Mexico's Bean News July 20-28, 2016 Update

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1 Mexico's Bean News July 20-28, 2016 Update 2016 SPRING-SUMMER PLANTING SEASON According to our sources, some of the articles published yesterday and 2 days ago have been published and confirming our theory, somehow with the remnants of the governor of Zacatecas in an interview who have to do with the fact of a state government strategy to make statements that allows them to pressure the Federal government to utilize emergency drought resources. Although the rains are behind vs. a very rainy 2015, the producers still have two weeks to complete planting (again, risking frosts during harvest) which is currently reported as of the month of June-July at 40%, and according to SAGARPA cannot be considered as a drought. Locals in Zacatecas had some rains this week and are expecting more rains in the following days. These rains will be the key to know exactly whether they will be able to plant the entire program or not, leading to a bad year, but still too early to make the final statement, planting is not over. The rain statement in our last report from our contacts is Zacatecas was rainfall season has not generalized as of yet, thus they were able to plant dry beans in the most important bean areas of Rio Grande and Sombrerete. According to the National Water Comission in Mexico, strong storms are expected in Zacatecas, Durango and Chihuahua with between 50-75mm. The weather forecast according to Weather Underground.com in the next three days is as follow: Zacatecas.- Until last week we reported a progress of 40% in their dry land bean planting with 236 thousand (out of a total of 591 thousand) hectares. This is considered a good progress as these were planted in the first half of July. The variety breakdown for dry land beans is: 49% black beans, 28% colored beans and 19% pintos. Their progress in planting irrigated beans is

2 83% with 26,344 hectares from a total program of 31,625 with the varieties: Flor de Mayo and Flor de Junio. Producers are expecting important rain in the next full week and August 5 th will be a good time to make an assessment for the planting estimates. Durango.- Unofficial information indicates that Durango has planted close to 190 thousand bean hectares from the programmed 246 thousand for this cycle. Agricultural leaders continue complaining about the lack of seed, however, SAGARPA has sent the message that around 30 thousand hectares will be converted to oats or wheat. Chihuahua.- Our contacts in the state consider that they have received less precipitations than last year which has delayed their planting. Latest reports indicate that they have around 46 thousand bean hectares planted, from the 129,151 programmed this year. Raining season has not generalized however, they expect to have enough time to plant even if they have to extend the planting season into August as it has happened before, since bean inventories in the state are practically zero, which will secure a good price for their beans. At this moment prices of pintos Chihuahua are at pesos per kilo. For your reference: WHEATHER The images in the next page correspond to the accumulated precipitations for the month of June in 2015 vs. June 2016 and the accumulated rain (mm) from in the month of June. In these images, it can be seen that the central states of Mexico are falling a little bit behind the historic rainfall with Zacatecas, Durango and Chihuahua in the 20 to 50 rain mm range, being Chihuahua the dryest and San Luis Potosi and Guanajuato in the range of 60 to 70 rain mm until June Accumulated Rain (mm) in the month of June 2015 in Mexico Accumulated Rain (mm) in the month of June 2016 in Mexico

3 Accumulated Rain (mm) in the month of June in Mexico From JULY 25 TH UPDATE - BEAN QUOTA PERMITS FOR COUNTRIES OUTSIDE NAFTA To this date there is one more company that obtained a permit to import beans from Non-NAFTA countries. The name of the company is Alazan de Lagos in Guadalajara Jal. From the total quota of 150 thousand MT, the amount allocated until July 25 th is: 2 217,050 kilograms or 22,170 MT. These will be potentially imported from China and/or Argentina. Relevant week s news clippings USDBC Disclaimer: In the following section the USDBC disseminates information published in Newspapers and Magazines related to beans (excerpts). The statements or numbers shown in each article are not necessarily in agreement with the USDBC. Lack of Rainfall Affects Bean and Corn Producers in Zacatecas Noticieros Televisa July 26, 2016

4 - Lack or rain stopped the planting in 25 municipalities. Drought puts at risk the production of the Agricultural Cycle and the subsistence of at least 1 million cattle heads. Fresnillo, Zacatecas.- The lack of regular precipitations in Zacatecas affects more than 150 thousand bean and corn producers that rely on the rainfall season. In the last two months, they have experiences the lowest rainfall levels in 3 years. There is an effect on the rain fed agriculture because in some areas moisture has not been enough to plant and the planting season for some crops such as beans is past due said Benajmin de Leon CONAGUA Delegate. Lack of rain has not permitted timely planting in 25 municipalities Precipitations have not covered all the areas, it has been uneven so it is not easy to plant and it is late to do it, said Aureliano Gallegos, producer. In the months of June and July, average precipitation levels passed from 120 mm to 75 mm causing a rain shortage during the decisive weeks to plant. We have a 25% deficit vs. previous years. Accumulated precipitations are 75% of the median values, said the CONAGUA Delegate. Every year in Zacatecas are planted more than 1 million hectares of rain fed crops, this year only 40% have been planted due to the lack of rainfall. If rainfall shows up, farmers discard the possibility of saving their crops. I think it is too late, it cannot be rescued said Jaime Ibarra. Drought has put at risk the current cycle s production and the subsistence of at least 1 million cattle heads. The chance for animals, the few we have, goats, sheep. Many save pasture but those who doesn t will loose, there will be nothing, it s ugly, said Aureliano Gallegos. In regards with the state s water dams, these are at 65% of their average capacity. Delay in Seed Delivery to Producers: Carlos Matuk Farmers Confederation Leader El Sol de Durango 28 de julio de 2016 To this date, it is estimated that there are some 30 thousand hectares waiting to be planted, although not all correspond to crops such as dry beans, but also to other alternative crops, said the Legislator and President of the National Farmers Confederation Carlos Matuk. There is a delay is seed delivery from SAGARPA Although a good number of producers have prepared their land well and have seeded, the truth is that there is still a considerable area to be planted, not necessarily dry beans, especially when they are looking for alternative crops such as oats, which is a good option. Guadalupe Victoria, Panuco de Coronado and Cuancame are the municipalities where the delay is happening. Concern for Dry Bean Planting Delay Imagen Zacatecas July 25, 2016 Zacatecas Sagarpa Delegate Roberto Luevano, recognized that there is a concern amongst producers for the delayed planting of beans. He explained that from 1.7 million bean hectares programmed, only 125 thousand have been planted which is really very little. The government official said that this percentage represents around 252 thousand hectares of beans and 125 thousand hectares of corn and forage. He said that they have planted in Tlalenango and Juchipila as well as in Rio Grande and Sombrerete. I the case of Fresnillo, he commented that they have planted in a very small area. Luevano mentioned that there are reports from regions in the north and south where it has not rained. He is confident that in the next two weeks the cycle will be regular and although the planting is late, they will be able to cultivate an important amount of beans. He said they are worried because the year is erratic.

5 In spite of the conditions, there are producers that will risk to plant 10 to 15 days after the recommended planting date, putting the crops at the risk of some frosts in early October. Producers that are not able to plant beans or corn in dry land, will have the option to plant other crops such as cereals that are more resistant to the cold and more profitable. Luevano said that they currently have in place the crop conversion program that supports the planting of malted barley, sunflower and wheat for bread. The Delegate said that last year Zacatecas bean production reached 450 thousand MT. Dry Bean Imports Increased REFORMA NTRZACATECAS.COM July, 21, 2016 México.- Dry bean imports increased 173% in comparison with the same period in The purchases reached 102,500 MT in the first 6 months of 2016 while in the same period in 2015 these were 37,500 MT according to the National Service of Agri-food Information. One of the reasons is the drop in bean production said the Director of ATM Roberto Delgado. Mexico produced 956,734 MT in 2015, this is 17% less according to ATM. Despite of the difference in the percentages, imports were the consequence of the bean production decrease due to the lack of precipitations in Durango, Zacatecas and San Luis Potosi in the most important cultivation stage of the Spring Summer cycle at the end of August. He also said that there is no high performance cultivation package recommended to bean growers and producers consider that it is a risk to invest in fertilizer, plague control and certified seed. Certified seed costs 35 pesos per kilo while commercial grain is 15 pesos per kilo, he said.