USDBC MEXICO MONTHLY REPORT MARCH 2016

USDBC MEXICO MONTHLY REPORT MARCH 2016 2015 / 2016 FALL - WINTER OFFICIAL DRY BEAN CROP REPORT 2016 Fall-Winter Bean Crop Comments Sinaloa.- Sinaloa reported final production of 75 thousand MT of Azufrado beans. These continue at high prices around 23 thousand pesos per MT. Our sources in the state commented that practically all these beans have been traded by now. Nayarit.- Reported a final production of 60 thousand MT from which 40 thousand MT were Jamapa black beans and the remaining 20 thousand were mainly Azufrado beans and other colored varieties. According to our sources, colored beans have been all traded at prices between 15 and 22 thousand pesos per MT depending on the variety. In the case of black beans, they are reporting the availability of 15 thousand MT, which they intend to trade at a price of 11 thousand pesos per MT and are fighting to obtain the government support program of 2 thousand extra pesos to reach 13 thousand pesos per MT. However until now, the government has only authorized 1,500 pesos per MT. USDBC Mexico Report March 2016 1

2016 Spring Summer Dry Bean Cycle Zacatecas, Durango and Chihuahua will soon resume the planting of their irrigated dry beans. As you may remember, this crop is harvested in August representing from 5 to 10 % of the total bean areas and the varieties planted are mainly: Pintos in Chihuahua and Durango and Bayos, Flor de Mayo and Flor de Junio en Zacatecas. The official 2016 Spring-Summer Dry land cycle planting program has not been published as of yet, so it will be sent to you as soon as it becomes available. RUMOR.- Apparently there is a rumor saying that Chihuahua would plant their Pintos earlier, however we have checked with local sources and authorities and this might be a confusion as they will start planting irrigated beans in the next days. So, there is no plan to do such thing, except for the irrigated beans that in the case of this state represent 10% of their total irrigated and dry land crop = 10 thousand MT. If anything, they could probably increase the irrigated bean area resting from the corn and cotton surfaces. However, there are no plans to do this and it is unlikely that producers would choose to do this. Nevertheless, we will continue monitoring to keep you posted. For your reference: BEAN QUOTA PERMITS FOR COUTRIES OUTSIDE NAFTA Imports outside NAFTA: As reported earlier in March, the Bean Quota has been announced Tuesday March 29th, 2016 in the Federal Register. As reported in the previous weeks the announcement indicates that the quota will be for 150 thousand MT (50 thousand more than the regular quota) and will be valid starting April 1 through November 30th only for 2016. The tariff numbers considered are: The quota increase obeyed to the lower production in the 2015 Spring-Summer cycle estimated in 23.45 % (around 200 thousand MT) and the increase of dry bean prices that according to the Secretariat of Economy summed 20.4% in the last months. According to the announcement, the process to apply for the permits will be the same except for some changes. USDBC Mexico Report March 2016 2

This means that importers will still have to present the proof of purchase with the application to obtain the permits. The changes for 2016 only are: 1. The time frame will be starting April 1st and ending November 30th, 2016. The normal is August through November. 2. The total quota available is 150 thousand MT. The normal is 100 thousand MT. 3. Maximum volume per company or individual will be 12,500 MT. The normal is 25 thousand MT 4. Each company or individual will have 45 days from the date the permit is issued, to import the beans Comments from the Industry: Members of the trade expressed their discomfort for the amount of money they are loosing because of the high prices they purchased their U.S. beans at and the lower current prices. Another comment was that they have not been able to sell their U.S. beans at the prices they need, therefore still have them waiting for better market opportunities and for this reason have not been interested in the recent Dry Bean Quota to import beans from non-nafta countries. Nevertheless, interest in this quota will be depending on the prices that importers will eventually offers they are starting to receive from China s 2015 and 2014 and from Argentina. CENTRAL MARKET PRICES AND SALES ANALYSIS BY USDBC USDBC Disclaimer: In the following section the USDBC Mexico office analyzes dry bean prices from SNIIM reports. In addition, the USDBC Mexico office place calls to the Mexican trade to complement the information. The USDBC will not be responsible for third party transactions based on this report. US Black beans prices continue high at 18 to 20 pesos per kilo in the most important markets in Mexico. In Mexico City Central market prices of US Blacks increased 2.78% in the last month. Mexican black bean prices oscillated between 13.50 and 15.00 pesos per kilo. US Pinto beans prices: US pintos also high prices in Mexico City, Monterrey and Guadalajara similar to black beans from 18.50 to 19 pesos per kilo. US Pinto prices have increase 32% in comparison with prices of 14 pesos per kilo in December 2015. Mexican pintos registered prices around 17 pesos per kilo in March, however, these also registered important increases of 41% in Mexico City and 70% in Guadalajara if compared with prices in December of 12 and 11 respectively. U.S. Alubias: small and large alubias continue at prices from 18.50 to 22 pesos per kilo in the market. Prices of theses remained stable in December. Peruanos, Mayocoba, Azufrados. Prices of these varieties did not have big changes in the December-March period as are regularly high priced. Prices were from 22 to 32 pesos per kilo. USDBC Mexico Report March 2016 3

Colored varieties: Bayos, Canarios, Flor de Mayo and Flor de Junio.- prices of these preferred Mexican varieties registered large increases from 37 to 61% in the December- March period. Prices of these oscillate between 16 and 25 pesos per kilo when regular prices are from 10 to 14 pesos per kilo. Wholesale and Semi-wholesale Prices Report USDBC Mexico Report March 2016 4

MEXICO 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. High Bean Prices Driving Consumers Away La Verdad de Tamaulipas April 7, 2016 Matamoros, Tam.- Bean traders estimated that Mexican beans prices are reaching US beans prices with only 70 cents of difference these days. The high prices put consumers in a difficult position as this staple food is becoming very expensive. According to Lauro Peña, wholesale sector rep in Matamoros, considers that the gradual price increase of beans has already doubled the prices they had at the beginning of the year. Dry Bean Seed Shortage El Siglo de Durango April 4, 2016 Durango bean producers are concerned since they perceive a lack of bean seed to plant next Spring-Summer cycle, and they still don t know about any actions that authorities will take over this situation. It is important to remember that during the bean collection process of the past bean program, producers opted to sell all or almost all their beans to the elevators participating in the program and now they do not have enough plant. Warning on Bean Imports El Siglo de Durango March 20, 2016 Before the imminent importation of 150 thousand MT of beans because of the national production deficit it is necessary to establish a progressive calendar of imports to avoid affecting the Mexican bean producers, said the National Farmers Confederation Leader Manuel Cota. In this sense, the said that it is necessary to consume the national production first and open the quota after. I would not talk about imports. The Secretariat of Economy has already authorized this, however, it is important to do it gradually to protect the prices Sid the also Nayarit state Senator. He insisted that imports must be made when necessary and at the right time, consuming the national production first, not only beans but all other products too. Zacatecas Converts Bean Hectares to other Crops Reforma.com March 9, 2016 Mexico City.- Because of the possible surplus production in Zacatecas -main producer of beans- the crop convertion to other crops has become a business opportunity. Dry bean producers in the state, are exploring the options to plant barley, sunflower and wheat for bread and the demand is increasing according to Manuel Alvarado the leader of the social organization El Barzon in Zacatecas. The mentioned crops are products required by Grupo Modelo, Pepsico and Bimbo bakeries. One of the most representative examples are the contracts made by Grupo Modelo and through the company Impulsora Agricola providing a secure scheme for the producer when making the conversion from beans to other products. In the 2014/2015 agricultural year, dry bean production reached 1.17 million MT in Mexico, while consumption was 1.09 million MT according to the National Agricultural Information Service SIAP. USDBC Mexico Report March 2016 5

Alvarado explained that now the producer has several options to plant and by converting their land to other crops, they can face the low prices of beans caused by the occasional surplus production. In 2015 -year when more crop conversions happened-, prices of beans oscillated between 8 and 12 thousand pesos per MT while in 2014 prices were between 5 and 6 thousand pesos per MYT Economic Report Mexican President Enrique Peña-Nieto stated that the agri-food segment has consolidated as an important reference in the economy with US$2 billion in exports and for the first time in 20 years, registering a trade balance surplus becoming the second source of income, higher than the manufacturing, tourism and revenue segments which had been the top income sources for this country. As commented in our past report, the Mexican agri-food segment has grown 4.3% in the last year, more than the average GDP growth. The increase in agricultural exports to different markets in the world is expected to maintain and increase in the next following years. Mexican consumption continues to be producing income for the country working like an engine on behalf of the oil industry that is no longer one of the main sources of income for Mexico. Consumption the started the year with a 4.5% growth annual according to the Private Consumption Index, considering only domestic goods, the largest for a month of March since 2012 when this indicator grew 12%. Consumption of imported goods had a slight decrease of 0.16% in January after the good results in December with 1.16%. On the exchange rate, the Private sector considered this month that the Mexican economy continues stressed by the expensive U.S. dollar and the impact over imported products prices is expected amongst other negative effects. The President of the Global Enterprises Council CEEG Frederic Garcia that represents the 47 most important transnational companies operating in Mexico and that generate 10% of the nation s GDP said that Mexico is one of the most attractive productive activity destinations in the world because of its privileged geographical situation and the structural reforms that are important for NAFTA and the TPP. He also said that the Mexican currency depreciation is a momentary factor that can favor investment. Price Waterhouse Cooper considered that the exchange rate for at the end of 2016 will be 17.90 pesos per USD however, during the year it could oscillate between 16 and 23 pesos per USD. The exchange rate reached the highest historic at 19.39 pesos per USD on February 11 th, which at that time represented a devaluation of 12.7% in the year, however in the last days the Mexican peso has recovered and on the first day of April it quoted 17.6 pesos per USD. The accumulated loss remains high at 16.1% in the last 12 months. Markets analysts say that Mexicans must get used to the expensive US Dollar and forget the 13-14 pesos per USD that we had couple of years ago and coincided with PWC forecast. The Secretariat of Economy reported that in 2015 Mexico has a good year in terms of Direct Foreign Investment as the nation received US$28.38 billion, 25.8% more vs. the US$22.56 received in 2014 and is expected to still improve with 5.7% more reaching US$30 billion, as the result of the telecom and energy reforms. The Foreign Investment was received from the following countries: 53.1% United States, 9.7% Spain, 4.7% Japan and the rest was received from other 76 countries. USDBC Mexico Report March 2016 6

Private sector analysts estimated this month that the GDP growth for 2016 will be 2.4%, while other economists consider that GDP will be between 1.6% and 2.3% due to the lower growth in the automobile sector in Q1 this year and lower Foreign Investment until now. End of the year projections indicate that inflation rate will be at 3.30%. On the TPP, May 1 st will be the date when 92% of the almost 12 thousand imports and export tariffs will be phased-out between Mexico, Colombia, Chile and Peru and only around 1 thousand that have some kid of protection and that include agricultural and livestock products and other sensitive manufacturing products will stay. Remaining tariffs will gradually disappear in year 2030. Average exchange rate in March was 17.80 pesos per USD. Exchange rate in the last day of March was 17.25 pesos per USD. PRECIPITATION MAPS 2016 MEXICO SPRING- SUMMER CYCLE DRY BEAN STATES Following are the maps of the most important dry bean production states for the 2016 Spring-Summer dry land cycle officially monitored by the USDBC in Mexico: Zacatecas, Durango, Chihuahua, San Luis Potosi and Guanajuato. Measurements are in rain milimiters. It is important to mention that raining season starts in the month of June. So at this point you will see arid surfaces which are expected to change gradually in the next months: USDBC Mexico Report March 2016 7

USDBC Mexico Report March 2016 8

USDBC Mexico Report March 2016 9

USDBC Mexico Report March 2016 10

5 YEAR PLANTING-PRODUCTION BEHAVIOR SPRING-SUMMER Programmed Planting HA MEXICO BEAN CROP 2010 2011 2012 2013 2014 2015 Zacatecas 524,684 604,004 574,257 556,517 586,402 608,288 Durango 229,029 225,082 223,288 243,326 245,675 254,676 Chihuahua 130,709 140,030 128,970 133,210 131,877 133,013 Chiapas 75,729 72,361 71,575 72,289 73,802 74,055 San Luis Potosi 127,072 121,604 123,865 119,657 118,401 115,626 Guanajuato 86,779 89,099 93,118 91,216 91,286 89,209 Other States 260,586 260,602 245,300 236,538 237,516 229,325 Total 1,434,588 1,512,782 1,460,373 1,452,753 1,484,959 1,504,192 SPRING-SUMMER Planted Surface HA MEXICO BEAN CROP 2010 2011 2012 2013 2014 2015 Zacatecas 606,012 503,850 562,306 677,063 596,944 560,000 Durango 239,882 200,212 249,617 258,431 255,052 246,000 Chihuahua 154,913 92,612 139,919 116,843 125,284 125,000 Chiapas 70,594 76,892 73,425 74,716 74,134 73,098 San Luis Potosi 127,906 62,214 102,334 131,347 135,483 116,000 Guanajuato 91,726 85,688 96,611 91,325 81,905 82,000 Other States 266,610 228,650 236,161 120,000 224,497 236,595 Total 1,557,643 1,250,118 1,460,373 1,588,311 1,493,299 1,438,693 SPRING-SUMMER Production Obtained MT MEXICO BEAN CROP 2010 2011 2012 2013 2014 2015 Zacatecas 265,029 108,613 301,754 456,928 356,084 200,000 Durango 98,399 17,455 110,989 170,727 181,412 85,000 Chihuahua 126,833 35,090 104,829 103,720 124,752 75,000 Chiapas 37,242 31,061 41,954 43,622 37,030 40,000 San Luis Potosi 33,754 16,952 30,767 31,529 63,039 40,000 Guanajuato 48,065 30,999 52,192 63,866 54,689 40,000 Other States 147,491 128,353 167,322 169,473 156,187 160,000 Total 756,813 **368,523 809,807 1,039,865 973,193 707,000 *Initial production estimations made with information provided by local agricultural authorities until March, 2016 ** Year of extreme drought USDBC Mexico Report March 2016 11