CLASSIFICATION: NOT OFFICIAL USDA DATA                                          
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 AGR Number: MX5023                                                             
                                                                                
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 From:   American Embassy, Mexico City, Mexico                                  
 To:     USDA/FAS Washington D.C.                                               
 Country:     MX                                                                
 Year:        1995                                                              
 Report Code: 11  Post Report Sequence Number: 005                              
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 Report Title: Grain and Feed                                                   
 Report Type:  A  - Annual Report                                               
 Report Subject: GRAIN AND FEED ANNUAL REPORT                                   
 Approved By: DANIEL B. CONABLE                                                 
 Drafted By:  MICHAEL L. CONLON                                                 
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 Security Classification: NOT OFFICIAL USDA DATA                                
                                                                                
                                                                                
 Date Due (MM/DD/YY): 03/10/95                                                  
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                    Table of Contents                                           
                                                  PAGE                          
-General Summary......................................................   1      
-Wheat................................................................   3      
   PRODUCTION.........................................................   3      
     GENERAL..........................................................   3      
     CROP AREA........................................................   5      
     INPUTS...........................................................   6      
     YIELDS...........................................................   7      
     CROP QUALITY.....................................................   8      
   CONSUMPTION........................................................   9      
   TRADE..............................................................  10      
     GENERAL..........................................................  10      
     OVERALL TRADE TRENDS.............................................  11      
     Trade Matrix 93..................................................  12      
     Trade Matrix 94..................................................  13      
     STOCKS...........................................................  14      
   POLICY.............................................................  14      
      PRODUCTION POLICY...............................................  14      
     TARIFF CHANGES...................................................  15      
-Corn.................................................................  16      
   PRODUCTION.........................................................  16      
     GENERAL..........................................................  16      
     PRODUCTION POLICY................................................  18      
     CROP AREA........................................................  19      
     INPUTS...........................................................  21      
     YIELDS...........................................................  22      
     CROP QUALITY.....................................................  23      
   CONSUMPTION........................................................  23      
   TRADE..............................................................  24      
     GENERAL..........................................................  24      
     OVERALL TRADE TRENDS.............................................  24      
     Trade Matrix 93..................................................  26      
     Trade Matrix 94..................................................  27      
   STOCKS.............................................................  28      
   POLICY.............................................................  28      
     PRODUCTION POLICY................................................  28      
     TARIFF CHANGES...................................................  28      
     EXPORT SUBSIDIES.................................................  30      
     QUALITY, SAFETY & HEALTH REGULATIONS.............................  30      
     IMPORT REQUIREMENTS..............................................  31      
     MARKETING CHANNELS...............................................  31      
-Sorghum..............................................................  32      
   PRODUCTION.........................................................  32      
     GENERAL..........................................................  32      
     PRODUCTION POLICY................................................  33      
     CROP AREA........................................................  33      
     INPUTS...........................................................  34      
     YIELD............................................................  35      
     CROP QUALITY.....................................................  35      
   CONSUMPTION........................................................  35      
   TRADE..............................................................  36      
     GENERAL..........................................................  36      
     Trade Matrix 93..................................................  36      
     Trade Matrix 94..................................................  37      
   STOCKS.............................................................  38      
   POLICY.............................................................  38      
     TARIFF CHANGES...................................................  38      
                                                                                
                                                                                
                                                                               
                    Table of Contents                                           
                                                  PAGE                          
     NON-TARIFF BARRIERS..............................................  38      
-Rice, Milled.........................................................  39      
   PRODUCTION.........................................................  39      
     PRODUCTION POLICY................................................  41      
     CROP AREA........................................................  41      
     INPUTS...........................................................  42      
     YIELDS...........................................................  43      
     CROP QUALITY.....................................................  43      
   CONSUMPTION........................................................  43      
     GENERAL..........................................................  43      
   TRADE..............................................................  44      
     GENERAL..........................................................  44      
     OVERALL TRADE TRENDS.............................................  45      
     Trade Matrix 93..................................................  45      
     Trade Matrix 94..................................................  46      
     STOCKS...........................................................  46      
   POLICY.............................................................  47      
     TARIFF CHANGES...................................................  47      
-Beans................................................................  48      
   PRODUCTION.........................................................  48      
     GENERAL..........................................................  48      
     PRODUCTION POLICY................................................  50      
     CROP AREA........................................................  51      
     INPUTS...........................................................  51      
     YIELDS...........................................................  52      
     CROP QUALITY.....................................................  53      
   CONSUMPTION........................................................  53      
   TRADE..............................................................  54      
     GENERAL..........................................................  54      
     OVERALL TRADE TRENDS.............................................  54      
     Trade Matrix 93..................................................  55      
     Trade Matrix 94..................................................  56      
   STOCKS.............................................................  57      
   POLICY.............................................................  57      
     TARIFF CHANGES...................................................  57      
     EXPORT SUBSIDIES.................................................  59      
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    1              
Grain and Feed                                                                  
   General Summary                                                              
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Production of corn is expected to decline in MY 1994/95 while the               
production of wheat, sorghum, rice and dry beans is expected to                 
increase because of improved incentives offered under PROCAMPO                  
(Mexico's farm policy reform program).  In MY 1995/96, production of            
corn and wheat will probably decline, while output of sorghum, rice             
and dry beans will increase slightly in response to higher domestic             
prices.                                                                         
                                                                                
Mexican imports of corn will increase in line with the zero-duty                
tariff rate quota (TRQ) enacted under the North American Free Trade             
Agreement (NAFTA) for MY 1994/95 and MY 1995/96.  Imports of wheat,             
sorghum, dry beans and rice will fall in MY 1994/95, reflecting both            
increased domestic production and the economic downturn caused by               
the peso devaluation.  Imports of these products may increase in MY             
1995/96 as the economy improves.                                                
                                                                                
Importers who have been using the GSM-102 credit program were                   
especially hard hit by the peso devaluation.  The vast majority of              
grain imports from the United States are financed under this                    
program, under which the U.S. government guarantees L/C's offered by            
an importer's bank.  As the Mexican program has operated, the                   
importer bears the full currency risk.                                          
                                                                                
Per hectare payments to farmers under PROCAMPO were increased                   
slightly by the Mexican government after devaluation, from N$380 per            
hectare to N$400 per hectare for the fall/winter 1994/95 crop cycle,            
and from N$400 per hectare to N$440 per hectare for the                         
spring/summer 1995 crop cycle.  Likewise, the guaranteed price for              
dry beans for the fall/winter crop cycle was increased 13 percent               
because of the devaluation.  A possible increase in the support                 
price of white corn from the current level of 600 pesos/ton                     
(US$2.67/bushel) is under discussion.                                           
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    2              
Grain and Feed                                                                  
   General Summary                                                              
--------------------------------------------------------------------------------
Over the next three to five years, U.S. grain exports should                    
increase significantly, as Mexico recovers from the internal                    
recession likely to result from the high interest rates and falling             
consumer buying power.  Although the government would like to                   
achieve greater self-sufficiency, several factors limit Mexico's                
ability to expand production.  Corn, sorghum and dry bean production            
takes place primarily in non-irrigated rainfed areas, subject to                
volatile weather conditions.  Wheat and rice production could be                
depressed if returns on export crops continue to be more favorable              
than returns from producing staple crops.  PROCAMPO is expected to              
encourage this pattern of diversification.                                      
                                                                                
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    3              
Grain and Feed                                                                  
   Wheat                                                                        
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                       Global Economic Data Exchange System                     
 Commodity: Wheat (0410000) (1000 HECTARES)(1000 MT)                            
 Beg. Month/Year of Marketing Year:  07 / 93          07 / 94          07 / 95  
 MEXICO                      Revised 1993      Prelim 1994      Forecast 1995   
                                 Old     New      Old     New      Old     New  
 Area Harvested                    714     877      750     950        0     850
 Beginning Stocks                  474     474      350     150        0     375
 Production                       3000    3582     3150    4175        0    3600
 TOTAL Mkt. Yr. Imports           1600    1500     1500    1300        0    1700
 Jul-Jun Imports                  1600    1500     1500    1300        0    1700
 Jul-Jun Import U.S.               750     778      750     676        0     884
 TOTAL SUPPLY                     5074    5556     5000    5625        0    5675
 TOTAL Mkt. Yr. Exports              0       0        0      88        0     125
 Jul-Jun Exports                     0       0        0      88        0     125
 Feed Dom. Consumption             520     450      400     125        0     180
 TOTAL Dom. Consumption           4724    5406     4650    5162        0    5325
 Ending Stocks                     350     150      350     375        0     225
 TOTAL DISTRIBUTION               5074    5556     5000    5625        0    5675
                                                                                
                                                                                
PRODUCTION                                                                      
                                                                                
GENERAL                                                                         
                                                                                
Total Mexican wheat production in MY 1994/95 (July/June) is                     
estimated to increase 17 percent to 4.175 MMT, largely because of               
the production incentives given under PROCAMPO.  For example, for               
the spring/summer 1994 crop (planting in the spring and summer;                 
harvest in the fall and winter), producers in the states of Hidalgo             
and Puebla increased wheat production by 40 percent by abandoning               
barley production because barley was not included under PROCAMPO.               
                                                                                
The increased production number for MY 1993/94 of 3.582 MMT is the              
final official figure.  This office will no longer maintain an                  
independent historical production series.                                       
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    4              
Grain and Feed                                                                  
   Wheat                                                                        
      PRODUCTION                                                                
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Production for MY 1995/96 is forecast to decrease to 3.6 MMT.  The              
heavy precipitation and warm temperatures during much of the                    
fall/winter 1994/95 crop cycle (planting in the fall and winter;                
harvest in the spring and summer) in Sonora, Baja California and                
northern Sinaloa has reduced wheat yields in those states.                      
Moreover, planted area is down because of the financial uncertainty             
caused by the devaluation.  For example, according to officials from            
the Secretariat of Agriculture (SAGDR), farmers in Baja California              
are producing more cotton and less wheat during that crop cycle                 
while farmers in Sonora are producing more safflower.                           
                                                                                
Even though total wheat production is expected to be down for MY                
1995/96, durum wheat production will be higher in Sonora, Baja                  
California, and Sinaloa for the fall/winter 1994/95 crop.  Durum                
wheat provides higher yields and is more resistant to disease, which            
was an important consideration for farmers because of the heavy                 
precipitation during the winter.  Moreover, 88,000 MT of durum wheat            
was exported from those states at attractive prices in 1994.                    
                                                                                
According to SAGDR officials, production of wheat in Michaocan and              
Guanajuato will decline significantly for the fall/winter 1994/95               
crop cycle because of the financial uncertainty caused by country's             
financial crisis.  Even though input costs have increased                       
significantly since the devaluation, the Mexican government has yet             
to announce a new negotiated price for wheat.  In addition, the                 
Mexican government is in arrears on subsidy payments owed to the                
wheat milling industry under the existing price management                      
arrangement, having failed to pay obligations for domestic wheat for            
February.  The drought in Chihuahua will reduce production in that              
state from over 200,000 MT in a typical year to as little as 20,000             
MT for the fall/winter 1994/95 crop cycle.                                      
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    5              
Grain and Feed                                                                  
   Wheat                                                                        
      PRODUCTION                                                                
--------------------------------------------------------------------------------
In Mexico, the major wheat producing areas are in the states of                 
Sonora, Sinaloa, Guanajuato, and Baja California.  These four states            
account for about 65 to 70 percent of the wheat harvested in the                
spring, producing hard red winter, soft red winter, white, and durum            
varieties.                                                                      
                                                                                
Under PROCAMPO, producers receive direct payments on a per hectare              
basis.  For the fall/winter 1994/95 crop cycle payments are 400                 
pesos per hectare and for the spring/summer 1995 cycle payments will            
be 440 pesos per hectare.  These payments are slightly higher than              
the decoupled payments announced for this transitional year in the              
move towards world market pricing.  "Full" per hectare payments, at             
a level not yet announced, will begin in the autumn/winter 1995/96              
crop cycle, at which point price supports will presumably disappear.            
                                                                                
                                                                                
CROP AREA                                                                       
                                                                                
Overall harvested acreage of wheat in MY 1994/95 is estimated to                
have increased by about 8 percent over MY 1993/94, to 950,000                   
hectares.  This reflects good weather conditions and the reversal of            
the earlier shift out of wheat and into corn under the old high corn            
price policy.                                                                   
                                                                                
Over-production of durum in relation to internal market demand has              
been a perennial problem in Mexico due to higher durum wheat yields.            
 In the past, saddled with high support prices, the Mexican                     
government imposed penalties on durum producers.  For MY 1994/95,               
durum wheat area is estimated to be about 92,000 hectares, all                  
located in Sinaloa, Sonora and Baja California.  For MY 1995/96,                
durum production is forecast to increase to around 128,000 MT.                  
                                                                                
Crop area is forecast to decline to 850,000 hectares in MY 1995/96              
because of the heavy rains in parts of the northwest, the drought in            
Chihuahua and the financial uncertainty caused by the economic                  
crisis.                                                                         
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    6              
Grain and Feed                                                                  
   Wheat                                                                        
      PRODUCTION                                                                
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INPUTS                                                                          
                                                                                
In 1994 the rate of increase in the cost of farm inputs prices                  
declined compared to previous years.  In the past, farm input prices            
rose faster than inflation, because of the decline in input                     
subsidies.                                                                      
                                                                                
However, the devaluation of the peso in late 1994 suddenly and                  
substantially increased the cost of many inputs.  Input costs are               
expected to increase at the rate of inflation in 1995, around 30                
percent.  Input costs are listed below for wheat production in the              
state of Guanajuato, reflecting the costs of inputs before the                  
devaluation and after the devaluation.  The cost of production for              
the fall/winter 1994/95 crop cycle, however, does not include the               
cost of credit, which has increased significantly.  The interest                
rate on agricultural loans increased from around 20 percent before              
the devaluation to over 40 percent currently.                                   
                                                                                
Water availability should be average for 1995/96.  There is above               
normal precipitation in Sonora, Baja California and northern                    
Sinaloa.  However, there are dry conditions in the central part of              
Sinaloa and drought conditions in Chihuahua.  Around 98 percent of              
the spring harvested crop is irrigated, while only three percent of             
the fall harvest crop is irrigated.                                             
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    7              
Grain and Feed                                                                  
   Wheat                                                                        
      PRODUCTION                                                                
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                  PRODUCTION COST BUDGET                                        
                   PESOS PER HECTARE                                            
                 THE STATE OF GUANAJUATO                                        
  ------------------------------------------------------------------            
                        Fall/            Fall/           Percent                
                       Winter 93/94     Winter 94/95    Increase                
  ------------------------------------------------------------------            
  Land Preparation     N$320            N$320             ----                  
  Planting             N$500            N$650             30.00                 
  Fertilizing          N$300            N$320             10.00                 
  Irrigation           N$802          N$1,026             29.00                 
  Cultural Practices   N$200            N$200             ----                  
  Control of Diseases  N$150            N$210             40.00                 
  Harvest              N$375            N$460             20.00                 
  Other Costs          N$535                                                    
  (Including Credit)                                                            
  Total              N$3,182          N$3,226                                   
  ------------------------------------------------------------------            
  Average Yield         6 MT                                                    
  Price                N$600                                                    
  Gross Profit       N$3,600                                                    
  Total Cost         N$3,182                                                    
  Net Profit           N$418                                                    
  Cost of Production   N$530                                                    
  per ton                                                                       
  ------------------------------------------------------------------            
  Source: State of Guanajuato                                                   
                                                                                
YIELDS                                                                          
                                                                                
For MY 1994/95, average yields are expected to be around 4.4                    
MT/hectare.  Most of the wheat producing areas in the northwest are             
under irrigation.  Little of the fall harvest is irrigated, given               
its location, relying instead on normal precipitation during the                
rainy season.  There are 3 different average yields in Mexico,                  
depending upon region of production and variety.                                
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    8              
Grain and Feed                                                                  
   Wheat                                                                        
      PRODUCTION                                                                
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                                     Estimated Average Wheat Yields             
                                            MY 1994/95                          
                                              (MT/HA)                           
                                                                                
               Durum                            6.0                             
               Spring harvested wheat           4.5                             
               Fall harvested wheat             2.0                             
                                                                                
The average yield for the MY 1995/96 is expected to fall to around              
4.2 MT/hectare because of the heavy rains and warmer temperatures in            
Sonora, Sinaloa and Baja California during the fall/winter 1994/95              
crop cycle.  Moreover, given the sharp increase in input costs                  
because of the devaluation, many producers may not have the                     
financial resources to use the same amounts of inputs as in previous            
crop cycles.  Thus, yields may be lower than expected.                          
                                                                                
CROP QUALITY                                                                    
                                                                                
For MY 1994/95, millers in Mexico indicate that the higher quality,             
domestic bread wheats are good, with low gluten content and                     
relatively high protein levels of about 11 percent.  According to               
industry sources, the quality of domestic durum is good and food-use            
demand for this type of wheat has increased for making pasta.  In MY            
1994/95, about 23 percent of total durum wheat production went into             
domestic livestock feed channels.  For MY 1995/96, the quality of               
wheat could be affected by the heavy rains in the northwest.                    
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:    9              
Grain and Feed                                                                  
   Wheat                                                                        
      CONSUMPTION                                                               
--------------------------------------------------------------------------------
Total domestic wheat consumption should decline in MY 1994/95 to                
5.162 MMT because of a decline in feed wheat consumption.  Human                
consumption should increase marginally in 1994/95 to 5.037 MMT                  
because of an increase in wheat production.  Excess domestic                    
production of durum wheat is expected to be used domestically as                
feed, or exported.                                                              
                                                                                
Human consumption is expected to only increase slightly in MY                   
1994/95 because of the Mexican government's subsidy policy for                  
bread.  While the price of the most common baked flour product, the             
bolillo or standard hard roll, has been priced controlled, the price            
limit was recently raised from N$.20 to N$.25 per roll.  Further                
price increases are likely.  Corn tortillas, on the other hand,                 
which compete directly with bolillos, are still heavily subsidized              
by the Mexican government, with the price controlled at the consumer            
level.  Low income consumers are expected to consume more tortillas             
this year.                                                                      
                                                                                
In MY 1994/95, excess durum is expected to be exported or used as               
livestock feed.  According to trade sources, feed manufacturers in              
Mexico prefer domestic durum in feed rations rather than imported               
sorghum or corn because of its higher nutritional value.  Feed wheat            
consumption is expected to be about 125,000 metric tons in marketing            
year 1994/95, and increase to 180,000 MT in MY 1995/96.  This                   
decrease in feed wheat consumption over MY 1993/94 is caused by                 
recent Mexican exports and the sharp drop-off of Canadian feed wheat            
imports.                                                                        
                                                                                
Consumption is expected to only increase slightly in MY 1995/96                 
because of the economic recession and the contraction in production.            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   10              
Grain and Feed                                                                  
   Wheat                                                                        
      TRADE                                                                     
--------------------------------------------------------------------------------
GENERAL                                                                         
                                                                                
Total wheat imports in marketing year 1994/95 will decrease by 13               
percent to about 1.3 MMT because of stagnant demand.  Imports are               
forecast to increase to 1.7 MMT in MY 1995/96 because of a decline              
in wheat production and an improvement in the economy.                          
                                                                                
The peso devaluation sent shock waves through the Mexican wheat                 
milling industry.  An immediate cash-flow problem resulted from the             
fact that the majority of mills have outstanding dollar denominated             
loans with Mexican banks for imports under the GSM-102 credit                   
guarantee program and its Canadian equivalent, the Export                       
Development Corporation (EDC).                                                  
                                                                                
Under the GSM-102 program, Mexican banks give mills six months to               
pay back dollar denominated loans for the purchase of U.S. wheat.               
Over the next three months, many of these loans must be repaid at               
the new exchange rate.  According to sources in the industry, the               
total group of 118 Mexican wheat mills have around US$114 million in            
U.S. dollar-denominated debt under the GSM-102 program.  Few of                 
these enterprises purchased forward coverage to insure the exchange             
rate risk on these loans.  The Mexican government has not been                  
responsive to industry suggestions the government cover these losses            
through financial mechanisms established by ASERCA (The Government              
agency in charge of managing Mexican agricultural support programs)             
to assure both purchase of the entire Mexican wheat crop and stable             
flour prices.                                                                   
                                                                                
The devaluation shock could precipitate closure of several Mexican              
wheat mills.  The industry claims that at present the majority of               
mills are operating at between 60 and 70 percent capacity.                      
Pessimists in the industry expect that perhaps 20 percent of the                
milling industry will be out of business in the next 18 months.  The            
most vulnerable segment of the industry today is that made up of                
smaller mills heavily reliant on imports.                                       
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   11              
Grain and Feed                                                                  
   Wheat                                                                        
      TRADE                                                                     
--------------------------------------------------------------------------------
Wheat imports, however, should not decline significantly in MY                  
1994/95 because domestic wheat still needs to be blended with                   
imported wheat to make acceptable final products.                               
                                                                                
Even with the current economic problems, the availability of GSM-102            
credit guarantees through the Commodity Credit Corporation will                 
continue to be an important incentive for Mexican wheat millers,                
even though Canada exports are normally accompanied by guaranteed               
credit terms, designed to compete with GSM-102 finance.                         
                                                                                
Moat Mexican millers prefer to purchase U.S. wheat due to the ease              
of shipment.  However, Canadian wheat is occasionally offered at                
prices lower than that of U.S. wheat, despite higher transport                  
costs, and a few mills express a preference for Canadian origin.                
                                                                                
In MY 1994/95 exports are estimated at 88,000 MT and are forecast at            
125,000 MT for MY 1995/96.  Producer groups in the northwest,                   
through credit unions, sold durum wheat for export for pasta and                
feed to South American and Italy.  Exports took place because of an             
oversupply of durum production and an attractive international price            
for durum wheat.  In order to make the exports competitive,  ASERCA             
gave a subsidy to the credit unions, which was the difference                   
between the internal wheat price and the international wheat price.             
Such subsidies may not be necessary to market the 1995/96 crop.                 
                                                                                
OVERALL TRADE TRENDS                                                            
                                                                                
The Mexican Government turned wheat imports over to the private                 
sector in May, 1992.  From May, 1992 until January 1, 1994, millers             
still had to receive an import permit from the Secretariat of                   
Commerce and Industry (SECOFI).                                                 
                                                                                
The enactment of NAFTA on January 1, 1994 removed the import                    
licensing requirement for imports of United States and Canadian                 
wheat, effectively removing EC and Argentine wheat from the Mexican             
market.  U.S. wheat must still compete on price and quality with                
wheat from Canada.                                                              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   12              
Grain and Feed                                                                  
   Wheat                                                                        
      TRADE                                                                     
--------------------------------------------------------------------------------
The U.S. maintains a significant advantage over all other suppliers             
with smaller mills in Mexico who buy for delivery by rail.  A factor            
currently limiting U.S. wheat exports to Mexico is the ability of               
millers to purchase large volumes of Canadian wheat at prices well              
below the U.S. cash price.                                                      
                                                                                
                                                                                
                                                                                
Trade Matrix                                                                    
  Wheat                          Units: Metric tons                             
-                                                                               
       Exports for 1993 to:                  Imports for 1993 from:             
      -U.S. ............                     -U.S. ............    962,228      
      -Other                                 -Other                             
                                              Argentina             16,500      
                                              Canada               680,308      
                                              France                82,451      
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others                        Total of Others      779,259      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total                            Grand Total        1,741,487      
                                                                                
                                                                                
                                                                                
Source: Banco de Mexico                                                         
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.                                                            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   13              
Grain and Feed                                                                  
   Wheat                                                                        
      TRADE                                                                     
--------------------------------------------------------------------------------
                                                                                
Trade Matrix                                                                    
  Wheat                          Units: Metric tons                             
-                                                                               
       Exports for 1994 to:                  Imports for 1994 from:             
      -U.S. ............     13,750          -U.S. ............    272,504      
      -Other                                 -Other                             
                                              Canada               544,151      
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others                        Total of Others      544,151      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total           13,750           Grand Total          816,655      
                                                                                
                                                                                
                                                                                
Source: Banco de Mexico                                                         
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.  1994 import data are from January to August.              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   14              
Grain and Feed                                                                  
   Wheat                                                                        
      TRADE                                                                     
--------------------------------------------------------------------------------
STOCKS                                                                          
                                                                                
Ending stocks are expected to increase to around 375,000 MT for MY              
1994/95 because of the significant increase in production.                      
Mexican flour millers are now able to import wheat from the United              
States and Canada without government controls.  Flour mills                     
generally keep between one and two months supply of imported wheat.             
Because of a forecasted sharp decline in production in MY 1995/96,              
stocks could fall to around 225,000 MT by the end of the marketing              
year.                                                                           
                                                                                
POLICY                                                                          
                                                                                
 PRODUCTION POLICY                                                              
                                                                                
Under the wheat pricing system for MY 1994/95, millers are required             
to purchase domestically produced wheat (see attache reports MX 4036            
of May 27, 1994, MX 4083 of December 23, 1994, and MX 5015 of                   
February 16, 1995). Growers, millers, and representatives of ASERCA             
all agree on the basic price level for wheat for the year.  For the             
spring/summer 1994 crop this price was N$600 per metric ton.  A                 
system of price premiums and discounts was applied in order to                  
account for quality differences.  There is also a merchandizing                 
subsidy given to the millers for both domestically grown and                    
imported wheat by ASERCA in order to keep the price of wheat flour              
low.                                                                            
                                                                                
ASERCA, however, is in arrears on subsidy payments owed to the wheat            
milling industry under the existing price management arrangement,               
having failed to pay obligations for wheat imported for part of                 
November, and all of December, January, and February.  Likewise,                
ASERCA has not yet paid the subsidy for local wheat for February.               
These delays, reflecting the extremely tight budget situation                   
resulting from fiscal elements of the government's economic                     
stabilization package, have created more financial pressure on the              
milling industry.                                                               
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   15              
Grain and Feed                                                                  
   Wheat                                                                        
      POLICY                                                                    
--------------------------------------------------------------------------------
TARIFF CHANGES                                                                  
                                                                                
Under the NAFTA,  the United States will phase out its tariff on                
durum wheat imports from Mexico over a ten-year period and its                  
import tariff on non-durum wheat over a five-year period.                       
                                                                                
It is unlikely that the eventual removal of the U.S. import tariffs             
on Mexican wheat will have any effect on trade so long as Mexican               
wheat imports are banned due to the presence of the disease of                  
karnal bunt in at least some parts of Mexico.                                   
                                                                                
Mexico has converted its import licensing scheme for wheat imported             
from the U.S. and Canada to tariff-only treatment.  The 15-percent              
tariff will be reduced to 0 over a ten year period.  The tariff is              
12.0 percent for 1995.                                                          
                                                                                
U.S. and Canada benefited immediately from the removal of the import            
licensing regime for wheat in Mexico.  Other exporters are still                
subject to high tariffs.                                                        
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   16              
Grain and Feed                                                                  
   Corn                                                                         
--------------------------------------------------------------------------------
                       Global Economic Data Exchange System                     
 Commodity: Corn (0440000) (1000 HECTARES)(1000 MT)                             
 Beg. Month/Year of Marketing Year:  10 / 93          10 / 94          10 / 95  
 MEXICO                      Revised 1993      Prelim 1994      Forecast 1995   
                                 Old     New      Old     New      Old     New  
 Area Harvested                   8000    7815     7900    7450        0    7900
 Beginning Stocks                 1558    1558      908    1800        0    1521
 Production                      16800   19519    16600   18600        0   18200
 TOTAL Mkt. Yr. Imports           1300    1678     2575    2575        0    2652
 Oct-Sep Imports                  1300    1678     2575    2575        0    2652
 Oct-Sep Import U.S.              1300    1678     2575    2575        0    2652
 TOTAL SUPPLY                    19658   22755    20083   22975        0   22373
 TOTAL Mkt. Yr. Exports             50      64        0       0        0       0
 Oct-Sep Exports                    50      64        0       0        0       0
 Feed Dom. Consumption            4400    5500     5200    5600        0    5650
 TOTAL Dom. Consumption          18700   20891    19475   21454        0   22100
 Ending Stocks                     908    1800      608    1521        0     273
 TOTAL DISTRIBUTION              19658   22755    20083   22975        0   22373
                                                                                
                                                                                
PRODUCTION                                                                      
                                                                                
GENERAL                                                                         
                                                                                
Production will decrease by about five percent to 18.6 MMT in                   
1994/95 (October/September).  The main reasons for this decline are             
weather and the drop in the support price for corn under PROCAMPO.              
The support price for corn has declined by 20 percent over the last             
year to N$600/MT, making corn less attractive to growers in                     
comparison to other crops.                                                      
                                                                                
Mexico has suffered dry conditions in some parts of the north.                  
Sinaloa is a major corn producing state for the fall/winter crop                
cycle.  The lack of rain over the last year in the central part of              
the state has significantly reduced reservoir levels in three                   
important dams in the Culiacan area. Thus, production in Sinaloa is             
expected to decline by over 27 percent as farmers switch to dry                 
beans, garbanzo beans, safflower and sorghum because these crops use            
less water than corn.  A major drought in Chihuahua decreased corn              
production in that state by over 40 percent.                                    
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   17              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
Production of corn in Guanajuato and Michaocan decreased as farmers             
increased sorghum planting for the spring/summer 1994 crop cycle.               
Tamaulipas is a major corn producing state for the fall/winter crop             
cycle.  Corn production is expected to decline by almost 20 percent             
as farmers switch to cotton because of the generous PROCAMPO cotton             
input subsidy payments and the high world price.  Political problems            
in Chiapas have reduced production in that state by 13 percent for              
the spring/summer 1994 crop.                                                    
                                                                                
Private traders, instead of importing, were aggressively buying                 
locally produced corn during the final stages of the spring/summer              
1994 (harvest in the fall and winter), offering prices to farmers as            
high as N$680/MT.  However, the benefits of these higher corn prices            
will be mitigated by an increase in credit and imported input costs.            
                                                                                
                                                                                
We are using official Mexican government statistics for historical              
purposes.  The higher figure for production in MY 1993/94 of 19.519             
MMT reflects Mexican government data.                                           
                                                                                
Production is forecast to decrease in 1995/96 to around 18.2 MMT.               
With lower corn prices, farmers are switching to alternative crops              
under PROCAMPO.  This forecast assumes normal weather and a decrease            
in harvested area.                                                              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   18              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
PRODUCTION POLICY                                                               
                                                                                
PROCAMPO establishes producer prices for corn (see below).  By                  
lowering the guaranteed price for corn, the program creates the                 
incentive for producers to lower their production of corn and                   
produce other crops.  With the recent devaluation of the Mexican                
peso, the guaranteed price of white corn is lower than imported                 
corn prices.  The Government of Mexico has yet to decide whether to             
increase the guaranteed price for corn.                                         
                                                                                
        GUARANTEED PRODUCER PRICES FOR CORN UNDER PROCAMPO                      
                    (pesos per metric ton)                                      
----------------------------------------------------------------                
Spring/       Fall/    Spring/  Fall/     Spring/    Fall/                      
Summer        Winter   Summer   Winter    Summer     Winter                     
1993          1993/94  1994*    1994/95   1995       1995/96                    
----------------------------------------------------------------                
White Corn                                                                      
750           650       600       600     500        Int'l Price                
Non-white corn                                                                  
625           540       500       500     400        Int'l Price                
-----------------------------------------------------------------               
February, 1994: U.S.$1.00 = 3.2 NEW PESOS                                       
February, 1995: U.S.$1.00 = 5.7 NEW PESOS                                       
* There was an additional N$56/MT up to 50 metric tons given to                 
communal farmers.                                                               
                                                                                
An important goal of PROCAMPO is keeping small farmers on the land.             
The Mexican government gave a per hectare payment of 350 pesos to               
farmers for the spring/summer 1994 crop cycle.  A per hectare                   
payment of 400 pesos will be given to farmers for the fall/winter               
crop of 1994/95 and 440 pesos per hectare for the spring/summer 1995            
crop.  "Full payment" at a level yet to be defined will be given                
starting with the fall-winter crop of 1995/96 when support prices               
are supposes to disappear .                                                     
                                                                                
In early January the Government of Mexico increased payments from               
N$380 per hectare to N$400 per hectare for the fall/winter 1994/95              
crop, and from N$400 to N$440 per hectare for the spring/summer 1995            
crop.                                                                           
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   19              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
CROP AREA                                                                       
                                                                                
Crop area is expected to decline in MY 1994/95 due to dry conditions            
in some areas of the north and the lower PROCAMPO payments.                     
Aflatoxin has been a serious problem in the state of Tamaulipas in              
the past.  However, corn production for the fall/winter 1994/95 crop            
does not appear to have been adversely affected.                                
                                                                                
Until last year, corn crop area was increasing from year to year.               
This increase in area reflected both lower levels of abandonment of             
fields between planting and harvest and increases in planted                    
acreage.  A guaranteed price for corn, roughly double the world                 
price, made corn the crop of choice for many growers.  Many states              
that did not have traditionally high production of corn shifted into            
corn.  For example, Sinaloa recently become an important producer of            
corn.  Many producers in that state shifted out of traditionally                
grown crops such as wheat and rice to obtain the high guaranteed                
corn price.                                                                     
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   20              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
This situation has changed over the last year as producers in                   
several states began switching out of corn and back into traditional            
crops.  Production is beginning to concentrate once again in central            
Mexico, the historical corn producing region of the country.                    
                                                                                
                       Main Corn Producing States                               
                            Estimated Percent                                   
                        of Total Corn Production                                
                                                                                
        ---------------------------------------------                           
         State              MY 93/94 MY 94/95  Change                           
        ---------------------------------------------                           
           Mexico              6.34%    7.98%  +1.64%                           
           Jalisco            12.34%   14.12%  +1.78%                           
           Chiapas             8.27%    7.82%  -0.45%                           
           Guanajuato          6.46%    5.05%  -1.41%                           
           Hidalgo             1.86%    2.67%  +0.81%                           
           Sinaloa            15.10%   13.07%  -2.03%                           
           Michoacan           5.59%    4.15%  -1.44%                           
           Chihuahua           4.52%    2.84%  -1.68%                           
           Puebla              5.26%    4.97%  -0.29%                           
           Guerrero            4.69%    4.60%  -0.09%                           
           Tamaulipas          7.14%    6.90%  -0.24%                           
           Others             22.43%   25.83%  +3.40%                           
           Total             100.00%  100.00%                                   
        --------------------------------------------                            
        Source: The Secretariat of Agriculture (SAGDR)                          
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   21              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
INPUTS                                                                          
                                                                                
In 1994 the rate of increase in the cost of farm input prices slowed            
from previous years, but peso devaluation has reversed that pattern.            
                                                                                
                                                                                
Input costs are expected to increase at the rate of inflation in                
1995, around 30 percent.  Below are the input costs for corn                    
production in the state of Guanajuato, reflecting the cost before               
the devaluation and after the devaluation.  The cost of production,             
however, does not include the cost of credit, which has increased               
significantly.  The interest rate on agricultural loans increased               
from around 20 percent before the devaluation to over 40 percent                
currently.                                                                      
                                                                                
                   PRODUCTION COST BUDGET                                       
                   THE STATE OF GUANAJUATO                                      
  -----------------------------------------------------------------             
                   Spring/            Spring/        Percent                    
                   Summer 1994        Summer 1995    Increase                   
  -----------------------------------------------------------------             
  Preparing the Land    N$320             N$320           --                    
  Planting              N$360             N$465           29                    
  Irrigation            N$300             N$330           10                    
  Fertilizing           N$802           N$1,036           29                    
  Cultural Practices    N$200             N$200           --                    
  Control of Diseases   N$150             N$210           40                    
  Harvest               N$420             N$540           29                    
                                                                                
  Total               N$2,552           N$3,101           22                    
  -----------------------------------------------------------------             
  SOURCE: State of Guanajuato                                                   
                                                                                
                                                                                
Around 14 percent of the spring/summer crop is under irrigation                 
while 56 percent of the fall/winter crop is irrigated.                          
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   22              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
YIELDS                                                                          
                                                                                
The nation-wide average corn yields will be about 2.5 metric tons               
per hectare for MY 1994/95.  Given the sharp increase in input costs            
because of the devaluation, many producers may not have the                     
financial resources to use the same amounts of inputs as in previous            
crop cycles.  Thus, yields may be lower than expected.                          
                                                                                
In general, weather conditions have been variable thus far in MY                
1994/95.  Parts of the north have been very dry.  Dam levels in the             
central part of Sinaloa were very low, limiting the use of water for            
irrigation.  There was also a severe drought in the state of                    
Chihuahua.  Rainfall in non-irrigated areas of the Bajio was average            
and thus soil moisture levels were good for the spring-summer 1994              
crop.  The states of Guanajuato, Jalisco, and Michoacan in west                 
central Mexico make up the Bajio region.                                        
                                                                                
Yields vary around Mexico.  For example, corn production in Sinaloa             
is highly mechanized, irrigated and grown on large farms.  The                  
yields in this state range from 6.5 to 7.5 MT per hectare.  On the              
other hand, corn production in Zacatecas is much less mechanized,               
non-irrigated, and grown on small private farms and ejidos (communal            
lands).  The yields in that state range from less than 1 to 2 MT per            
hectare.                                                                        
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   23              
Grain and Feed                                                                  
   Corn                                                                         
      PRODUCTION                                                                
--------------------------------------------------------------------------------
CROP QUALITY                                                                    
                                                                                
The general quality of the corn crop has been average thus far in MY            
1994/95.  The corn crop from the Bajio region was of good quality               
for the spring-summer 1994 crop.  Normally, few problems are                    
experienced with aflatoxin in this area because of mild temperatures            
and abundant rainfall during the growing season.  The quality of                
corn grown in parts of the north of Mexico suffered from recent dry             
conditions.                                                                     
                                                                                
CONSUMPTION                                                                     
                                                                                
Total corn consumption is estimated to be around 21.454 MMT in                  
1994/95 and should increase to approximately 22.100 MMT in 1995/96.             
Corn in Mexico has historically been almost exclusively a food grain            
rather than a feed grain.  Corn is a staple in the Mexican diet,                
with per capita consumption of around 120 kilograms per year.                   
                                                                                
The expected increase in total corn consumption reflects a sharp                
increase in human consumption.  Tortillas are a basic food staple               
and consumption should increase sharply with falling household                  
incomes in 1995.                                                                
                                                                                
Until 1991, little of the domestic corn crop entered official feed              
channels, except when forced to by aflatoxin levels.  In late 1991,             
however, due to the recent large domestic crops, in late 1991,                  
CONASUPO (The National Commission for the Distribution of Basic                 
Food) began selling corn to the feed industry.  In 1994, CONASUPO               
sold 4.176 MMT of corn in the domestic market as feed.                          
                                                                                
To keep the price of tortillas low the government uses a system of              
price controls and direct subsidies.  The price of tortillas for                
poor consumers is set at a low level (currently N$.750 pesos per                
kg.) and the government corn is sold to the corn flour manufacturers            
and tortilla makers considerably below the government guaranteed                
farm price, in order to hold down tortilla prices to all consumers.             
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   24              
Grain and Feed                                                                  
   Corn                                                                         
      TRADE                                                                     
--------------------------------------------------------------------------------
GENERAL                                                                         
                                                                                
Even though corn production for marketing year 1994/95 is estimated             
at 18.579 MMT, imports are expected to increase to 2.575 MMT.  This             
increase reflects the minimum guaranteed access level for U.S. corn             
to Mexico under the terms of the NAFTA.  It is unlikely that Mexico             
will import any corn from sources other then the United States.  For            
marketing year 1995/96, Mexico is forecast to import the quota level            
of 2.652 MMT.                                                                   
                                                                                
OVERALL TRADE TRENDS                                                            
                                                                                
Importers who were using the GSM program were especially hard hit by            
the devaluation.  The vast majority of imports of feed grains from              
the United States are made using the GSM-102 program.  Under the                
program, Mexican banks give importers six months to pay back dollar             
denominated loans to purchase imported corn and sorghum.  Over the              
next three months, these dollar denominated loans are coming due at             
the new exchange rate.  The feed industry petitioned SECOFI for                 
importers to be able to pay back these loans to the Mexican banks               
using a N$4.5 per US$1 exchange rate, with the Mexican government               
paying Mexican banks the difference between N$4.5 and the actual                
exchange rate.  Because the Mexican government has to reduce costs              
at all levels, SECOFI was not able to accommodate this request.                 
                                                                                
Private traders, instead of importing high priced corn, aggressively            
bought locally produced corn during the final stages of the                     
spring/summer 1994 harvest, increasing the price to farmers.                    
According to industry sources, the price farmers received in some               
areas of Mexico was as high as N$680/MT for corn.                               
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   25              
Grain and Feed                                                                  
   Corn                                                                         
      TRADE                                                                     
--------------------------------------------------------------------------------
CONASUPO offered producers a guaranteed price of N$600/MT for the               
spring/summer 1994 white corn crop.  However, many farmers did not              
sell to CONASUPO because of higher prices received from private                 
traders.                                                                        
                                                                                
CONASUPO continues to market its corn for feed even more cheaply, in            
dollar terms, than it did in 1994, when the government agency tended            
to undersell imported corn by five to ten dollars a ton.  In January            
and February, CONASUPO set its price of corn for sale for feed to               
the local feed industry following its normal practice of offering               
its corn at roughly 95% the cost of imports, but calculating its                
peso price using the government's optimistic "ideal" peso/dollar                
exchange rate of 4.5 to 1.  This means, for example, that CONASUPO              
sold corn for feed at N$564.86/MT (US$99.10/MT, using a N$5.7 per               
US$1 exchange rate) FOB warehouse Veracruz for the month of February            
compared to US$120/MT CIF Veracruz for imported feed quality corn.              
                                                                                
According to industry sources, there has been a 70 percent drop off             
in U.S. grain exports to Mexico since the devaluation.  Because of              
the big push to fill the quota, many feed mills are covered through             
March.  Moreover, since the devaluation, many Mexican banks are                 
reluctant to open letters of credit.  In the month of January, there            
was only around 96,000 MT of corn imported into Mexico.  Out of that            
amount, 82,000 MT was imported by feed mills in the Yucatan.                    
CONASUPO does not have the corn to meet the needs of feed mills in              
that state and thus imports are necessary.                                      
                                                                                
Over the long term Mexico will over the long term remain a                      
substantial importer of corn from the United States.  Any increases             
in corn production will not likely keep pace with demand growth in              
the long run.  In addition, given the importance that timely rains              
play in Mexican agricultural production, wide swings from year to               
year in corn imports can be expected.                                           
                                                                                
What may change Mexico's longer term production and import                      
requirements for corn is PROCAMPO, which will allow the domestic                
price of corn to fall to international levels.  Inefficient                     
producers will likely be forced out of the market.                              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   26              
Grain and Feed                                                                  
   Corn                                                                         
      TRADE                                                                     
--------------------------------------------------------------------------------
                                                                                
Trade Matrix                                                                    
  Corn                           Units: Metric tons                             
-                                                                               
       Exports for 1993 to:                  Imports for 1993 from:             
      -U.S. ............     19,341          -U.S. ............    154,204      
      -Other                                 -Other                             
       Costa Rica             5,250           Canada                   109      
       Nicaragua              1,136           Guatemala                  8      
       Switzerland           19,626                                             
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others       26,012           Total of Others          117      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total           45,353           Grand Total          154,321      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.                                                            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   27              
Grain and Feed                                                                  
   Corn                                                                         
      TRADE                                                                     
--------------------------------------------------------------------------------
                                                                                
Trade Matrix                                                                    
  Corn                           Units: Metric tons                             
-                                                                               
       Exports for 1994 to:                  Imports for 1994 from:             
      -U.S. ............     21,028          -U.S. ............    712,775      
      -Other                                 -Other                             
       Costa Rica            21,028           Guatemala                  6      
       Guatemala                  2                                             
       Honduras                   5                                             
       Venezuela              1,313                                             
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others       22,348           Total of Others            6      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total           43,376           Grand Total          712,781      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data. 1994 data are only for the period January to               
August.                                                                         
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   28              
Grain and Feed                                                                  
   Corn                                                                         
      STOCKS                                                                    
--------------------------------------------------------------------------------
Mexico's ending stock position should decline slightly to around 1.5            
MMT in 1994/95 due to substantial sales of feed corn by CONASUPO and            
the reduction in production.  Stocks should decrease substantially              
by the end of MY 1995/96 as corn production declines and demand for             
tortillas increase.                                                             
                                                                                
POLICY                                                                          
                                                                                
PRODUCTION POLICY                                                               
                                                                                
For the past several years, the Mexican Government and farmer                   
organizations called for self-sufficiency in the production of basic            
agricultural commodities, especially corn and dry beans.  This led              
to high support prices for corn and dry beans and culminated in a               
record corn crop for 1992/93.                                                   
                                                                                
PROCAMPO should actually reduce corn production as producers move               
back into crops, such as rice, soybeans, and cotton, that have not              
been the beneficiaries of major government support for the past                 
several years.  This change has begun to affect Mexico's grain                  
production in MY 1994/95.  The devaluation could also help to reduce            
corn production, with other crops such as sorghum and cotton more               
attractive to growers.                                                          
                                                                                
                                                                                
TARIFF CHANGES                                                                  
                                                                                
With the implementation of the NAFTA on January 1, 1994, the U.S.               
eliminated the 0.2 cents per kilogram tariff on imported corn from              
Mexico.                                                                         
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   29              
Grain and Feed                                                                  
   Corn                                                                         
      POLICY                                                                    
--------------------------------------------------------------------------------
On January 1, 1994, Mexico converted its import licensing system for            
corn imported from the U.S. and Canada to a transitional tariff-rate            
quota.  The tariff-rate quota will remain in effect for 15 years.               
The U.S. gains duty-free access for 2.575 MMT of corn in 1995.  This            
access will grow by a 3-percent annually compounded rate over the               
15-year transition period.  U.S. exports to Mexico in excess of the             
2.575 MMT quota would be assessed a 206.4 percent tariff for 1995,              
unless the Mexican government chooses to expand the quota.  Over the            
first six years of the agreement, an aggregate 24 percent of the                
tariff will be eliminated.  The remainder will be phased-out over               
the rest of the 15-year transition period.                                      
                                                                                
Canada gains duty-free access for 1,030 metric tons of corn for                 
1995.  Canadian corn exports above this amount and over the                     
transition period will receive the same treatment as U.S. corn.                 
                                                                                
During the initial year of the phase-in of the NAFTA, Mexico                    
encountered rather large corn surpluses, with production at record              
levels. This corn found its way into feeding channels and replaced              
U.S. sorghum exports.  As the effects of the new Mexican farmer                 
support program are realized, however, corn production will likely              
decrease, taking pressure off of consumption and stocks.                        
                                                                                
The Mexican government has presently allocated over 3 MMT for the               
1995 quota, well above the minimum 2.575 MMT.  The Mexican                      
government committed itself to try and fill the 2.5 MMT quota for               
1994.  For example, last year the Mexican government gave subsidies             
on financing and storage to corn flour millers in order for these               
millers to import yellow corn under the quota.  This yellow corn was            
then swapped for white corn from CONASUPO's stocks.  According to               
SECOFI officials, Mexico imported 2.276 MMT under the tariff rate               
quota for 1994.  The Mexican government includes only the tariff                
number 1005.90.99 under the tariff rate quota.  Cracked corn (tariff            
number 1005.90.02) is not included under the Mexican TRQ for corn.              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   30              
Grain and Feed                                                                  
   Corn                                                                         
      POLICY                                                                    
--------------------------------------------------------------------------------
EXPORT SUBSIDIES                                                                
                                                                                
Exports of corn by CONASUPO have been made through the use of                   
implicit subsidies.  For example, a sale by CONASUPO in February,               
1994 for export was reportedly priced at US$105/MT FOB vessel.  If              
this was white corn, the export subsidy, excluding charges for                  
handling, storage and transportation, would be around US $139 per               
metric ton.  The devaluation effectively stops removes any need for             
an export subsidy, should CONASUPO seek export outlets for surplus              
corn.                                                                           
                                                                                
QUALITY, SAFETY & HEALTH REGULATIONS                                            
                                                                                
Mexico no longer requires imported corn to be dyed green, since the             
devaluation has removed the incentive for importers to attempts to              
sell U.S. corn into the CONASUPO support price program.                         
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   31              
Grain and Feed                                                                  
   Corn                                                                         
      POLICY                                                                    
--------------------------------------------------------------------------------
IMPORT REQUIREMENTS                                                             
                                                                                
The Mexican Government and USDA are involved in discussions of                  
procedures that will govern overland shipment of U.S. grains and                
oilseeds to Mexico in the future.  The procedures will address                  
phytosanitary, food safety, and quality issues.  To date nothing has            
been finalized.                                                                 
                                                                                
MARKETING CHANNELS                                                              
                                                                                
The end-users of corn in Mexico are the food industry, the feed                 
industry and the wet milling industry.  Because government policy               
currently limits imports for U.S. corn for food use, U.S. exporters             
should concentrate on the latter two industries.                                
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   32              
Grain and Feed                                                                  
   Sorghum                                                                      
--------------------------------------------------------------------------------
                       Global Economic Data Exchange System                     
 Commodity: Sorghum (0459200) (1000 HECTARES)(1000 MT)                          
 Beg. Month/Year of Marketing Year:  10 / 93          10 / 94          10 / 95  
 MEXICO                      Revised 1993      Prelim 1994      Forecast 1995   
                                 Old     New      Old     New      Old     New  
 Area Harvested                    600    1032      618    1335        0    1440
 Beginning Stocks                  591     591      783     783        0     765
 Production                       2040    3018     2100    3900        0    4200
 TOTAL Mkt. Yr. Imports           3100    3089     1860    2100        0    2200
 Oct-Sep Imports                  3100    3089     1860    2100        0    2200
 Oct-Sep Import U.S.              3100    3089     4543    2100        0    2200
 TOTAL SUPPLY                     5731    6698     4743    6783        0    7165
 TOTAL Mkt. Yr. Exports              0       0        0       0        0       0
 Oct-Sep Exports                     0       0        0       0        0       0
 Feed Dom. Consumption            4948    5915     4343    6018        0    6300
 TOTAL Dom. Consumption           4948    5915     4343    6018        0    6300
 Ending Stocks                     783     783      400     765        0     865
 TOTAL DISTRIBUTION               5731    6698     4743    6783        0    7165
                                                                                
                                                                                
PRODUCTION                                                                      
                                                                                
GENERAL                                                                         
                                                                                
Sorghum production in Mexico for marketing year 1994/95                         
(October/September) is expected to increase by almost 30 percent to             
around 3.9 MMT because of the increase in the domestic price of                 
sorghum and the per hectare payment made under PROCAMPO.  The peso              
price of sorghum recently jumped by as much as 50 percent in Mexico             
because of devaluation's impact on the price of competing imports.              
This increase in production also reflects a shift out of corn                   
production and into sorghum production in the states of Michoacan               
and Guanajuato.                                                                 
                                                                                
We are using official Mexican government statistics for historical              
purposes.  The increased production for 1993/94 of 3.018 MMT                    
reflects Mexican government data.  Production is forecast to                    
increase in 1995/96 to around 4.2 MMT, as farmers continue to shift             
out of corn and into sorghum.                                                   
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   33              
Grain and Feed                                                                  
   Sorghum                                                                      
      PRODUCTION                                                                
--------------------------------------------------------------------------------
Sorghum production is spread throughout the country, with the                   
largest producing states being Tamaulipas, Guanajuato, and Jalisco.             
                                                                                
                                                                                
In the past, feed manufacturers have readily purchased the Bajio                
sorghum crop because of its quality and proximity to demand centers.            
 Due to transportation and quality issues, feed millers have been               
less aggressive in purchasing the Tamaulipas spring crop since the              
liberalization of imports.                                                      
                                                                                
PRODUCTION POLICY                                                               
                                                                                
Under PROCAMPO, the Tamaulipas fall/winter crop will receive an                 
additional N$50/MT to compensate for the distance from consumption              
centers.                                                                        
                                                                                
CROP AREA                                                                       
                                                                                
Harvested area of sorghum in marketing year 1994/95 is expected to              
increase about 300,000 hectares due to high sorghum prices and the              
per hectare payments under PROCAMPO.                                            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   34              
Grain and Feed                                                                  
   Sorghum                                                                      
      PRODUCTION                                                                
--------------------------------------------------------------------------------
INPUTS                                                                          
                                                                                
In 1994 the rate of increase in the costs of farm input prices                  
slowed down from previous years.  In previous years, farm input                 
prices rose faster than inflation because of the decline in input               
subsidies.                                                                      
                                                                                
However, the devaluation of the peso in late 1994 radically changed             
input costs.  Input costs are expected to increase at the rate of               
inflation in 1995, around 30 percent.  Below are the input costs for            
sorghum production in the state of Guanajuato, reflecting the before            
devaluation and after devaluation costs.  The cost of production,               
however, does not include the cost of credit, which has increased               
significantly.  The interest rate on agricultural loans increased               
from around 20 percent before the devaluation to over 40 percent                
since the devaluation.                                                          
                                                                                
                   PRODUCTION COST BUDGET                                       
                   THE STATE OF GUANAJUATO                                      
  -----------------------------------------------------------------             
                        Spring/           Spring/        Percent                
                        Summer 1994       Summer 1995    Increase               
  -----------------------------------------------------------------             
  Preparing the Land    N$320             N$320           --                    
  Planting              N$250             N$320           28                    
  Irrigation            N$300             N$330           10                    
  Fertilizing           N$802           N$1,036           29                    
  Cultural Practices    N$200             N$200           --                    
  Control of Diseases   N$150             N$210           40                    
  Harvest               N$375             N$480           28                    
                                                                                
  Total               N$2,397           N$2,896           21                    
  -----------------------------------------------------------------             
  SOURCE: State of Guanajuato                                                   
                                                                                
Thus far in MY 1994/95, water availability has been adequate in most            
parts of Mexico for sorghum.  Around 24 percent of the fall/winter              
crop is irrigated and approximately 45 percent of the spring/summer             
crop is irrigated.                                                              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   35              
Grain and Feed                                                                  
   Sorghum                                                                      
      PRODUCTION                                                                
--------------------------------------------------------------------------------
YIELD                                                                           
                                                                                
Sorghum yields are expected to remain the same in marketing year                
1994/95 as in marketing year 1993/94, at about 2.92 metric tons per             
hectare.  However, given the sharp increase in input costs because              
of the devaluation, many producers may not have the financial                   
resources to use the same amounts of inputs as in previous crop                 
cycles.  Thus, yields may be lower than expected.                               
                                                                                
CROP QUALITY                                                                    
                                                                                
The fall 1994 harvest was reported as generally being of good                   
quality, due to timely precipitation.  Most balanced feed producers             
consider sorghum from Bajio and Sinaloa better in quality than                  
Tamaulipas-produced sorghum.  This is due to the lack of covered                
storage in Tamaulipas and poor transportation from Tamaulipas to end            
users in Central Mexico.                                                        
                                                                                
CONSUMPTION                                                                     
                                                                                
Sorghum consumption is estimated to increase from 5.915 MMT in MY               
1993/94 to 6.018 MMT in MY 1994/95 because of an increase in                    
production.  Consumption is forecast to increase to 6.3 MMT in MY               
1995/96 because of an increase in production and imports.                       
                                                                                
Sorghum consumption has expanded rapidly in Mexico over the past                
several years due to its liberalization and expansion of the                    
livestock sector.  However, demand for sorghum slowed because of                
CONASUPO's sales of corn for feed and feed corn imported into Mexico            
from the United States under the NAFTA.  In addition, excess durum              
wheat supplies have displaced some sorghum in feed channels.                    
                                                                                
The poultry industry is the major consumer of sorghum in Mexico.                
Because of the economic problems caused by the devaluation, many                
middle income consumers will switch from higher priced red meat to              
poultry.  Thus, demand for sorghum should increase moderately.                  
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   36              
Grain and Feed                                                                  
   Sorghum                                                                      
      TRADE                                                                     
--------------------------------------------------------------------------------
GENERAL                                                                         
                                                                                
MY 1994/95 imports of sorghum are expected to decrease significantly            
because of the competition with feed corn from CONASUPO and U.S.                
corn imports under the NAFTA corn quota.  Imports of sorghum in MY              
1995/96 are forecast to increase slightly as the economy improves.              
                                                                                
                                                                                
                                                                                
Trade Matrix                                                                    
  Sorghum                        Units: Metric tons                             
-                                                                               
       Exports for 1993 to:                  Imports for 1993 from:             
      -U.S. ............                     -U.S. ............  2,951,557      
      -Other                                 -Other                             
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others                        Total of Others                   
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total                            Grand Total        2,951,557      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.                                                            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   37              
Grain and Feed                                                                  
   Sorghum                                                                      
      TRADE                                                                     
--------------------------------------------------------------------------------
                                                                                
Trade Matrix                                                                    
  Sorghum                        Units: Metric tons                             
-                                                                               
       Exports for 1994 to:                  Imports for 1994 from:             
      -U.S. ............         29          -U.S. ............  1,720,745      
      -Other                                 -Other                             
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others                        Total of Others                   
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total               29           Grand Total        1,720,745      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.  1994 data are only for the period January                 
through August.                                                                 
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   38              
Grain and Feed                                                                  
   Sorghum                                                                      
      STOCKS                                                                    
--------------------------------------------------------------------------------
Ending stocks are estimated to be around 765,000 MT for MY 1994/95              
and 865,000 MT for MY 1995/96.  Generally, private feed millers keep            
approximately one to two months supply of feed in stock.                        
                                                                                
POLICY                                                                          
                                                                                
TARIFF CHANGES                                                                  
                                                                                
Under the NAFTA, the United States and Mexico reciprocally                      
eliminated import tariffs on sorghum.  However, the earlier Mexican             
seasonal import tariff on sorghum overall had little effect on total            
imports;  it simply resulted in greater imports during non-tariff               
periods.  The removal of this tariff offers greater flexibility on              
the part of sorghum importers in planning their needs.  Nonetheless,            
with the additional corn that has be allowed into Mexico under the              
NAFTA,  expanded sales of feed corn by CONASUPO, and increased                  
sorghum production, sorghum imports are expected to fall                        
substantially in MY 1994/95.                                                    
                                                                                
NON-TARIFF BARRIERS                                                             
                                                                                
CONASUPO has become more aggressive in its subsidized sales of corn             
for feed purposes.  The parastatal sold around 4.176 MMT in 1994 and            
expects to sell around 3.3 MMT in 1995.  Because of these subsidized            
sales, imports of sorghum from the United States are expected to                
fall to around 2.1 MMT in 1994/95.                                              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   39              
Grain and Feed                                                                  
   Rice, Milled                                                                 
--------------------------------------------------------------------------------
                       Global Economic Data Exchange System                     
 Commodity: Rice, Milled (0422110) (1000 HECTARES)(1000 MT)                     
 Beg. Month/Year of Marketing Year:  10 / 93          10 / 94          10 / 95  
 MEXICO                      Revised 1993      Prelim 1994      Forecast 1995   
                                 Old     New      Old     New      Old     New  
 Area Harvested                     50      60       60      70        0      73
 Beginning Stocks                  246     246      261     248        0     244
 Milled Production                 140     197      167     230        0     240
 Rough Production                  210     295      250     345        0     360
 MILLING RATE (.9999)             6667    6667     6667    6667        0    6667
 TOTAL Imports                     400     280      350     250        0     265
 Jan-Dec Imports                   400     280      350     250        0     265
 Jan-Dec Import U.S.               300     206      300     180        0     190
 TOTAL SUPPLY                      786     723      778     728        0     749
 TOTAL Exports                       0       0        0       0        0       0
 Jan-Dec Exports                     0       0        0       0        0       0
 TOTAL Dom. Consumption            525     475      536     484        0     495
 Ending Stocks                     261     248      242     244        0     254
 TOTAL DISTRIBUTION                786     723      778     728        0     749
                                                                                
                                                                                
PRODUCTION                                                                      
                                                                                
GENERAL                                                                         
                                                                                
Mexican rice production in MY 1994/95 (October/September) is                    
estimated to increase to 230,000 MT (milled basis), an increase of              
around 17 percent from the record low production of MY 1993/94.                 
Production is forecast to increase by about 4 percent, to 240,000 MT            
(milled basis) in MY 1995/96.  We are using official Mexican                    
government production data for historical purposes.  Thus, we                   
increased production for 1993/94 to 197,000 MT (milled basis) to                
reflect government data.                                                        
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   40              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      PRODUCTION                                                                
--------------------------------------------------------------------------------
PROCAMPO and an attractive world price are responsible for the                  
increase in rice production. In Sinaloa, for example, the production            
is expected to increase from 16,500 MT for the spring/summer 1993               
crop to around 70,000 MT for the spring/summer 1994 crop, as farmers            
switch out of corn and into rice.  For climatological reasons, corn             
yields for the spring/summer crop cycle tend to be below the yields             
for the fall/winter crop cycle, but equal to rice yields.  Producers            
received around N$720/MT for the milagro filipino variety for the               
spring/summer 1994 crop, in addition to the N$74 per metric ton                 
merchandizing subsidy paid by ASERCA.  Corn farmers only received               
N$600/MT for their corn.                                                        
                                                                                
Since liberalization of the rice market in 1990 until 1994, rice                
production fell in Mexico due to increased costs of inputs, low                 
producer prices in relation to other crops, and relatively less                 
expensive imports.  Rice production had been relatively less                    
profitable than other crops, especially in the state of Sinaloa                 
which has been the dominant rice producing state.  In Sinaloa, 16               
out of the 22 rice mills are currently closed and the open mills are            
only operating at approximately 20 percent of installed capacity.               
Along with Sinaloa, Veracruz and Campeche are now major rice                    
producing states, with Veracruz remaining an important milling                  
center for imported rice.                                                       
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   41              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      PRODUCTION                                                                
--------------------------------------------------------------------------------
PRODUCTION POLICY                                                               
                                                                                
Mexican rice production could rebound to historical levels within               
the next five years if local market prices and per hectare payments             
to farmers under PROCAMPO prove to be sufficiently large to draw                
land out of corn production.  In addition to decoupled payments,                
PROCAMPO gives 74 pesos/MT in direct payments to rice farmers in                
order to "merchandize" their crop.   This replaces the 80 pesos that            
farmers had received for the three years previous to PROCAMPO.                  
                                                                                
CROP AREA                                                                       
                                                                                
Crop area is estimated in MY 1994/95 at 70,000 hectares.  Crop area             
is forecast to increase slightly to 73,000 hectares for MY 1995/96.             
As noted earlier, crop area in the state of Sinaloa, which had                  
fallen dramatically since 1990, has only recently begun to recover.             
Sources have indicated that production has increased in that state              
because of attractive rice prices and PROCAMPO payments.  The                   
Government is also attempting to increase rice production in the                
state of Veracruz and in the Yucatan Peninsula.                                 
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   42              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      PRODUCTION                                                                
--------------------------------------------------------------------------------
INPUTS                                                                          
The following gives estimated production costs in an important                  
producing state.                                                                
                                                                                
         PRODUCTION COST BUDGET                                                 
         THE STATE OF SINALOA                                                   
         FALL/WINTER 1993/94                                                    
                 PESOS                                                          
  ------------------------------------------                                    
  Preparing the Land      N$451                                                 
  Planting                N$204                                                 
  Irrigation              N$140                                                 
  Fertilizing             N$859                                                 
  Insect/disease control  N$482                                                 
  Cultural Practices      N$346                                                 
  Interest on capital     NS 52                                                 
  Harvest                 N$324                                                 
  Total                 N$2,858                                                 
  ------------------------------------------                                    
  Yield                       5.4                                               
  Price                   N$660                                                 
  Gross Profit          N$3,564                                                 
  Net Profit              N$706                                                 
  ------------------------------------------                                    
  SOURCE: Mariano Padillo, Culiacan, Sinaloa                                    
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   43              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      PRODUCTION                                                                
--------------------------------------------------------------------------------
YIELDS                                                                          
                                                                                
Given that most rice production in the major growing regions is                 
irrigated, yields are expected to remain at about 4.9 metric tons               
per hectare for MY 1994/95.  At the same time, given the sharp                  
increase in input costs because of the devaluation, many producers              
may not have the financial resources to use the same amount of                  
inputs as in previous cycles, thus constraining input use and                   
lowering yields.                                                                
                                                                                
CROP QUALITY                                                                    
                                                                                
Domestically-produced rough rice is of good quality.  However, some             
less-efficient domestic milling operations do produce lower quality             
milled rice.                                                                    
                                                                                
CONSUMPTION                                                                     
                                                                                
GENERAL                                                                         
                                                                                
Over the next two marketing years, rice consumption is only expected            
to grow as the result of population growth.  Per capita rice                    
consumption in Mexico is one of the lowest in Latin America.                    
                                                                                
The variety of consumer ready rice mixes in Mexican grocery stores              
has increased dramatically over the past four years.  Consumer                  
acceptance has been widespread due to the variety of flavors and the            
ease of preparation.                                                            
                                                                                
Rice prices are no longer controlled at the consumer level.                     
However, due to large imports, milled rice has been an affordable               
food choice for many segments of the Mexican population.  However,              
consumer prices have gone up sharply since the devaluation.                     
                                                                                
Although prices of imported rice mixes are quite expensive, they                
have found an excellent niche market in the upper income brackets in            
Mexico.                                                                         
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   44              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      TRADE                                                                     
--------------------------------------------------------------------------------
GENERAL                                                                         
                                                                                
Rice imports are expected to decline to 250,000 MT in MY 1994/95 as             
a result of the peso devaluation and increased domestic production.             
Prices in the United States have increased significantly following              
the opening up of the Japanese market.  The Mexican market is closed            
to Asian rice imports.  The only other current suppliers of rice are            
Uruguay and Argentina.  The majority of rice being is imported by               
brokers and millers.                                                            
                                                                                
On September 20, 1993, the Mexican government banned rice imports               
from Asia due to phytosanitary concerns.  Because of the closing of             
the Asian markets, imports of Uruguayan and Argentine rice have                 
increased significantly.  There is a bilateral agreement between                
Mexico and Argentina and Uruguay that gives these countries a zero              
duty on rice exports to Mexico.                                                 
                                                                                
On October 20, 1994, the Mexican government announced in the Diario             
Oficial (The Mexican government's Official Gazette) a quarantine of             
U.S. rough rice.  The Mexican government never enforced the                     
quarantine, however, and quickly rescinded this regulation.                     
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   45              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      TRADE                                                                     
--------------------------------------------------------------------------------
OVERALL TRADE TRENDS                                                            
                                                                                
Since privatization, price competitiveness has been the primary                 
concern for importers, followed by quality.  Given an eventual                  
lifting of the Asian rice ban, U.S. rice exports will continue to be            
large as long as prices are competitive. For example, importers                 
prefer U.S. rice.  But in 1992 with short U.S. supplies and                     
relatively high prices, importers purchased over 200,000 metric tons            
of rice from southeast Asia.                                                    
                                                                                
                                                                                
                                                                                
Trade Matrix                                                                    
  Rice, Milled                   Units: Metric tons                             
-                                                                               
       Exports for 1993 to:                  Imports for 1993 from:             
      -U.S. ............                     -U.S. ............    201,995      
      -Other                                 -Other                             
       Cuba                     120           Uruguay                   22      
                                              Canada                     9      
                                              Spain                     19      
                                              Italy                      8      
                                              Panama                   902      
                                              Thailand               1,347      
                                              Puerto Rico               23      
                                              Vietnam               44,229      
                                              China                 29,639      
                                                                                
                          ---------                              ---------      
       Total of Others          120           Total of Others       76,198      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total              120           Grand Total          278,193      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.                                                            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   46              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      TRADE                                                                     
--------------------------------------------------------------------------------
                                                                                
Trade Matrix                                                                    
  Rice, Milled                   Units: Metric tons                             
-                                                                               
       Exports for 1994 to:                  Imports for 1994 from:             
      -U.S. ............                     -U.S. ............    121,587      
      -Other                                 -Other                             
       El Salvador               11           Afghanistan               20      
                                              Argentina             17,726      
                                              Columbia               1,887      
                                              Taiwan                 7,923      
                                              France                   430      
                                              Italy                      8      
                                              Japan                      7      
                                              Thailand               2,893      
                                              Vietnam                1,360      
                                              China                  4,549      
                          ---------                              ---------      
       Total of Others           11           Total of Others       36,803      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total               11           Grand Total          158,390      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.  1994 data are only for the period January                 
through August.                                                                 
                                                                                
STOCKS                                                                          
                                                                                
Ending stocks are forecast to decrease slightly in MY 1994/95 to                
244,000 MT.  Rice mills generally keep between two and three months             
supply of imported rice in stocks.                                              
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   47              
Grain and Feed                                                                  
   Rice, Milled                                                                 
      POLICY                                                                    
--------------------------------------------------------------------------------
On September 20, 1993, Mexico banned the importation of rice from               
Asia because of phytosanitary concerns.  Asia was a major exporter              
of rice to the Mexican market.  According to Mexican trade data, in             
1993 Mexico imported 73,868 MT of rice from Asia worth over $15                 
million.                                                                        
                                                                                
TARIFF CHANGES                                                                  
                                                                                
Under the NAFTA, the United States and Mexico will eliminate their              
respective tariffs on rice over ten-year periods.  It is highly                 
unlikely that Mexico will ship rice to the United States even with              
lower tariffs, given infrastructure constraints and quality                     
considerations.  For 1995 the tariff on U.S. paddy rice is 8 percent            
and the tariff on U.S. milled rice is 16 percent.                               
                                                                                
In the short run, the tariff benefits that accrue to U.S. rice will             
be relatively small.  However, over a period of several years, U.S.             
rice will become more competitive vis-a-vis non-NAFTA countries.                
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   48              
Grain and Feed                                                                  
   Beans                                                                        
--------------------------------------------------------------------------------
                       Global Economic Data Exchange System                     
 Commodity: Beans (0542100) (1000 HECTARES)(1000 MT)                            
 Beg. Month/Year of Marketing Year:  10 / 93          10 / 94          10 / 95  
 MEXICO                      Revised 1993      Prelim 1994      Forecast 1995   
                                 Old     New      Old     New      Old     New  
 Area Harvested                   2000    1911     1818    1970        0    1985
 Beginning Stocks                  140     140      205     178        0     178
 Production                       1100    1300     1000    1340        0    1350
 TOTAL Mkt. Yr. Imports             75      75       75      40        0      75
 Jul-Jun Imports                    75      75       75      40        0      75
 Jul-Jun Import U.S.                 0      74        0      39        0      74
 TOTAL SUPPLY                     1315    1515     1280    1558        0    1603
 TOTAL Mkt. Yr. Exports             10      37       10      30        0      30
 Jul-Jun Exports                    10      37       10      30        0      30
 Feed Dom. Consumption               0       0        0       0        0       0
 TOTAL Dom. Consumption           1100    1300     1100    1350        0    1400
 Ending Stocks                     205     178      170     178        0     173
 TOTAL DISTRIBUTION               1315    1515     1280    1558        0    1603
                                                                                
                                                                                
PRODUCTION                                                                      
                                                                                
GENERAL                                                                         
                                                                                
Dry edible bean production in Mexico is expected to increase                    
slightly in MY 1994/95 to 1.34 MMT because of PROCAMPO per hectare              
payments.  The spring/summer  crop is expected to account for about             
70 percent of total dry edible bean production, with the remainder              
coming from the fall/winter crop.                                               
                                                                                
Production in Zacatecas is expected to increase from 312,000 MT in              
spring-summer 1993 to 455,000 MT in the spring/summer 1994 crop, an             
increase of 46 percent.  PROCAMPO and timely rains helped to                    
significantly increase production of dry beans in that state.                   
                                                                                
                                                                                
                                                                               
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Grain and Feed                                                                  
   Beans                                                                        
      PRODUCTION                                                                
--------------------------------------------------------------------------------
PROCAMPO, in fact, has made dry bean production much more attractive            
for farmers in Zacatecas.  Zacatecas is the main producing state for            
dry beans, accounting for some 30 percent of national production.               
Producers in that state have few alternatives to dry bean                       
production.                                                                     
                                                                                
The average yield in Zacatecas for the spring/summer 1994 crop was              
around .6 MT per hectare.  The guaranteed price for dry beans fell              
from N$2,100 per ton for the spring/summer 1993 crop cycle to                   
N$1,600 per ton for the spring/summer 1994 crop cycle.  This is a               
decrease of N$300/hectare for a farmer in Zacatecas with an average             
yield.  Under PROCAMPO, however, per hectare payments were N$350.               
Thus, the typical farmer in Zacatecas came out N$50/hectare ahead               
because of PROCAMPO, which helped to increase dry bean production in            
that state.  Moreover, according to SAGDR officials in Zacatecas,               
since PROCAMPO payments are made before planting, farmers were able             
to purchase improved seeds and fertilizers that increased yields.               
                                                                                
In the states of Hidalgo, Puebla, Mexico and Tlaxcala, production               
increased as farmers switched out of barley for the spring/summer               
1994 crop.  Barley was not covered under PROCAMPO during that crop              
cycle.                                                                          
                                                                                
Production in the state of Chihuahua declined from 149,000 MT in the            
spring/summer 1993 crop to 72,000 MT in the spring/summer 1994 crop             
because of a severe drought in that state.                                      
                                                                                
MY 1995/96 production  s forecast to increase to 1.35 MMT thanks to             
PROCAMPO and high producer prices.  For example, in the middle of               
February, before CONASUPO announced an increase in the dry bean                 
guaranteed price, farmers in Nayarit were receiving N$2,000/MT for              
preferred dry bean varieties from the private trade, while CONASUPO             
was offering only N$1,600 per ton.  These high prices should spur on            
increased production in the short run.  However, not all the gain in            
peso prices will be pure profit for producers.  Input costs --                  
particularly credit costs -- have risen dramatically as a result of             
the financial crisis.                                                           
                                                                                
We are using official Mexican government production data for                    
historical purposes.  Thus, we increased production for MY 1993/94              
to 1.3 MMT.                                                                     
                                                                                
                                                                                
                                                                               
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Grain and Feed                                                                  
   Beans                                                                        
      PRODUCTION                                                                
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PRODUCTION POLICY                                                               
                                                                                
PROCAMPO establishes producer prices for dry beans (see below), as              
well as per hectare payments identical to those for other crops.                
                                                                                
At the end of February the Mexican government announced an increase             
in the guaranteed price for dry beans for the fall/winter 1994/95               
crop from N$1,600 to N$1,800 for preferred varieties and from                   
N$1,415 to N$1,600 for non-preferred varieties.  The Government is              
also offering premiums for quality and cleanliness of an additional             
N$200 per metric ton.                                                           
                                                                                
                                                                                
                                                                                
     GUARANTEED PRODUCER PRICES FOR DRY BEANS UNDER PROCAMPO                    
                  (pesos per metric ton)                                        
                                                                                
  ----------------------------------------------------------------              
  SPRING/      AUTUMN/     SPRING/    AUTUMN/        AUTUMN/                    
  SUMMER       WINTER      SUMMER     WINTER         WINTER                     
  1993         1993/94     1994       1994/95*       1995/96                    
  ----------------------------------------------------------------              
  Preferred Varieties                                                           
  2,100        1,800      1,600      1,800          Int'l price                 
  Non-preferred Varieties                                                       
  1,800        1,595      1,415      1,600          Int'l price                 
  ----------------------------------------------------------------              
  FEB, 1994: U.S.$1.00 = 3.2 NEW PESOS                                          
  FEB, 1995: U.S.$1.00 = 5.7 NEW PESOS                                          
                                                                                
* The guaranteed price was increased by the Mexican government                  
because of the peso devaluation.                                                
                                                                                
Preferred Varieties: Canario, Mayocoba, Negro Jamapa, Flor de Mayo,             
Flor de Junio,  Manzano, and Pinto.                                             
                                                                                
                                                                                
                                                                               
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   Beans                                                                        
      PRODUCTION                                                                
--------------------------------------------------------------------------------
Non-preferred varieties: Pastilla, Garbancillo, Azufrado, Bayo                  
Blanco, Bayo Rio Grande, Ojo de Cabra, Negro Veracruz, Negro                    
Queretaro, Negro San Luis, and Negro Zacatecas.                                 
                                                                                
CROP AREA                                                                       
                                                                                
Total crop area is expected to increase by around 3 percent in                  
1994/95 to 1.97 million hectares.  Total crop area is forecast to               
increase in MY 1995/96 to 1.985 million hectares.  The area forecast            
for MY 1995/96 reflects a normal bean crop.                                     
                                                                                
Mexico's bean production area, while encompassing nearly every                  
state, has two important regions and crop cycles.  The predominant              
states for the fall-harvested dry bean crop are Zacatecas,                      
Chihuahua, Puebla, and Durango, little of which is irrigated.  Over             
45 percent of the spring harvest area is irrigated.  Nonetheless,               
over 75 percent of Mexico's total annual bean area is rainfed and               
consequently, weather continues be the predominant crop production              
factor.                                                                         
                                                                                
INPUTS                                                                          
                                                                                
Below are calculated input costs for the states of Sinaloa and                  
Zacatecas, before the devaluation.  The production budget for                   
Zacatecas does not include credit costs.  Before the devaluation,               
the interest rate was around 20 percent.  Since the devaluation, the            
interest rate has risen above 40 percent.                                       
                                                                                
                                                                                
                                                                               
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Grain and Feed                                                                  
   Beans                                                                        
      PRODUCTION                                                                
--------------------------------------------------------------------------------
                            Production Cost Budget                              
                                 (Pesos)                                        
  -------------------------------------------------------------------           
                              Sinaloa              Zacatecas                    
                          Fall/Spring 1993/94  Spring/Summer 1994               
                              (Irrigated)          (Rain fed)                   
  -------------------------------------------------------------------           
  Land Preparation               350                150                         
  Planting                       539                240.40                      
  Fertilizing                    190                118.18                      
  Insect/disease control         456                264.34                      
  Cultural Practices             107                250                         
  Irrigation                     139                                            
  Harvesting                     498                230                         
  Interest on operating capital  267                                            
  Other                          472                                            
  Total                        3,018               1,252.92                     
  -----------------------------------------------------------------             
  Yield                          2.0 MT/Hectare                                 
  Price                      N$2,100                                            
  Gross Profit               N$4,200 pesos                                      
  Net Profit                 N$1,182 pesos                                      
  -----------------------------------------------------------------             
  Source: SAGDR (Secretariat of Agriculture)                                    
                                                                                
YIELDS                                                                          
                                                                                
The overall yield for the marketing year 1994/95 dry bean crop in               
Mexico is expected to reach about 0.68 metric tons per hectare,                 
similar to the average yield in marketing year 1993/94.  Because of             
timely rains and improved inputs, such as improved seeds and                    
fertilizers, the average yield in Zacatecas increased from .5                   
MT/hectare for the spring/summer 1993 crop to .6 MT/hectare for the             
spring/summer 1994 crop.  However, yields fell in Chihuahua from .70            
MT/hectare for the spring/summer 1993 crop to .48 MT/hectare for the            
spring/summer 1994 crop because of a severe drought in that state.              
                                                                                
                                                                                
                                                                               
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Grain and Feed                                                                  
   Beans                                                                        
      PRODUCTION                                                                
--------------------------------------------------------------------------------
Yields are forecast to be around .68 metric tons per hectare for MY             
1995/96.  Low reservoir levels in the central part of Sinaloa could             
affect the dry bean yields in that state.  Moreover, given the sharp            
increase in input costs due to the devaluation, many producers may              
not have the financial resources to use the same amounts of inputs              
as in previous crop cycles.  Thus, yields may be lower than                     
expected.                                                                       
                                                                                
CROP QUALITY                                                                    
                                                                                
For the spring/summer 1994 crop cycle the quality of dry beans in               
Zacatecas and Durango was average.  Chihuahua suffered a severe                 
drought throughout the growing season, thus some of the beans were              
small and immature because of this drought.                                     
                                                                                
CONSUMPTION                                                                     
                                                                                
Per capita consumption of dry beans is one of the highest in the                
world, at around 15 kilograms per year.  Dry bean consumption in                
Mexico for MY 1994/95 is expected to increase by around 3.8 percent             
to 1.35 MMT.  Dry beans are a basic food staple in Mexico and                   
consumption should increase because of the current economic                     
problems.   It is likely that middle income consumers will switch to            
dry bean consumption to offset the loss in purchasing power. Dry                
bean consumption is forecast to increase at around 3.7 percent for              
MY 1995/96 to 1.4 MMT.                                                          
                                                                                
Packers have begun to realize the importance of a quality product.              
Several labels have used a quality dry bean product as the launching            
pad for introduction of other dry goods under the same name.                    
                                                                                
                                                                                
                                                                               
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Grain and Feed                                                                  
   Beans                                                                        
      TRADE                                                                     
--------------------------------------------------------------------------------
GENERAL                                                                         
                                                                                
Imports are expected to be around 40,000 MT for MY 1994/95.  If                 
rainfall is adequate to produce a good 1995 bean crop, and the price            
spread between imported and domestic beans remains above 20 percent,            
as few as 40,000 MT of dry beans may move into Mexico during MY                 
1994/95, including both authorized and unofficial imports.                      
                                                                                
CONASUPO exported around 37,000 MT of dry beans in MY 1993/94 to                
Brazil and Venezuela.  The parastatal is expected to export around              
30,000 MT in MY 1994/95.  According to several sources, if bean                 
prices within Mexico do not rise much above the current support                 
price, small quantities of select quality Mexican beans could  be               
exported to the United States and other neighboring countries.                  
                                                                                
OVERALL TRADE TRENDS                                                            
                                                                                
Black and pinto beans are the most popular varieties from the United            
States.  Several sources have stated that because of the current                
price relationship, very few black beans will shipped to Mexico                 
under the TRQ.  On March 1, 1995, black beans were priced at $802/MT            
FOB mid-bridge Laredo.  Pinto beans, however, are currently more                
attractive.  The price of pinto beans FOB mid-bridge Laredo was                 
$550/MT as of March 1, 1995.                                                    
                                                                                
Because of the overall influence of weather on dry bean production,             
Mexico will continue to be in and out of the international market in            
the future.  If Mexico is in the market and U.S. supplies are low               
and prices high, importers will likely continue to look toward other            
sources of supply, based not on quality, but on price.                          
                                                                                
                                                                                
                                                                               
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Grain and Feed                                                                  
   Beans                                                                        
      TRADE                                                                     
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Trade Matrix                                                                    
  Beans                          Units: Metric tons                             
-                                                                               
       Exports for 1993 to:                  Imports for 1993 from:             
      -U.S. ............      1,306          -U.S. ............      2,082      
      -Other                                 -Other                             
       Cuba                     415           Canada                   844      
       El Salvador              398                                             
       Guatemala              1,646                                             
       Haiti                    341                                             
       Honduras                 200                                             
       Venezuela                600                                             
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others        3,600           Total of Others          844      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total            4,906           Grand Total            2,926      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.                                                            
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   56              
Grain and Feed                                                                  
   Beans                                                                        
      TRADE                                                                     
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Trade Matrix                                                                    
  Beans                          Units: Metric Tons                             
-                                                                               
       Exports for 1994 to:                  Imports for 1994 from:             
      -U.S. ............                     -U.S. ............     14,287      
      -Other                                 -Other                             
       Brazil                 1,300           Canada                   952      
       Cuba                      42                                             
       Guatemala                238                                             
       Holland                3,619                                             
       Venezuela              1,000                                             
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                          ---------                              ---------      
       Total of Others        6,199           Total of Others          952      
       Others not listed                      Others not listed                 
                        -----------                            -----------      
       Grand Total            6,199           Grand Total           15,239      
                                                                                
                                                                                
                                                                                
Source:  Banco de Mexico                                                        
                                                                                
NOTE: There are substantial differences between U.S. export and                 
Mexican import data.  1994 data are only for the period January                 
through August.                                                                 
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   57              
Grain and Feed                                                                  
   Beans                                                                        
      STOCKS                                                                    
--------------------------------------------------------------------------------
After building substantial dry bean stocks in marketing year                    
1990/91, Mexico began drawing these stocks down to meet domestic                
demand without official imports by CONASUPO.  Since that time,                  
Mexico's consumption of dry beans has exceeded production until                 
1993/94, when production equaled consumption.                                   
                                                                                
Ending stocks are expected to remain at 178,000 MT for MY 1994/95               
and then fall slightly in MY 1995/96 to 173,000 MT.                             
                                                                                
POLICY                                                                          
                                                                                
TARIFF CHANGES                                                                  
                                                                                
On January 1, 1994, under the NAFTA, the United States eliminated               
its tariff on imported dry beans from Mexico.  Mexico converted its             
import licensing regime for the United States and Canada to a                   
transitional tariff-rate quota.  For the United States, duty free               
access to the Mexican market is assured for 51,500 metric tons of               
dry beans in 1995.  The TRQ grows at a 3-percent annual compounded              
rate over the 15-year transition period starting in 1994.                       
                                                                                
On February 8, 1995, SECOFI auctioned off permits to import 51,500              
MT in 1995.  A total of 66 firms participated in the closed bid                 
auction.  All 51,500 MT were auctioned off to 33 companies.  The                
amount that each company had to pay for a permit was N$.03 per                  
kilogram.  Quantities awarded ranged from a high of 6,136 MT to a               
low of 136 MT. All U. S. beans (except for the white alubia variety)            
must enter Mexico on or before July 31, 1995.   Alubia beans which              
are similar to white navy beans, may enter Mexico through December              
31, 1995.                                                                       
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   58              
Grain and Feed                                                                  
   Beans                                                                        
      POLICY                                                                    
--------------------------------------------------------------------------------
U.S. exports in excess of 51,500 metric tons will be assessed a                 
tariff, based on the "tariffication" of Mexico's import licensing               
system.  The rate is 127.9 percent for 1995.  Over the first 6 years            
of the agreement, an aggregate 24 percent of this over-quota tariff             
will be eliminated.  The remainder of the tariff will be phased-out             
over the rest of the transition period.                                         
                                                                                
Canada gained duty free access for 1,545 metric tons of dry beans               
for 1995.  The design of the over-quota tariff phase-out and growth             
in the quota amount is the same as for the U.S.                                 
                                                                                
According to SECOFI officials, 48,425 MT were imported under the dry            
bean quota for 1994. However, according to U.S. export data, the                
United States only exported 36,037 MT to Mexico in 1994.                        
                                                                                
The immediate phase-out of the U.S. tariff on dry bean imports is               
likely to have little effect on Mexican exports to the United                   
States.  Some Mexican bean packers might see this as an opportunity             
to market Mexican bean varieties under their own labels in the                  
United States to Hispanic consumers, especially since the                       
devaluation.  In any event, the amount of exports would be                      
relatively small.                                                               
                                                                                
By gaining a guaranteed minimum access of U.S. dry beans each year,             
Mexico will become a more stable import market, whose imports will              
be driven more by market forces than political decisions.  If                   
Mexico's import needs are greater than the tariff rate quota in any             
year, the United States is guaranteed MFN treatment for beans                   
purchased to meet this demand.                                                  
                                                                                
                                                                                
                                                                               
Report Code: MX9511A       AGR Number: MX5023           Page:   59              
Grain and Feed                                                                  
   Beans                                                                        
      POLICY                                                                    
--------------------------------------------------------------------------------
EXPORT SUBSIDIES                                                                
                                                                                
Exports of dry beans by CONASUPO have been made through the use of              
implicit export subsidies. Simply, CONASUPO sold dry beans in the               
export market for considerably less that they bought dry beans from             
farmers. For example, a sale in 1993 for export was reportedly                  
priced at US$ 265.00 per metric ton.  If these were preferred                   
varieties, the export subsidy, excluding charges for handling and               
storage, would have been $418.00/MT.  The devaluation and the                   
lowering of the guaranteed price under PROCAMPO should effectively              
stop the CONASUPO export subsidy.                                               
END OF REPORT                                                                   
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