Mexico - Country Commercial Guide
Agribusiness

This is a best prospect sector for this market, includes a market overview and trade data for agricultural sector and agribusiness.

Last published date: 2022-09-23

Overview

Mexico is a priority market for U.S. agricultural and food-related machinery and equipment. Despite broader contractions in the Mexican economy, agribusiness production responded positively to COVID-19 related demands for food products, growing 4.5 percent 2021 to 290.7 million tons (21.7 million hectares harvested, 1.9 million tons of fisheries related products, and 7.4 million tons of meat). As such,the industry in Mexico remains poised to continue expanding, driven in part by strong consumer demand and a growing middle class. Mexico remains well-suited to large-scale agricultural production with its large land mass and a diverse range of climates. Mexico’s Secretariat of Agriculture and Rural Development (Secretaría de Agricultura y Desarrollo Rural or SADER) states that Mexico is the world’s 11th-largest agriculture producer, 12th largest livestock producer, 17th largest fisheries producer, and 12th largest food producer in the world. Overall, the country is the third largest agricultural producer in Latin America. Of the country’s total 60.8 million acres of arable land, 53.6 million acres are planted, with only 1.5 million acres using irrigation technologies (the latest data is from 2017). A significant portion of the Mexican labor force is devoted to agriculture, as can be seen in this chart:

Table: Mexican Employment by Sector (2020)

Trade

Services

Industry

Agriculture

13.0%

17.6%

17.0%

11.4%

Source: Observatorio Laboral

The highly fragmented state of Mexican farming leaves significant room for consolidation, technological adoption, and conversion to higher value-added crops that require more sophisticated technologies to control water usage. The growth of the avocado, berry, and tomato industries exemplify the trend of searching for an increase in revenue per ton produced and represent possible export opportunities for U.S.-made equipment and technologies poised to support Mexican producers. Likewise, given the global increase in agricultural chemical prices, Mexican agribusiness contacts have shown increasing interest in systems to enhance fertilizer utilization to achieve higher yields. Animal production remains robust, particularly in the dairy, beef, and poultry sectors, increasing 2.2 percent when compared with 2020 levels.

U.S. Exports of Agricultural Equipment

U.S. exports of agricultural equipment and parts to Mexico totaled USD 1.5 billion in 2021, up 16.4 percent from 2020. Exports of tractor parts, off-road diesel engines, and engine parts accounted for USD 996.4 million – a full two thirds -(66.4 percent) of the total. Equipment for cultivating and harvesting fruits, vegetables, and other high-value crops were the largest and fastest growing category of whole goods exports to Mexico, worth USD 190.4 million in 2021 and up 5.4 percent from 2017.

Mowers and other power equipment exports were worth USD 108.6 million. Exports of equipment for cultivating grain, oilseeds, and other commodity crops (including high-horsepower tractors, combine harvesters and center-pivot irrigation equipment) were valued at USD 100.9 million, and equipment for raising livestock at USD 62.7 million.  The high proportion of U.S. made parts in agricultural equipment used and produced in Mexico underscores the extensive agriculture equipment manufacturing operations maintained by major U.S. original equipment manufacturers (OEMs) in the country.

According to the U.S. Census Bureau’s Foreign Trade Division, below are the largest export categories of equipment to Mexico, by value, for 2021 (Source: Trade Policy Information System TPIS Database, USHS EXPORTS, Revised Statistics for 1989–2021).

  • Tractor parts, engines, and engine parts
  • Irrigation equipment
  • Parts for 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-horsepower tractors

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 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)

Market Entry

The best way for U.S. suppliers of agribusiness equipment to enter the Mexican market is through a regional distribution arrangement with 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.

Mexico’s Government continues to actively amend or threaten to take action to limit the use of certain herbicides, pesticides, and genetical modified organisms. This has impacted the willingness of Mexican buyers to invest in those products and any accompanying equipment required to apply them to crops. U.S. exporters should continue to monitor these developments closely and contact the U.S. Commercial Service in Mexico for further information.

As with any commercial endeavor, firms should consult with 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.

Main Competitors

Competition in Mexico stems mainly from European manufacturers who are typically able to 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 the Export-Import Bank of the United States (EXIM), 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 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 69 percent of this sector’s market share, representing by far the top supplier.

 

Opportunities

Demand for 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 involves irrigation technologies, there is modest demand for such products from producers who seek to ensure their crops are not left dependent on seasonal rains or irrigation through mobile water pumps.

Recommendations

U.S. firms in irrigation technology, commercial mowers, and dairy farm 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 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 rapidly.
Irrigation Systems. Mexico’s diverse agricultural economy offers many applications for irrigation systems. Mexico is currently the largest U.S. export market for agricultural sprayers. Drip and micro-irrigation equipment account for more than half of U.S. exports of irrigation products.
Mowers and Other Power Equipment. Steady growth has characterized this category over the last decade. This equipment will continue to find widespread application.
Precision agriculture, and equipment integrating IT and big data for produce and high-value crops. Mexico’s specialization in higher value-added crops, due to the increasing demand from their major trading partners (the United States, Canada, and Europe), requires more efficient use of land and resources, and hence the increase in interest for sensors, big data, drones, robots, automated picking and packing systems, blockchain, and other modern technologies.
Fertilizers. The Government of Mexico has been exploring ways to boost national fertilizer production, as local manufacturing is not sufficient to meet national demand and global supply shocks continue to reverberate throughout the industry. Of the 53.3 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, the use of fertilizers has experienced significant growth over the past decade and is expected to continue to grow in the coming years.


That said, recent shortages of key inputs, such as urea, and higher natural gas prices have affected fertilizer supply, which is having a tremendous impact on the availability and use of these products in Mexico. As just one example, the price per ton of urea in 2020 was USD 110.00. By December 2021, the price per ton had increased to USD 1,100.00. All international companies trying to promote soil or plant nutrition should consider the resources (human and economic) that will be required to run trials, implement protocols, and achieve certifications by the Mexican authorities, which may be cumbersome and could last longer than a year.

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 these products. Pesticides require three registrations in Mexico: 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 must be conducted by a Mexican company. U.S companies should be aware that the approval process for these products has experienced significant delays. Interested firms should contact the U.S. Commercial Service in Mexico for detailed guidance on this process.

Resources

Secretariat of Agriculture and Rural Development (SADER)                 

Federal Commission for the Protection Against Sanitary Risks (COFEPRIS)         

Tax Administration Service (SAT) & Customs                                             

National Association of Fertilizer Traders (ANACOFER)                         

Mexican Association for Protected Horticulture (AMHPAC)                 

National Union of Poultry Farmers                                                                  

International Egg Commission                                                                          

Consejo Mexicano de la Carne                                                                             

Events

FIGAP Mexico 2022, October 19-21, 2022, Guadalajara, Jalisco
Expo Agroalimentaria Guanajuato, November 8-11, 2022, Irapuato, Guanajuato
International Production & Processing Expo, January 24–26, 2023, Atlanta, Georgia
World Ag Expo, February 14-16, 2023, Tulare, California
Agrobaja, March 2-4, 2023, Mexicali, Baja California

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