Mexican farmers suffer worst drought in 70 years

1 of 2. A farmer herds his goats in San Jose de la Paila in the state of Coahuila November 24, 2011.

Credit: Reuters/Stringer

By Noe Torres

MEXICO CITY | Fri Nov 25, 2011 8:57pm EST

MEXICO CITY (Reuters) - Mexico is being battered its worst drought in seven decades, which has devastated farm life and is expected to continue into next year.

The lack of rainfall has affected almost 70 percent of the country and northern states like Coahuila, San Luis Potosi, Sonora, Tamaulipas and Zacatecas have suffered the most acute water shortage.

Due to the drought and a cold snap at the start of the year, the government has cut its forecast for corn production two times in 2011. It now expects a harvest of 20 million tonnes compared to a previous estimate of 23 million.

Crops that cover tens of thousands of acres have been lost this year and roughly 450,000 cattle have died in arid pastures. Crucial dams, typically full at this time of year, are at 30 to 40 percent of capacity.

"This is very serious," Ignacio Rivera, an official at the Ministry of Agriculture and Rural Development, told Reuters. "Statistics on precipitation in the country show us that this year has been the driest in the last 70 years."

The country has total arable land of 22 million hectares (54.4 million acres) that can be tilled over two planting seasons while the national cattle herd last year was just over 32.6 million.

Mexico is one of the world's five top corn producers and the government expects output to recover to 25 million tonnes in 2012, aided by reorganization of the cultivated areas.

Rivera said that of the 8.1 million hectares of farmland insured by the government against natural disaster, some 600,000 claims have been lodged to recover losses on 3.8 million hectares. The Mexican government has so far set aside some 1.6 billion pesos ($113 million) to cover the losses.

TROUBLING PICTURE

Forecasts do not signal any near-term relief, but rather more losses ahead as the winter season brings damaging frost.

"It's a troubling situation, and is more worrisome because the rainy season is over... the hope is that by June it starts to rain," said Felipe Arreguin, deputy director of the National Water Commission (Conagua).

In the northern state of Durango, where a third of the population lives in the countryside, authorities expect significant losses in grain and seed production as well as bean and corn, which are a staple in the Mexican diet.

"It's a tragedy because there is virtually no harvest. It's a critical situation that we don't even have beans for home consumption," the state governor Jorge Herrera told Reuters.

Official figures show an expected 28 percent loss in production of beans this year, while the recovery to historical levels of 1.2 million tonnes will depend on the weather.

If the drought does not lift soon, analysts say authorities will be forced to raise its food imports to cover lower domestic production.

(Additional reporting by Adriana Barrera; Editing by Marguerita Choy)

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Stocks suffer worst week in 2 months on Europe woes

Traders work on the floor of the New York Stock Exchange November 21, 2011.

Credit: Reuters/Brendan McDermid

By Angela Moon

NEW YORK | Fri Nov 25, 2011 5:26pm EST

NEW YORK (Reuters) - Stocks posted seven straight sessions of losses on Friday, ending the worst week in two months, as the lack of a credible solution to Europe's debt crisis kept investors away from risky assets.

Wall Street traded higher for most of the abbreviated session on hopes that "Black Friday," the traditional start of the U.S. holiday shopping season, would support major retailers. But gains were quickly offset by headlines out of Europe that further dented market sentiment. With less than 20 minutes before the close, all three stock indexes had turned negative.

Yields on Italy's debt approached recent highs that sparked a sell-off in world markets. Italy paid a record 6.5 percent to borrow money over six months on Friday, and its longer-term funding costs soared far above levels seen as sustainable for public finances.

High debt yields from major economies in Europe such as Spain, France and Germany suggest investing in the region is seen as being more risky.

"Trading remains cautious (since) the poor auction of German bonds mid-week raised concerns the debt crisis is spreading to Europe's core," said WhatsTrading.com options strategist Frederick Ruffy.

Adding to concerns, Standard & Poor's downgraded Belgium's credit rating to double-A from double-A-plus, citing concerns about funding and market pressures.

The Dow Jones industrial average .DJI slipped 25.77 points, or 0.23 percent, to 11,231.78 at the close. The Standard & Poor's 500 Index .SPX declined 3.12 points, or 0.27 percent, to 1,158.67. The Nasdaq Composite Index .IXIC shed 18.57 points, or 0.75 percent, to 2,441.51.

For the week, the S&P 500 fell 4.7 percent, giving back almost two-thirds of its gains in October, the market's best month in 20 years. The Dow was off 4.8 percent for the week and the Nasdaq fell 5.1 percent.

Pressuring the Nasdaq, shares of Netflix (NFLX.O) fell 6.8 percent to $63.86.

Entertainment companies with major consumer product units ranked among the gainers. U.S.-listed shares of Sony Corp (SNE.N) rose 4.2 percent to $16.96. Disney (DIS.N) shares rose 0.3 percent to $33.51.

Trading volume was thin, as expected, with just 3 billion shares changing hands on the New York Stock Exchange, NYSE Amex and Nasdaq as the stock market closed at 1 p.m. The day after Thanksgiving is typically one of the lightest trading volume days of the year. (Reporting by Angela Moon; Editing by Jan Paschal)

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