Long-Term Mexican Outlook Shows Promise for Crop Inputs Industry

The Mexican economy grew just 0.4% last year, according to the International Monetary Fund. That number is expected to reach 1.3% in 2020. While not stellar growth, there is good news. Middle- and high-income households in Mexico are expected to grow from 30% of all households in 2018 to over 40% by 2025, according to a report from the USDA Foreign Agricultural Service.

“This is good news for U.S. exporters since consumer demand patterns shift toward a greater diversity of higher-quality meats, produce, and processed foods when incomes rise. This trend will provide new opportunities for U.S. farmers, ranchers, and food processors to expand their consumer base in Mexico and increase sales,” the report said.

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Chart 1 top 20 crop protection companies in MexicoMexico’s population is the world’s 11th largest at nearly 126 million. Mexico’s economy is the world’s 11th largest, with a gross domestic product of nearly U.S. $2.5 trillion in 2018 on a purchasing power parity basis.

While the overall economic situation is expected to improve, the government is also working to support agriculture, which in turn can help the crop inputs industry.

“The Mexican government’s attitude toward agriculture is primordial, especially for very small growers that are receiving their economic and social supports,” according to GreenCorp. “Agricultural produce growers and exports are the second-most important generators of gross domestic product in Mexico.”

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Mexican President Andres Manuel Lopez Obrador is pushing domestic development by focusing on the rural poor. A new governmental program, Sembrando Vida (Sowing Life), was introduced last year and involves the planting of 1 million hectares of wood-trees and fruit crops, around the country. While the program focuses on poor growers, it does promote the use of biological and sustainable inputs.

Chart 2 Top 10 Biological Products in MexicoRegulatory Issues

The regulatory process in Mexico is easy to be submitted but very slow for biopesticides. It can take three to four years to finalize the process. On the other hand, compared with the U.S., EU, and Brazil, the process is considerably cheaper. For example, registering a botanical pesticide can cost between $20,000 to $30,000 to get the RSCO (Consultation of Sanitary Registries of Pesticides).

There are separate tracks for biological and traditional crop inputs and for each category.

Distribution

The distribution process varies depending on where the products are coming from. The multinationals deliver their products through wholesalers, who in turn provide products for retailers, who sell to the end user. For domestic and medium-sized manufacturers, the process is slightly more streamlined. Those manufacturers send products to distributors, who sell to the end user. Regional manufacturers typically use retailers who sell to the end user.

Chart 3 Top Crops in Mexico

Mexico in 2019 became the second-largest agricultural partner of the U.S. agricultural and related product exports from the U.S. to Mexico totaled $19 billion, with overall bilateral agricultural trade of $45 billion. The U.S. remains Mexico’s principal agricultural trading partner, receiving almost $26 billion of Mexico’s total agricultural exports. Overall U.S. market share in Mexico has remained high, as geographic advantages continue to make the U.S. the best supplier for most major agricultural goods.

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