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Mexico Agribusiness Report Q2 2010
Business Monitor International, March 2010, Pages: 76
Business Monitor International's Mexico Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Mexico's agribusiness service.
In the first quarter of 2010, Mexico finally began long-awaited trials of genetically modified corn seeds. The plantings came after years of wrangling over the issue, which has stirred up strong emotions in Mexico, the home of corn. A law to allow GM trials was first passed in 2004 according to a Reuters report. However, widespread opposition and an inability to decide on the conditions for any plantings meant it was another five years before permits were issued.
In reality, the current trials, taking place in the north of the country, are in no way the first occasion on which GM corn has been grown in Mexico. Many farmers in the area have been illegally planting GM seeds for years with little apparent effort by the authorities to crack down on the practice. Despite this, the official trials have raised tension in a country where corn can be an emotive issue. On top of the usual protests by environmental groups, the official introduction of GM seeds has also been met with dismay by many of the country's indigenous groups, for whom corn is a scared crop. Traditional farmers are concerned that the new GM varieties will spread and hybridise with Mexico's many native corn varieties . On the whole, BMI believe the introduction of GM corn will be positive for Mexican agriculture. GM varieties have the potential to improve yields and reduce the cost of inputs. The protests of indigenous groups cannot be ignored, however, and a compromise may have to be struck, such as limiting the use of GM seeds to the north, outside the area where corn was originally cultivated, and where farms are on average larger.
In mainstream corn production, BMI are still forecasting a fairly large fall in production in 2009/10 owing to the dry weather conditions through the summer months that delayed planting.
While many Mexican companies were suffering over the past year, the country's largest dairy company, Grupo Lala, took the opportunity of falling asset prices to go on a buying spree north of the border. The Coahuila-based dairy splashed out on three US dairy companies, Promised Land Dairy, Farmland Dairies and National Dairy. The most significant purchase, Dallas-based National Dairy, was bought for a reported US$435mn from its former parent company, co-operative Dairy Farmers of America. National Dairy gives Lala control of 18 dairy-processing facilities in the US as well as number of well known regional brands. The acquisitions followed the purchase of Nebraska-based Wells Dairy in 2008. The acquisitions make Lala the second largest dairy company in the US and the fifth biggest in the world. BMI believe the purchases will prove to be astute moves. Buying at a time when dairy prices were crashing and dairies across the country were losing money, the purchases came cheap relative to what they would have cost a year or more earlier. BMI believe Lala will now be in an excellent position to benefit from the expected continuing recovery in the world dairy market in coming years.
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