Mexico - C. Agribusiness Mexico - Agribusiness
Overview
Mexico is a priority market for U.S. agricultural and food machinery and equipment. The agribusiness industry in Mexico has been in continuous and steady expansion, with the agribusiness landscape driven in part by strong consumer demand and a steadily growing middle class. Mexico is well-suited to large-scale agricultural production with its large land mass and a diverse range of climates. The highly-fragmented state of Mexican farming leaves significant room for consolidation and increasing yields.According to production estimates by Mexico’s Secretariat of Agriculture and Rural Development (Secretaría de Agricultura y Desarrollo Rural or SADER, previously Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación or SAGARPA), Mexico’s agricultural and fishing output is expected to grow by about 4.6 percent in 2019. This growth in a market, already replete with export opportunities for U.S.-made equipment, opens more doors for U.S. exporters.
SADER states that Mexico is the world’s 11th-largest agricultural and livestock producer, and the 3rd-largest in Latin America. Of the country’s total 60,8 million acres of arable land, 53,3 million acres are being planted, 51.4 million acres are being harvested, and only 1.5 million acres use irrigation technologies. A significant portion of the Mexican labor force is devoted to agriculture.
Mexican Employment by Sector
| Industrial Sector | Agribusiness | Industry | Services |
| Employment Percentage | 13.4 | 24.1 | 61.9 |
Agribusiness Statistics
Total U.S. exports of agricultural equipment and parts to Mexico totaled USD 1.6 billion in 2018. Of that total, USD 1.2 billion (73 percent) included agricultural equipment parts and components. U.S. exports of tractor and engine parts totaled USD 1.08 billion, or 67 percent. U.S. exports of agricultural equipment and components amounted to $98.7 million in 2018. The high proportion of parts in U.S. agricultural equipment exports to Mexico underscores the extensive agriculture equipment manufacturing operations maintained by major U.S. OEMs in the country.U.S. agricultural equipment exports rose 13.5 percent in 2018, compared with 2017. U.S. exports grew at a slightly slower—but still robust pace—in the first three months of 2019, by 12.4 percent over the same period in 2018. According to U.S. Census Bureau’s Foreign Trade Division, below are the largest exports of equipment to Mexico, by value. (Source: Trade Policy Information System TPIS Database, USHS EXPORTS, Revised Statistics for 1989-2019. TPIS is designed and operated by the Office of Trade and Economic Analysis for the U.S. Department of Commerce International Trade Administration.)
- Tractor parts, engines, and engine parts
- Mowers and power equipment
- Equipment for produce and high-value crops
- Equipment for grains, oilseeds, and other commodity crops
- Equipment for raising livestock
- Sprayers
- Low- and medium-HP tractors
Market Entry
The best way for U.S. suppliers of agribusiness equipment to enter the Mexican market is through regional distribution by representatives or distributors. The Mexican market is distinct from the U.S. market in that farms are smaller and therefore require different equipment than is customarily sold in the United States. U.S. fertilizer manufacturers should also be prepared to spend at least one growing season testing small plots in Mexico to prove the efficacy of their products.
Barriers
There are no major trade barriers in the agribusiness sector, although Mexico’s size and diversity are often underappreciated by U.S. exporters. As with any commercial endeavor, firms should consult with a competent legal counsel before entering into any legal agreement with a Mexican entity. The U.S. Commercial Service in Mexico offers services to conduct background checks on potential Mexican partners.
Leading Sub-Sectors
Agricultural equipment encompasses products with both agricultural and non-agricultural end-uses, such as commercial mowers and irrigation equipment. Major end-uses for agricultural equipment include cultivating crops (e.g., food, fiber, and fuel), raising livestock, and some immediate post-harvest processing (i.e., grading and sorting fresh produce).In food and beverage manufacturing, food processing and packaging machinery is employed to produce semi-finished ingredients and finished food and beverage products. Other end-uses include pharmaceutical manufacturing and the packaging of a wide range of other consumer packaged goods.
Commercial and industrial refrigeration equipment and commercial food service equipment are used in the distribution of fresh, frozen, and refrigerated food and beverage products, and in the delivery of these products to consumers at the final point-of-sale.
The agricultural and food machinery and equipment in the end-use descriptions mentioned above include the following products, as codified by the North American Industry Classification System (NAICS):
- Farm Machinery & Equipment Manufacturing (NAICS 333111)
- Food Product Machinery Manufacturing (NAICS 333294)
- Packaging Machinery Manufacturing (select codes within NAICS 333994)
- Commercial & Industrial Refrigeration Equipment (select codes within NAICS 333415)
- Commercial Food Service Equipment Manufacturing (NAICS 333319)
Opportunities
Modern agricultural machinery presents U.S. suppliers with strong opportunities, albeit more muted than in years past due to increased foreign competition and the extension of better credit terms from other foreign exporters. Approximately 70 percent of Mexican agriculture is harvested through manual labor, utilizing rudimentary tools. Since only 1.5 million acres of arable land use irrigation technologies, there is demand for them, so crops are not left dependent on seasonal rains or irrigation through mobile water pumps.In December 2018, Mexico’s President Lopez Obrador changed the name of the agriculture secretariat from SAGARPA to SADER and launched the “Bienestar para el Campo” program that intends to bring benefits to 2.8 million small farmers by providing subsidies of up to $80 per hectare.
Recommendations
U.S. firms in irrigation technology, commercial mowers, and farm dairy equipment have particularly strong sales opportunities in Mexico, where the agribusiness market continues to build capacity to meet growing domestic demand. Assembly plants producing new parts commonly require that their supplier base be as close to them as possible to reduce inventory volumes and to facilitate just-in-time and just-in-sequence deliveries. This trend opens a new field of opportunity to U.S. suppliers of production machinery and equipment, materials, pre-assembled components, molds and tooling, cutting tools, automation process equipment, raw materials, engineering and design, finished parts, and accessories sold through local representatives or distributors.We particularly highlight six areas of opportunity:
- Tractor Parts, Engines, and Engine Parts. These products currently dominate U.S. exports and support major U.S. and other OEM tractor assembly operations in Mexico. Major component exports (steering, mufflers, radiators, etc.) have been growing strongly.
- Sprayers. Mexico’s diverse agricultural economy offers many applications for sprayers. Mexico is the largest U.S. export market for agricultural sprayers.
- Mowers and Other Power Equipment. Steady growth has characterized this category over the last decade. This equipment will continue to find widespread application.
- Equipment for Produce and High-Value Crops. Drip and micro-irrigation equipment account for more than half of U.S. exports of irrigation products.
- Fertilizers. The Government of Mexico is seeking to boost fertilizer production, as local manufacturing is not sufficient to meet national demand. Of the 55 million planted acres of land nationwide, 66.8 percent are fertilized. Six states make up 43 percent of total fertilized land: Jalisco (8.3%), Sinaloa (8.1%), Veracruz (7.2%), Michoacán (6.8%), Chihuahua (6.8%), and Guanajuato (5.9%). According to independent projections, use of fertilizers has experienced significant growth over the past decade and will continue to grow in the coming years. Thus, we continue to predict strong market potential for affordable fertilizers in the Mexican agricultural sector.
- Pesticides. Pesticides have become more regulated in Mexico. Despite on-going efforts to reduce their use in most of Mexico’s harvested land, there is strong market demand for pesticides. These products need three registrations: Federal Commission for the Protection against Sanitary Risk (Comisión Federal para la Protección contra Riesgos Sanitarios or COFEPRIS), Secretariat of Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales or SEMARNAT), and SADER. The process for registering the products has to be conducted by a Mexican company and the steps are listed on the following link: https://www.gob.mx/cofepris/acciones-y-programas/registro-sanitario-de-plaguicidas-nuevos.
Main Competitors
Competition in Mexico stems mainly from European manufacturers who present more favorable financing options for sales. For a list of U.S.-based banks active in the Mexican market, particularly U.S. brokers and banks working with Export-Import Bank of the United States (EXIM) programs, please contact Commercial Specialist Sylvia Montaño (Sylvia.Montano@trade.gov).Mexican companies have financing options through the Trust Fund for Rural Development (Fideicomisos Instituidos en Relación con la Agricultura or FIRA), which was established by the Mexican Government in 1954. FIRA is a second-tier development bank that offers credit, loan guarantees, training, technical assistance, and technology-transfer support to the agriculture, livestock, fishing, forestry, and agribusiness sectors in Mexico.
Despite strong foreign competitors active in the Mexican market, U.S. suppliers account for 68.8 percent of this sector’s market share, representing by far the top supplier.
Market Segmentation of Agricultural Equipment Imports in Mexico
| Country | Market Share |
| United States | 69% |
| Italy | 5% |
| India | 4% |
| Germany | 3% |
| Spain | 3% |
| Other | 16% |
Web Resources
| Secretariat of Agriculture and Rural Development (SADER) | www.gob.mx/agricultura |
| Federal Commission for the Protection Against Sanitary Risks (COFEPRIS) | www.cofepris.gob.mx |
| Tax Administration Service (SAT) & Customs | www.sat.gob.mx |
| National Association of Fertilizer Traders (ANACOFER) | www.anacofer.com.mx |
| Mexican Association for Protected Horticulture (AMHPAC) | www.amhpac.org |
| National Union of Poultry Farmers | www.una.org.mx |
| International Egg Commission | www.internationalegg.com |
| Consejo Mexicano de la Carne | www.comecarne.org |
Events
- Expo Agroalimentaria Guanajuato (Agro Industrial), November 12–15, 2019, Irapuato, Guanajuato
- International Production & Processing Expo, January 28–30, 2020, Atlanta, Georgia
- FIGAP Mexico 2020, October 21–23, 2020, Guadalajara, Jalisco
Contacts
For more information on the agribusiness sector in Mexico, please contact:
Juan Herrera
Commercial Specialist
U.S. Commercial Service—Guadalajara
Tel: +52 (33) 3615-1140 ext. 103
Juan.Herrera@trade.gov