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: 2021-09-02

Overview

Mexico is a priority market for U.S. agricultural and food-related machinery and equipment. Prior to the emergence of the COVID-19 pandemic, the agribusiness industry in Mexico had been in continuous and steady expansion, with growth of the agribusiness landscape driven in part by strong consumer demand and a steadily growing middle class. The industry is expected to rebound quickly in 2021, and Mexico remains 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.

As was the case in many countries around the world, the Mexican economy suffered a significant overall contraction in 2020. According to the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía or INEGI), while the primary sector did in fact grow by 1.9 percent, the agribusiness industry experienced a minor decline of 0.4 percent largely as a result of the underperformance of the beverage industry (closing of production for all major breweries on the third quarter of 2020). Mexico’s Secretariat of Agriculture and Rural Development (Secretaría de Agricultura y Desarrollo Rural or SADER) originally forecast 2.5 percent growth in overall agricultural and fisheries production. However, real numbers show a decline of 1.9 percent in 2020, which does hide positive growth in some important subsectors such as animal growth (2.4 percent) and fisheries (1.9 percent). Despite the decrease in total tonnage of agricultural goods produced in Mexico in 2020, the country continued to experience an increase in terms of revenue per ton, resulting from investment in higher value-added crops (such as avocados, berries, and tomatoes). These changes in agricultural practices represent export opportunities for U.S.-made equipment and technology, and continues to open additional doors for U.S. exporters.

SADER states that Mexico is the world’s 11th-largest agricultural and livestock producer, and the third largest in Latin America. Of the country’s total 60.8 million acres of arable land, 53.3 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:

Mexican Employment by Sector (2020)

Trade

Services

Industry

Agriculture

13.0%

17.6%

17.0%

11.4%

Source: Observatorio Laboral

Agribusiness Statistics

U.S. exports of agricultural equipment and parts to Mexico totaled USD 1.3 billion in 2020, down 17.5 percent from 2019 largely as a result of the COVID-19 pandemic, a perceived increase in political risk, and a reduction in federal government programs supporting Mexico’s agribusiness industry. Exports of tractor parts, off-road diesel engines, and engine parts accounted for USD 825 million (64.1 percent) of the total. 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 178 million, and equipment for raising livestock at USD 56.9 million. No-till planters and transplanters were two categories of equipment exports that demonstrated high growth in 2020. 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 2020 (Source: Trade Policy Information System TPIS Database, USHS EXPORTS, Revised Statistics for 1989–2020).

  • Tractor parts, engines, and engine parts
  • Suspension shock absorbers for tractors for agricultural use
  • 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

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.

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)

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 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 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.
  • 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 is seeking to boost fertilizer production, as local manufacturing is not sufficient to meet national demand. 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, 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. 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.

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.

Market Segmentation of Agricultural Equipment Imports in Mexico

Country

Market Share

United States

69%

Italy

5%

India

4%

Germany

3%

Spain

3%

Other

16%

 

Resources

  • Secretariat of Agriculture and Rural Development (SADER)
  • Federal Commission for the Protection Against Sanitary Risks
  • 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

Expo Agroalimentaria Guanajuato, Irapuato, Guanajuato
International Production & Processing Expo, Atlanta, Georgia
FIGAP Mexico 2022, Guadalajara, Jalisco


Contacts

Juan Herrera

Commercial Specialist

U.S. Commercial Service—Guadalajara

Tel: +52 (33) 3615-1140 ext. 103

Juan.Herrera@trade.gov