Mexico’s production agriculture comprises two markedly different segments. Most output originates at semi-commercial and subsistence farms on small plots of land, principally in the south, with the rest grown on a small number of large, modern operations, mainly in the center and north.
Mexico is the third largest producer of coarse grains in the Organization for Economic Cooperation and Development, behind the U.S. and E.U. Mexico also has the OECD’s fourth largest beef herd.
Since the launch of the North American Free Trade Agreement in 1994, Mexican agricultural policy has undergone structural change to promote freer trade and greater productivity. Still, agriculture is the least productive sector in the country’s economy, with its problems primarily based on lack of credit to mechanize and update farm equipment and practices.
Mexico’s government has tried to improve the sector through the "Alliance for the Countryside" (Alianza Para el Campo) scheme. The program is intended to introduce modern equipment and technology, make efficient use of soil and water resources and advance protection and conservation issues.
The program has met with some success, as the agriculture sector’s productivity, as measured in output per worker, has grown at twice the rate of that of the overall economy. Nonetheless, agricultural productivity gains in other countries have outstripped those in Mexico, hindering Mexican competitiveness.
Earlier this year, the Mexican government published a study of NAFTA’s effects on the agricultural sector. In general, the trade pact was expected to benefit Mexican fruit and legume producers and domestic consumers, but harm net grain and oilseed sellers. The reality has largely fallen within these expectations, the study concluded.
The study noted the productivity gap between Mexico and its competitors and trade partners and said raising the sector's productivity was of key importance to the entire economy. The study concluded that Mexico should develop a rural policy with a long-term horizon, aimed at increasing the sector's share of GDP while ensuring greater efficiency, productivity and international competitiveness.
Specifically, the study recommended action in several areas, including increasing the level of investment in agriculture, which has been shorted for decades. For example, in 2001, the agriculture sector accounted for 5.4% of GDP, but received less than 1% of total investment.
The study’s other recommendations include providing individualized support to targeted producers based on specific needs; enhancing and coordinating government support programs to avoid overlapping benefits; developing a long-term support program with stable financing to provide economic certainty; and fully applying defense mechanisms allowed for agriculture under NAFTA.
WHEAT AND FLOUR MILLING
Mexico has produced an annual average of just under 3 million tonnes of wheat in the past five years, down from an annual average of 3.3 million in the previous five-year period. Planted area also has declined in recent years, primarily based on severe water shortages for irrigation, particularly in Sonora and Sinaloa states.
At the same time production has dropped, imports have increased to about 3.4 million tonnes annually from 2.2 million in the same two five-year periods to meet domestic consumption. Although wheat use decreased during the economic crisis in the mid-1990s, consumption steadily if slowly has been on the rise since, currently averaging about 5.9 million tonnes a year.
The United States and Canada provide virtually all of Mexico’s wheat, as import duties dropped to zero under NAFTA in 2003. In 2003-04, the U.S. shipped about 2.8 million tonnes of wheat, with Canada shipping about 691,000.
In durum, Mexico has become a net exporter in recent years, primarily because of high internal transport costs and several years of high crop quality. According to International Grains Council data, Mexico in 2001-02 and 2002-03 was the world’s fifth-largest durum exporter, at 495,000 and 466,000 tonnes, respectively. North Africa and western Europe are primary destinations.
While durum is exported when quality is high, Mexican livestock producers use domestic durum as a major feed ingredient in hog rations when low quality supplies are in surplus.
Mexico’s wheat flour milling industry ranges from modern, efficient industrial facilities operated by major multi-mill corporations to small family operations.
The industry is consolidating, but not as quickly as in some other countries; in 2003, Mexico had 116 wheat flour mills, according to World Grain’s sister publication, the Grain & Milling Annual, down from 130 mills 10 years earlier. The greatest concentration of mills is found in the heavily populated Distrito Federal and Estado de Mexico states.
Pastas have become increasingly popular among Mexican consumers, and over the past few years, annual per capita pasta consumption increased to reach 1.8 kg in 2002. Consumers have moved to pasta products for their flavor, easy preparation and cost.
The U.S. is the main supplier of these types of pastas to Mexico with a market share of 46.4%, followed by Italy with a share of 36.8%. The remaining 17% is divided between France, Guatemala, Spain, China, Chile, Germany and Canada.
COARSE GRAINS AND FEED
Mexico’s largest grain crop is maize, averaging about 19.8 million tonnes a year over the past five years. In 2003-04, the maize crop reached a record 21 million tonnes, although 2004-05 output is expected to slip some to 20.3 million.
Only about 39% of the 25 million tonnes consumed annually is for feed, as maize, particularly white maize, is the primary food staple. Per capita food use is about 66 kg per year in urban areas.
Mexico’s annual maize imports total about 5.5 million tonnes, on average, with the U.S. supplying around 90% of Mexico’s maize import needs. The poultry industry prefers to import yellow maize for feed, based on nutritional values in rations and the resulting color of the poultry skin.
The Mexican feed millers’ association expects that feed consumption of maize will increase approximately 3% in 2004-05, based on strong demand from the livestock and poultry industries. Total maize feed consumption is forecast to reach 10.8 million tonnes this marketing year.
Other important end-users of yellow maize include the swine and wet-milling industries. The swine sector is the second largest coarse grain consumer at almost 4.4 million tonnes.
Given that Mexico produces a large maize crop, the issue of imports can be politically sensitive. Under NAFTA, Mexico is allowed to impose a tariff rate quota on maize, and the TRQ allocation process has been subject at times to delays if not outright denial.
For that reason, some feed importers have been increasing their purchases of cracked maize. This item falls into a separate category and is not subject to the NAFTA TRQ or to the domestic allocation process.
According to Mexican government estimates, Mexico imported 2.6 million tonnes of cracked maize during the first 11 months of 2003, 42% higher than the same period a year earlier. Private sources foresee this trend continuing, although some big feed importers have complained about poor quality and sometimes unappealing prices.
Controversy surrounding genetically modified maize and biotechnology generally has waxed and waned in the past year, as anti-GMO groups have lobbied the government, unsuccessfully so far, to include trade restrictions in a national biosafety bill. Observers indicate that Mexican consumers appear to be unaware or disinterested in the GMO debate and its potential trade implications.
This year, the Mexican government decided to suspend the moratorium, in place since 1998, on planting transgenic maize for experimental purposes. But the moratorium on GM maize for commercial purposes still remains in effect.