variety; similar to the more
valued consumer preferred black beans. USDA is also sponsoring jointly
with SAGARPA a program that seeks to find more profitable and efficient
growing practices as well as alternative uses and markets for dry beans.

In Durango, the second most important dry bean state, growers planted
approximately 21,000 fewer hectares of dry beans in the 2007
spring/summer crop cycle compared to the same time last year.
Reportedly, the lost hectares were planted with corn, oats and wheat.
SAGARPA estimates Durango's production will be approximately 154,000 MT
for the current harvest, compared to 199,000 MT in the 2006 harvest. The
majority of the crop was pinto variety. Growers in Durango are producing
a new pinto bean, "Saltillo", which has good drought resistance. The
"Pinto Saltillo" seed was provided by the GOM as a part of the "Bean
Reorganization Program" at a very low cost to encourage producers to sow
this variety. Through this program, the GOM has continued to support
bean farmers by offering certified seeds, subsidies for the adoption of
improved machinery/technology (i.e., combines and packing plants),
reduced diesel prices, and PROCAMPO supports (See MX7024). SAGARPA is
also attempting to eliminate black bean production from the state and
focus on pinto production. Private sources have stated this program has
been successful as 60 percent of pinto hectares have been planted with
"Pinto Saltillo" and "Pinto Villa." Bean quality has been reported as
good. Similarly, in the city of Guadalupe Victoria, the construction of
a cleaning facility was recently completed, which was built under the
government-financing scheme (See MX7024). However, it is still pending
operational approval.

In Chihuahua, another important dry bean state, production of dry beans
has followed the same pattern seen in Zacatecas and Durango. Planted
area was reduced to 84,000 hectares for the 2007 spring/summer crop
cycle versus 99,700 hectares from the previous season. This decrease
reflects a switch to corn as a result of good weather conditions and the
GOM conversion program. Initially, timely early rains encouraged growers
to plant corn, but when weather conditions changed, growers planted oats
instead. During the last part of the planting season (July), beans were
finally planted. According to private industry sources, Chihuahua has
produced a good corn, oats, and dry bean crop this year. Similarly, the
dry bean quality is very good. Also, INIFAP has provided "Pinto
Saltillo" seed to the Chihuahua growers since this variety has better
drought resistance. It is expected that plantings of this variety will
increase in the next few years.

In San Luis Potosi, now the third most important dry bean state, 123,830
hectares were planted during the 2007 spring/summer crop cycle. It
should be noted that San Luis Potosi is the only state, among the main
producing states, that increased its planted area compared to the same
season a year ago. As already mentioned, part of the Zacatecas planted
area has been pushed into San Luis Potosi. SAGARPA estimates this state
will produce approximately 86,400 MT for the current harvest, compared
to the original forecast of 92,580 MT, due to dry weather conditions.
San Luis Potosi has a small irrigated area, but it has primarily been a
dry land producer. The area is marked by rocky thin soil, arid
conditions, and inadequate weed control. The majority of San Luis
Potosi's production is colored beans ("flor de mayo", "flor de junio"
and bayos).

**Production Policy**

On November 14, 2007, SAGARPA announced the program to support dry bean
farm-gate prices for the 2007 spring/summer cycle. This program was
established in CY 2003 to support bean growers in Zacatecas, Durango,
Chihuahua, and San Luis Potosi (see MX7024 & MX6019). This year, the
program will pay 5.5 pesos/kg (U.S. \$ 0.51/kg) and will support 113,000
MT. This volume represents nearly 17 percent of the production in the
main producing states. Through this program, dry beans are delivered to
private warehouses, and the established price is paid (i.e. 5.5
pesos/kg) in full to the producer. According to official sources, the
program will have a budget of 460 million pesos this year (roughly U.S.
\$42 million), and it will ease the transition of NAFTA's trade opening
in 2008.

**Consumption**

Consumption estimates for MY 2007/08 remain unchanged at 1.380 MMT. This
level, however, represents an increase of approximately one percent
relative to last year and is primarily driven by population growth.
According to the Support and Services for Agriculture and Livestock
Marketing Agency (ASERCA), Mexico's per-capita consumption of dry beans
has decreased approximately 20 percent in the last 20 years. Therefore,
on November 14, 2005, the Secretary of Agriculture, Alberto
Cardenas-Jimenez, announced 18 million pesos (U.S. \$1.65 million) would
be used to establish a National Campaign that would increase domestic
bean consumption.

**Trade**

The elimination of tariffs on dry beans under NAFTA is not expected to
have a major impact on the Mexican dry bean market, as some have feared,
as sufficient Mexican stocks and higher international prices are
expected to limit demand for imported beans. The MY 2007/08 imports
estimate was revised downward to 110,000 MT, slightly lower than MY
2006/07 levels, in part because of the increase of the ending carryover
stocks of MY 2006/07 which help assure sufficient domestic supply.
However, the reduction in imports is also due to the price increase that
has been seen in imported beans. According to trade sources, the price
of U.S. beans has increased nearly 34 percent in the last twelve months
(i.e. Michigan black and pinto bean varieties) due to smaller U.S.
supplies, as higher prices in other crops such as corn have also led to
dry bean planted area being reduced in the United States.

Import estimates for MY 2006/07 have been revised upward based on end of
year data from the Secretariat of Economy (SE). Similarly, export
estimates for MY 2006/07 have been revised upward based on SE's official
data and trade sources.

**Stocks**

The estimated MY 2006/07 ending stocks were revised upward to 163,000
MT, due to higher-than-previously estimated domestic production. This
increase in the carry over of MY 2006/07, in turn, helped reduce not
only the import estimate, but also had a small affect on the ending
stocks estimate of MY 2007/08, which increased slightly to 68,000 MT.