Mexico's huge order of corn on Thursday came despite improved hopes for domestic supplies, with rains encouraging extra sowings, while livestock liquidation quells feed demand.

The US Department of Agriculture's Mexico City bureau said that the drought conditions, reflected in an increased estimate for corn imports in the year to September, had eased in many areas, enabling a sharp slowdown in buy-ins in 2012-13.

"The rainy season started on time in several important corn-producing areas," the bureau said in a report, flagging a 20% jump in sowings for the spring-summer crop.

The rainy season "has been producing enough volumes of rainfall to expect a good 2012 spring-summer harvest", the briefing said, quoting a Mexican government assessment.

'Contraction in livestock demand'

The bureau lifted its forecast for the corn crop to a four-year high of 21.5m tonnes.

And, while lifting its estimate for 2011-12 imports to a record 11.5m tonnes, it downgraded its forecast for buy-ins next season to 8.7m tonnes, 300,000 tonnes below the official USDA figure.

The forecast is even further below the International Grains Council estimate of 9.5m tonnes.

For sorghum, another feed grain, the bureau cut its forecast for 2012-13 imports by 500,000 tonnes to 2.5m tonnes also noting the impact of "anticipated contraction in livestock sector demand".

Besides the impact of a bird flu outbreak, which has prompted the slaughter of 6m head of poultry, Mexican cattle numbers are being curtailed by an exodus of animals for fattening on US feedlots, as drought-hit ranches opt to sell rather than carry the cost of fodder.

US cattle imports from Mexico were 29% higher in May than a year before, and up 31% in June, according to USDA data.

Huge sale

The report was released hours after the USDA unveiled an order by Mexico for 1.5m tonnes of the grain from the US, spread over 2012-13 and 2013-14, despite near-record prices.

The deal was the fourth-biggest one-day sale ever of US corn, and the biggest since the former Soviet Union purchases 3.7m tonnes shortly before its break-up, and was seen as a sign of concern at the supply prospects worsened by the Midwest drought.

"It could be a signal as to how concerned the Mexican government is about either our drought, their own or maybe both," Jon Michalscheck at Benson Quinn Commodities said.

Imports totalling 8.7m tonnes in 2012-13 would still secure Mexico second place among world buyers, behind Japan but ahead of South Korea, which is expected to take 8.0m tonnes.