Agriculture is an important piece of Mexico’s economic portfolio, accounting for more than 3.5% of GDP and nearly 13.5% of the labor force. According to the Food and Agricultural Organization of the United Nations (FAO), Mexico has almost 2.7 million hectares set aside for permanent crop production and almost 23 million ha of arable land. The US is Mexico’s most important trade partner in terms of agriculture, and nearly 80% of Mexico’s exports are destined for the US, according to the US Department of Agriculture (USDA). In 2015 alone, Mexico exported more than USD21.9 billion worth of goods to the US. With the establishment of NAFTA, agricultural trade between Mexico and the US has exploded, and Mexico’s agricultural exports have grown by double digits every year, according to the USDA.
Grains and Corn
Mexico is a large grain producer, but its production capacity is below national demand, making it a net importer of grain, much of which comes from the US. According to the International Grains Council (IGC), Mexico’s grain production for 2016-2017 will reach 35.1 millions tons, up nearly 1 million tons from the previous year’s figures. Wheat production is forecast to reach around 4 million tons, up by more than 5% from the previous year, and corn production is set to hit 23.5 million tons, or slightly lower than the previous year. Additionally, sorghum production is forecast to hit 6.8 million tons, growing by nearly 20% over 2015-2016, and durum wheat production is expected to surpass 2.5 million tons.
A number of factors have the potential to undercut agricultural productivity in Mexico in the coming year. The uncertainty surrounding the forthcoming El Niño weather pattern has caused forecasters to lower their expectations for a number of crops. According to the USDA, the large variability in technological advancement across the nation’s agricultural sector also has a major impact on yields in Mexico, with those in advanced agricultural areas like Sinaloa achieving figures comparable to those in the US. Small-scale growers, however, still utilize outdated and sometimes inefficient techniques. A lack of training, knowledge, and poor organization often have a negative impact on productivity as well.
According to the National Institute of Statistics and Geography (INEGI), maize is the single-most important staple crop for Mexicans, and it is most often consumed in the form of tortillas or corn. Corn in these forms represents nearly 8.3% of total food expenditure for the average Mexican household. As domestic production increases, prices for corn may fall in the short term, but in the long term Mexican farmers will need to focus on and leverage economies of scale to prop up yields.
According to the latest Global Agricultural Information Network (GAIN) report from the USDA Foreign Agriculture Service, Mexican cattle numbers are expected to increase in the coming year. Government programs aimed at creating financial incentives for herd repopulation, programs aimed at improving the genetic composition of the domestic Mexican herds, and stable grain prices are all expected to have serious positive impacts on the strength and size of the cattle industry in Mexico. Coupled with this rise in cattle production will be a rise in exports. According to the USDA, Mexican cattle herds are expected to reach 7.1 million in 2017. Exports to other markets, particularly the US, remain strong, but cattle recovery in foreign markets has the potential to slow growth. In order to improve herd genetics, Mexican livestock firms are expected to continue importing American and Australian cattle.
Production for beef and veal is forecast to reach 1.9 million tons in 2017, a bit more than production levels in 2016, which reached 1.87 million tons. Consumption is forecast hit 1.79 million tons in 2017. Additionally, imports are expected to reach 182,000 tons in 2017, most of which will come from the US. Exports are forecast at 290,000 tons, with the US as the primary market, followed by Japan, Hong Kong, and Canada.
Pig droves have been impacted by the spread of porcine epidemic diarrhea (PED), but efforts aimed at improving herd genetics are expected to reduce the severity of the outbreak. This, in turn, is expected to bolster production, bringing down pork prices and improving consumption. Mexican pig droves are expected to reach 19.3 million head in 2017, and commodity pork production is expected to grow 4.5%, reaching 1.44 million tons. Consumption is also expected to grow, expanding by almost 3% to 2.27 million tons or 19kg per capita. Imports are forecast to hit 1 million tons, or 2% higher than 2016, most of which is sourced from the U.S. Exports are expected to reach 170,000 tons, with Japan being the country’s largest export market.
Blue Agave and Tequila
The agriculture industry in Mexico has many faces, and a prominent one is tequila. Agave, the most important ingredient in tequila, is an important component of Mexico’s agricultural and cultural landscape. With tequila more popular than ever before, producers hope agave production will increase. There are, however, signs that agave production may be in the midst of an industry-wide decline. The time it takes to cultivate agave and falling prices for the crop has catalyzed a shift among some farmers, and they are switching from the slow-growing agave to cash crops with a faster turnover like corn and beans. This shift has some fearing that agave supplies will fall well below demand, leading to higher prices for end-consumers of tequila. Leaders in the tequila industry are trying to ensure that farmers are able to both maintain their traditional methods of farming and increase the level of agave supplies, and they are confident that their efforts will strengthen the industry and ensure it remains sustainable and profitable.
Coffee is an important component in Mexico’s agricultural basket, and production has been growing in recent years. According to the USDA’s Foreign Agricultural Service, Mexican coffee producers are expected to produce 3.5 million 60kg bags in 2016/2017 and 3.8 million in 2017/2018. Large-scale replanting efforts and optimal growth conditions have had a positive impact on production figures in recent months, and these improvements are expected to persist. Conversely, coffee imports are expected to fall as domestic supply meets domestic demand.
According to the USDA’s most recent GAIN Report, Mexican sugar production for the marketing year 2017/18 is forecast to reach 6.6 million metric tons of raw-value, while 2016-2017 numbers are expected to hit 6.5 million tons. Officials expect weather patterns to be highly conducive to high production yields, and the number of hectares cultivated will remain stable at around 824,000. With approximately 51 sugar mills in operation across the country, the industry is an important source of employment, both direct and indirect, for Mexicans in the agricultural space.
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