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GRAIN MARKET IN MEXICO

12 February 20218 min reading
grains imports in Mexico

Despite being a producer of corn, wheat, and rice, grains imports in Mexico continue steady growth trends, with expansion in the animal feed sector driving growth for feed grains rather than for food grains. Mexico’s growing livestock and poultry sector increasingly relies on imports of U.S.-grown corn.

With a population of almost 130 million, a rich cultural history and diversity, and abundant natural resources, Mexico is among the world's 15 largest economies in the world and the second-largest economy in Latin America. Aided by its proximity to the US market, the county has established itself as an important manufacturing and export powerhouse. Latin American country has been on a reform path for several years, privatizing, deregulating, and cutting back the role of government. It has generally enjoyed stable economic growth since the 1990s, despite weakening in 2019 and a COVID-linked recession in 2020. It is heavily dependent on the American economic situation.

Mexico is located in the southern portion of North America, bordering the southwestern United States from California to Texas. It has an area of 1,964,375 square kilometers—making it the third-largest nation in Latin America after Brazil and Argentina.

Mexico is the most populous Spanish speaking nation in the world. Seventy-nine percent of its inhabitants live in urban areas. Ten percent of the population is considered wealthy, and about 44 percent live in poverty. The remaining 46 percent of the population is considered middle class.

It experiences great climatic variation owing to its considerable north-south extension and variations in elevation. Mexico is well-suited to large-scale agricultural production with its large landmass and a diverse range of climates. It is the world’s 11th-largest agricultural and livestock producer, and the third-largest in Latin America. Mexico ranks among the world's largest producers of coffee, sugar, corn, oranges, avocados and limes. Cattle farming and fishing are also important activities in the food industry. 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. Although the COVID-19 pandemic created significant challenges, the agricultural sector has been one of the more privileged sectors in the country.

global corn productionThe agricultural sector's contribution to employment in Mexico has been on a downward trend in recent years. In 2020, the sector represented 12.44 percent of employment in the North American country, down from a share of over 13.9 percent in 2010. In contrast, the value added by the agricultural sector to Mexico's GDP has continuously increased in the last decade. According to the latest data from the World Bank, agriculture accounted for 3.38% of Mexico’s GDP in 2019.

It has a large and diversified agricultural sector. Agricultural practices range from traditional techniques, such as slash-and-burn cultivation of indigenous plants for family subsistence, to the use of advanced technology and marketing in large-scale, capital-intensive export agriculture. The staple food crops are maize, wheat, sorghum, barley, rice, beans, and potatoes. The principal cash crops are coffee, cotton, sugarcane, fruit, and vegetables. Other important agricultural goods include beef, poultry, dairy products, and wood products.

With President Andrés Manuel López Obrador taking office in December 2018, Mexico shifted its focus domestically, promoting programs and incentives to enhance both local small-scale production and consumption with a goal of becoming self-sufficient in core agricultural products. The agriculture programs focus primarily on providing support to marginalized and small farmers instead of larger commercial operations, with special emphasis given to small producers in the southern and central states of Mexico.

U.S. agricultural exports

Due to logistical advantages and existing business relationships, the United States is Mexico’s principal agricultural trading partner, receiving almost USD 29 billion of Mexico’s total agricultural exports. And Mexico is the top destination for U.S. agricultural exports of corn, dairy products, poultry meat and eggs, sugar and sweeteners, distillers dried grains, and rice. However, Mexico actively looks for alternate sources of supply. In recent years, competition emerged from the European Union, South America, and Asia.

Despite being a producer of corn, wheat, and rice, grains imports in Mexico continue steady growth trends, with expansion in the animal feed sector driving growth for feed grains rather than for food grains.

The agribusiness industry in the country has been in continuous and steady expansion, with the agribusiness landscape driven in part by strong consumer demand and a steadily growing middle class.

CORN

Corn is the major crop in Mexico. It is the largest crop in terms of production and consumption volume. It has for thousands of years been a symbol of Mexican pride, a staple of local and national cuisine. Corn accounts for a large share of the population’s caloric intake and is used to make tortillas and other corn-based foods—a practice that dates back thousands of years.

corn production

On average, Mexico produces 27 million tons of corn in a year, three percent of global corn production. Mexico is largely self-sufficient in white corn used to make the country’s staple tortillas but depends on imports of mostly GMO yellow corn from the United States for livestock feed.

Corn farms in Mexico are small-scale, averaging 3.6 hectares each, and government policies support small-scale agriculture with direct payments and other programs. Although white corn is grown in each of Mexico’s 32 States, 10 States account for 84 percent of production, and two States—Sinaloa and Jalisco—account for over one-third.

corn production

The United States Department of Agriculture (USDA) forecasts 27.8 million tons of corn production for the 2020/21 season. According to USDA’s latest Grain and Feed Update report released on 14th January, water availability for irrigation was approximately 27.1 percent below the level registered in 2019 at the national level, which is likely to limit corn production in this crop cycle.

BAN ON GENETICALLY MODIFIED CORN

Mexico is among the major corn importer countries. The average of corn imports is 17.7 million tons. Corn import is estimated at 17.5 million tons for 2020/2021 season. As the destination for over $3 billion annually in exports of U.S.-grown corn and corn-based products, Mexico is the largest foreign market for U.S. corn farmers in terms of export value and volume. Mexico’s growing livestock and poultry sector increasingly relies on imports of U.S.-grown corn. USDA’s long-term agricultural projections suggest that in the coming decade, consumption of Mexican grown corn will continue to increase due to expanding livestock production.

On December 31, Mexico published a final decree in its Mexican Federal Register that bans the use of both glyphosate and genetically modified (GM) corn for human consumption in the country. The use of the herbicide glyphosate and GM corn will be phased out by January 2024 at the latest.

WHEAT CONSUMPTION DECREASED

Along with corn, wheat is among the most important of Mexico's grains. Last season, it produced 3.2 million tons of wheat. USDA’s total wheat production estimates for the 2020/21 season were revised downward to 2.9 million tons. “Regarding the fall/winter crop cycle, private sources state that wheat planted area was approximately nine percent lower than the initial planting intentions. Farmers have recently shifted to planting more bread wheat than their typical durum-type wheat because of modifications to the Mexican government’s Guarantee Prices program, which grants small and medium growers a guaranteed price per ton of bread wheat produced. A shift from planting durum wheat (called “cristalino” in Mexico) to planting more bread wheat will lead to lower yields for farmers, as bread wheat has relatively lower yields than the cristalino variety,” the report said.

wheat production

USDA forecasts 7.2 million tons wheat consumption for the 2020/21 season. According to the Mexico’s National Chamber of the Wheat Milling Industry (CANIMOLT), wheat consumption decreased in 2020 because of the pandemic. As a result of pandemic restrictions, CANIMOLT reports the wheat industry has seen an average 30 percent fall in sales at traditional bakeries. While the sale of shelf-stable products (bread, pasta, cookies) has increased by 15 percent, this increase does not make up for the loss of sales to restaurants, hotels, and institutions. On the financial front, the industry reports that flour mills are having difficulty recovering losses from past-due clients and face “brutal” competition to win the few clients still able to pay. Mills have less purchasing power due to the depreciation of the peso, higher costs for financing, and an increase in costs from establishing sanitary and hygiene measures in their facilities.

SORGHUM EXPORTS TO CHINA

Mexico is the world’s fourth-largest producer of sorghum. USDA forecasts 4.6 million tons sorghum production in the 2020/21 season. Last year, Mexico and China signed phytosanitary protocols that will allow Mexico to export sorghum to China for human consumption. Mexico was previously able to export sorghum to China only for animal consumption. China began talks with Mexico to diversify its sorghum sources amid escalating China–U.S. trade tariffs in 2019. Mexican analysts believe Mexico will be able to capitalize on increasing Chinese demand because of Mexico's strong transportation networks and port infrastructure and may ultimately be able to compete in volume with Argentina and Australia, China’s other main sorghum suppliers. The private industry believes that sorghum export volumes to China could reach 50,000 and 100,000 MT by MY 2021/22. Some analysts predict Mexican white corn farmers may take advantage of the new export protocol to shift acreage to sorghum.

Mexico’s rice production

RICE

Rice is another important staple in Mexico. Mexicans consume around 8.5 kg of rice per capita per year. Although it produces many varieties of rice in many areas of the country, production is insufficient to meet the domestic demand. Mexico imports 60% of its rice consumption from other countries. It is the largest export market for U.S. rice, importing more than 20 percent of all U.S. rice exports. Mexico’s rice production is estimated at 281,000 mt in the 2020/21 season. And the import estimate for the same season is 800,000 mt.

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