Crop Protection Market Development in Central America
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SPECIAL REPORT
By Derek Oliphant
This article will outline the development of the crop protection market in the key Central American markets of Mexico, Guatemala, and Nicaragua, examining the current situation as well as the key future trends expected to influence market development over the coming years. Data availability for less commercially significant crop protection markets, such as Guatemala and Nicaragua, is more limited; the most comprehensive datasets available are included in this report. For larger markets such as Mexico, while more recent data is available, the datasets have been chosen to provide consistency and comparison with the smaller aforementioned markets.
Mexico
The geography of Mexico, being bordered by the Pacific and Atlantic oceans, provides a variety of topographical conditions, ranging from deserts and mountains in the north to more tropical conditions in the south.
In recent years, grain crop yields have been improving, particularly for small-holder farmers in the central and south regions. This has largely been driven by assistance from research organizations such as the International Centre for Improvement of Corn and Wheat (CIMMYT) in efforts to meet increasing domestic demand. Much of the grain crops produced in the county are destined for use in animal feed, a sector that has been expanding rapidly in recent years.
Dry conditions are a frequent issue for Mexican agriculture, particularly in the north of the country. More than 90% of the total crop area is rain-fed, so any significant drop in rainfall levels can impact a large proportion of the overall area.
The Mexican crop protection market declined by 1.4% in 2020, amounting to $890 million. Between 2015 and 2020, the crop protection market in Mexico was slightly more positive despite the impacts of dry conditions in many years, notably 2016, as well as issues over credit availability. However, the country has remained relatively economically stable in comparison to many neighboring Central American countries, benefiting from its trade relationships, particularly with the United States.
Maize is the most significant crop in Mexico, with the country reputed to be the first to domesticate its wild ancestor, teosinte, around 10,000 years ago. As a result, the country has blocked the cultivation of genetically modified (GM) varieties of the crop in an effort to maintain the genetic base. The country generally produces enough maize to satisfy domestic food, seed, and industrial consumption; however, imports, primarily from the U.S., are normally required to satisfy feed use requirements. Insecticides are the most significant sector in the maize crop protection market, with the main products being chlorpyrifos and fipronil, followed by lambda-cyhalothrin and thiamethoxam. Whilst growers in Mexico have adopted integrated pest management (IPM) programs for many crops, this form of insect management is not common in maize crops. The most significant insect pest in maize is Fall Armyworm.
Agriculture in Mexico is heavily reliant on export markets, with the key export crops being fruits, nuts, vegetables, and coffee. Although maize is of significant importance in the country, much of this is for domestic consumption. The country has a heavy reliance on grain imports in order to satisfy internal demand, with much of this being derived from the U.S., a key trading partner. Mexico is a member of a number of trade agreements that have boosted the country’s export capabilities and hence economy in recent years.
The crop protection market in the country is dominated by the leading multi-nationals, as outlined below:
Mexico Outlook
The agriculture sector in Mexico in recent years has advanced at a rate ahead of the country overall, with growth in agricultural gross domestic profit (GDP) now outstripping total GDP. Between 2015 and 2020, overall GDP declined, but GDP of agriculture and forestry has been increasing. The country has placed a focus in recent years in creating and maintaining a position as a key exporter of agricultural produce, primarily fruit and vegetables (F&V), with this resulting in a shift of focus in terms of crop protection spend, away from grain crops and towards the high value F&V sector.
The economy in Mexico is amongst the largest in the Latin America region, behind only Brazil, and more than 90% of overall trade is through free trade agreements. These agreements are integral to the country’s agriculture sector, although the drawback of this highly industrialized economy is that agriculture in the country is affected by low cost imports from its trading partners, who generally place more of a focus on production of row crops.
Although maize is the most significant crop cultivated in the country in terms of area, it is mainly grown as a subsistence crop for domestic consumption. As a result, the area is not generally subject to fluctuations in maize prices. However, imports from the U.S. are significant, although in many cases this is utilised for animal feed. GM technology has not been introduced, with authorities reluctant to alter the genetic base of domestic maize. Due to the cultural significance of the crop in the country, it is unlikely that GM maize varieties will be introduced in the near future. As a result, the prospects for maize herbicide sales are relatively buoyant compared to other South American countries where GM technology has been readily adopted.
There have been a number of measures and government programs put in place to incentivize grain crop cultivation, however these remain in their initial phase and it is not yet clear how this will affect planted areas and subsequently the crop protection market. Grain crop cultivation is generally undertaken on a less intensive basis than most other countries in the Americas, partly due to the greater focused placed on fruit and vegetable production.
The removal of glyphosate from the market is expected to result in a shift in weed control practices. This is expected to result in wider use of selective herbicides, potentially boosting the overall value of the herbicides market in the country.
Despite the potential requirement to boost production for domestic demand, the country is also increasingly looking to expand export opportunities, with exports of arable produce to Middle Eastern countries, including the United Arab Emirates, Kuwait, Qatar, and Saudi Arabia, rising significantly in the last decade. China is also becoming a key destination for Mexican exports, including for sorghum, the main cereal crop in the country. Generally, exports are more focused on fruit and vegetable crops and livestock, with grains often diverted for use in animal feed.
In efforts to boost crop production and meet rising domestic and overseas demand, the country has been investing in improving its irrigation infrastructure in recent years, including through increased technification. Mexico ranks sixth in the world in terms of irrigated land for agriculture, with more than 60% of the value of national agricultural production requiring irrigation, including maize, wheat, and sorghum.
Mexico as a country has significant growth potential, with the middle class expanding rapidly. Over the next five years, this middle class is expected to drive increased demand for produce, including fibres for clothing production, and maize, cereals and oilseeds for use in food production and for animal feed.
The increasing focus on fruit and vegetable production has benefited the crop protection market in recent years, with this sector expected to continue to expand in the coming years. The high number of biological crop protection products that are being introduced is also expected to drive growth, with this sector in line for rapid expansion, ahead of the growth rates expected for conventional crop protection products.
Guatemala
The Guatemalan agrochemical market enjoyed sustained growth from 2003 through 2014 but has since stabilized. Agriculture in Guatemala has shifted in emphasis toward plantation crops grown for export, and the slowdown in the growth of the agrochemical market corresponds with a period of depressed prices for these commodities. Unfortunately, that price weakness continued in 2019.
The country’s tropical climate results in Guatemala being consistently listed among the world’s 10 most vulnerable nations to the effects of climate change. Increasingly erratic climate patterns have affected crop harvests, and 2018 was noted again as an El Niño-related drought year. However, in 2019 the El Niño cycle was broken, hence the prospects for improvement in crop production and agrochemical usage exist.
There is limited basic manufacture of active ingredients in Guatemala, notably by DuWest and Foragro. However, there are significant formulation capabilities, notably by Quilubrisa (a subsidiary of Disagro), Agrocentro/Cindeco, and Inquisa, amongst others.
There are many importers and distributors of agrochemicals in Guatemala, including GBM (based in Mexico and now part of Arysta/UPL), Hendrix, Tikal Agros, Agrofortress, Anasac, La Quinsa, and Cosmocel. In addition, there are a number of chemical companies, formulators, and trading houses based in Central America that service the market.
The market is led by the major multinational and local companies, whilst imports are led by Chinese and Indian companies. The leading exporters from Guatemala are Bayer, Rainbow, UPL, Anona Trading, Trilex, Quatroagro, Febres Cordero, and FMC; the local companies are mostly export managers acting on behalf of other companies.
Guatemala Outlook
Guatemala is still a country in the earlier stages of development where agriculture accounts for a major share of GDP (13.3%) and export income (32%). Agriculture is developing on two fronts: Quality fruit and vegetable production, mostly for export, and plantation crops — not so much for staple crop production of maize, beans, and rice. The country still has low labor costs that allow it to be price competitive in export markets. Average expenditure on agrochemicals on a $/ha basis is relatively high, probably due to the large share of the markets attributable to fruit and vegetables.
Key trends in production are the increase in the planting of oil palm and melons, but a fall in rubber and sorghum. The maize area has been essentially static, although there has been a limited improvement for dry beans and the small area of rice.
Compared with other developing countries, Guatemala has a stronger agrochemical active ingredient manufacturing infrastructure, but a significant formulation capability, indicated by 63.6% of imports being of technical material. The major source of product is China, but with more advanced products coming from the European Union and U.S., Guatemala is a member of the World Intellectual Property Organisation. Industrial property law is overseen by the Ministry of Economic Affairs Registry of Intellectual Property.
Guatemala is considered one of the highest risk countries in the world from geological activity and climate change, with drought affecting agrochemical market performance in 2018. Cyclones, volcanic activity, and natural disasters are a threat. Poverty and the impact of rising plantation crop production have affected subsistence farmers, with migration from the country a significant issue. However, the continuing increase in the value of crops for export should continue to drive growth of the agrochemical market, particularly if weather conditions are favorable.
Nicaragua
The Nicaraguan agrochemical market enjoyed almost consistent growth between 2004 and 2017. However, the market suffered a decline in 2018, chiefly due to dryness associated with an El Niño event (the warm phase of the ENSO climate pattern). This dryness was still an issue in 2019, primarily affecting rice Primera harvest in August. Reduced rainfall impacted crop production in the Chinandega area, in a region known as the Dry Corridor that extends along the Pacific coast of Central America, through Guatemala, El Salvador, Honduras, and Nicaragua.
A further issue has been social and political problems and reform of taxation in 2018, which has negatively impacted agriculture. Tax increases have reportedly resulted in a 30% increase in the price of agrochemicals. This resulted in a significant reduction in the importation of agrochemicals in 2019.
There is limited basic manufacture/formulation of active ingredients in Nicaragua. However, there are many importers and distributors. Initially, local formulation focused on biologicals and insecticides, predominantly pyrethroids and organophosphates. More recently, herbicide and fungicide formulation has been increasing.
The most significant local distribution companies include Abrasa, AgriCentre, Agroinsumos del Tropica, Agrovvet Nicarao, Agro Alfa, Ramac, Cisa Agro, Servicio Agrícola Gurdián, Insecticidas San Cristóbal, Bellrod, BioQuim, Cindeco, DuWest, Foragro, Formunica, HanseAndina, Leiman Invest, and Profiysa. The major multinational companies in the country include Bayer, BASF, FMC, Syngenta, Helm, and Jebagro.
Agrochemical companies in Nicaragua are represented by the Nicaraguan Association of Formulators and Distributors of Agrochemicals (ANIFODA).
The market is led by products imported from China, Guatemala, the U.S., and Costa Rica. Products from Guatemala and Costa Rica may well be Chinese or Indian derived active ingredients formulated and re-exported from those countries.
Nicaragua Outlook
Agriculture remains a key part of the Nicaraguan economy, employing 30.6% of the workforce despite accounting for only 15.8% of GDP. Agriculture is divided between crop production for domestic consumption and commodities for export. The country enjoys a positive balance in trade in arable products, which account for 18.8% of all exports from the country. Agrochemical usage on a per hectare basis is high compared to other developing markets, although similar to that in the other Latin American countries of Bolivia, Guatemala, and Ecuador.
Nicaragua has a climate conducive to the production of many different crops, ranging from temperate highlands to tropical swampland. However, concerns regarding climate change are an issue, with dryness affecting both agriculture and the agrochemical market in 2018 and 2019. As in many developing markets, there is a dichotomy between crops to feed a growing but impoverished local population and crops for export to support the economy.
Nicaragua has only limited agrochemical formulation capability, indicated by only 1% of imports from the U.S., China, and India being of technical material. The most significant product sources are China, the U.S., the EU, and India. A substantial amount of product is supplied through companies and formulators based in neighboring Costa Rica and Guatemala. Industrial property law (Law on Patents, Utility Models, and Industrial Designs, Law No. 354) is overseen by the Registro de la Propiedad Intelectual (RPI). Patents and trademarks are granted on a first-to-file basis; patents have a 20-year term. Trademarks are registered for 10 years but can be renewed indefinitely. Illicit trade and copy products are a long-term issue in Nicaragua. The country is a member of the World Intellectual Property Organisation.
The Nicaraguan agrochemical market enjoyed significant and steady growth until the weather-impacted years of 2018 and 2019. The country generally has ample water supply, although distribution is uneven, with heavy rain normal in the Caribbean lowlands. Inland areas are, however, much drier. Water supply management, the responsibility of the Nicaraguan Institute of water, is an issue, and only 10% of arable land is irrigated. Improved irrigation could result in crop yield enhancement. If these issues can be overcome, then continuing growth of the agrochemical market in Nicaragua can be expected. •
By Ingo Bartussek – stock.adobe