BMI View: We extend our generally positive outlook for the Mexican agricultural sector in our latest Q42017 report update. BMI notes that the Trump administration's efforts towards rethinking the NorthAmerican Free Trade Agreement (NAFTA) and renegotiating trade with Mexico are factors that havesignificant upside and downside risks for the agricultural sector. Mexico is a major importer of USproduced food stuffs, and an introduction of new tariffs will encourage the country to increase domesticproduction and resource imports in order to meet its growing demand at home. Nevertheless, thefundamentals of the Mexican agricultural industry remain stable with a positive outlook for virtually allprimary indicators.
We have made some minor forecast revisions this quarter to account for production variations. Growth ratesacross the sector will remain steady. We see positive trends in domestic consumption and production in thedairy and livestock sector. Grain yields in the 2017/18 year will be steady, but not as robust as the 2016/17year. Nevertheless, we are positive that the coffee crop will begin to recovery as the effects of the royacoffee rust begin to fade away. On the demand side, rising per capita disposable incomes will continue todeliver demand-side growth, but we hold our opinion that competitiveness remains an issue for the Mexicanagricultural sector as a whole, particularly in the grains, livestock and sugar subsectors.