Mexico’s bean production misfortune should help mop up some of the “slop” in the United States pinto bean market and has already had a positive impact on black bean prices, say analysts.
Bill Thoreson, sales manager for North Central Commodities, one of North Dakota’s largest grain exporting firms, toured Mexico at the end of October when the country was in the midst of its spring-summer bean harvest.
He saw a crop that was about 40 percent of normal due to severe drought and insect problems.
The smaller fall-winter crop, which comes off in February, is looking much improved but when the two are combined, experts still predict half of the usual 1.2 million tonne crop for the 2005-06 crop year.
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“The Mexicans are going to buy more beans from both Canada and the U.S. It’s just a question of how much they buy,” said Thoreson.
The impact has already been felt in the black bean market, said Ivan Sabourin, president of Roy Legumex Inc., one of Canada’s largest bean buyers.
Prices that were hovering around 18-19 cents per pound in the fall have jumped to 24 cents per lb. and that is due largely to the shortage in Mexico.
“Given that we’re getting our butts kicked everywhere else by China, Mexico is the one area where we can extract value,” said Sabourin.
He estimated Mexican buyers are short about one million bags of beans, prompting them to buy Canadian product despite facing a duty of 23.5 percent on all imports over the 2,139 tonne quota. That tariff, which was once as high as 133.4 percent, will fall to zero in 2008 under the North American Free Trade Agreement.
“They are importing beans outside their duty-free tariffs,” said Sabourin.
While Mexican demand is lifting black bean prices, it has done little to help slumping pinto prices, the other type of bean Mexican buyers desire.
U.S. pinto production rose 68 percent in 2005 to 13.1 million bags, up from 7.8 million bags in 2004. If it hadn’t been for Mexico’s supply problems there would be a three million bag carryover going into the 2006-07 crop, said Thoreson.
“We need Mexico to be in the market to eat up some of the supply, some of the slop that has been added to this market.”
A Jan. 13 report issued by the United States Department of Agriculture’s Foreign Agricultural Service predicted bean prices will rise 25 to 45 percent in Mexico in the coming weeks due to the 50 percent reduction in production.
The report, based on comments from the director of one of northwestern Mexico’s largest grain companies, said that because of significant price differentials, imported beans from the
U.S. will soon start to displace domestic beans on Mexican store shelves.
Thoreson agreed that pintos will start moving south despite the 23.5 percent duty on over quota product.
“I do see demand there, it’s just a matter of when and how much the demand will actually be.”
Regardless, it will only put a dent in what is still expected to be a large North American carryover of pintos.
Blacks are a different story, said Thoreson. It was the only one of the top four bean classes grown in the U.S. that saw reduced output in 2005, with production falling by four percent.
And demand for the market class has been strong since harvest.
“I can actually show a negative carryover number at the end of this marketing year on blacks,” he said.
