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: 2020-08-17

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.

Mexico’s newly re-named Secretariat of Agriculture and Rural Development (Secretaría de Agricultura y Desarrollo Rural or SADER) originally expected 4.6 percent growth in 2019 agricultural and fisheries production. However, Mexico’s overall agricultural and fishing output decreased by 0.1 percent in 2020 (with agriculture down 0.4 percent, animal farming up 2.9 percent, and aquaculture increasing 3.0 percent).  Despite the decrease in total tonnage produced in 2019, the country had 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 it opens more 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 (2019)

Trade

Services

Industry

Agriculture

19.0%

18.01%

16.9%

11.5%

Source: Observatorio Laboral
Agribusiness Statistics

U.S. exports of agricultural equipment and parts to Mexico totaled USD 1.6 billion in 2019.  Exports of tractor parts, off-road diesel engines, and engine parts accounted for USD 1.1 billion (67.1 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 worth USD 117 million, and equipment for raising livestock USD 64.8 million. 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 1.5 percent in 2019, compared with 2018. U.S. exports fell sharply in the first four months of 2020, by 23.9 percent compared with the same period in 2019, as the economic impact of COVID-19 made itself felt in both the U.S. and Mexican economies. According to the U.S. Census Bureau’s Foreign Trade Division, below are the largest exports of equipment to Mexico, by value, for 2019. (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-horsepower 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 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.

In December 2018, Mexico’s President Lopez Obrador changed the name of the agriculture secretariat to SADER from Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación or SAGARPA 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 USD 80 per hectare. This program may help spur demand for some U.S. products.

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) demands more efficient use of land and resources, and hence the increase in demand 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 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 must be conducted by a Mexican company. Contact Commercial Service Mexico for detailed guidance on how to follow 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 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

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