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Mexico’s Market a Winning Bet for U.S. Soybeans
By Ben Juarez and Gabriel Hernandez
The numbers speak for themselves: last year, several sales predictions for U.S. soybeans to Mexico had to be revised upward to accommodate stunning growth. In 2000/01, U.S. soybean exports to Mexico are forecast to climb 5 percent and oilseed meal sales overall will jump 4 percent.
There is no question that the U.S. product dominates Mexico’s oilseed market, but there’s no room for complacency at the top. Competitors worldwide long to take some of the U.S. market share. Canada, Brazil and Argentina are among those waiting in the wings.
Mexico signed new trade deals this year with the European Union (EU) and Israel. It now has trade deals with 27 countries, including the United States, the EU, Canada and Central and South America.
Knowing what fuels this red-hot market is key if U.S. exporters want to burn up the competition while heating up their own profits.
Mexico’s
Prosperity Powers Trade
Mexico gets a third of its revenues from petroleum, so when world oil prices nearly tripled recently, this country was able to invest the profits in its other industries–and buy more U.S. agricultural products.
In addition to rising oil prices, the Mexican government’s new fiscal policies have resulted in a gross domestic product that has surpassed expectations. In the last two semesters, the Mexican economy grew
7 percent, while annual inflation was estimated at 9.5 percent in July 2000. Economic experts are predicting inflation will drop to around 3 percent by 2003. In short, Mexico is more ready to buy than ever.
The Power of Pork and Poultry
Mexico’s agriculture perked up this year, thanks to its improving economy. The swine industry is expected to recover fully from a recent slump triggered by market meltdowns in Asia and Russia. Look for pork to go whole hog in early 2001.
Experts predict the poultry industry will mount a steady 6-percent growth in 2000. Moreover, the demand for oilmeals in the poultry and swine industries is expected to rise.
Ripple effects from these industries have invigorated the soybean processing industry. Mexico’s National Association of Oils, Fats and Shortening (ANIAME) says that the larger, better managed crushing plants tend to swallow up smaller, less efficient crushers. This consolidation, in turn, whets their appetite for more soybeans.
Surviving managers are bulking up their plants with improved infrastructure like never before. This appears to be corroborated by equipment sales. According to a key supplier of crushing machinery, sales to Mexico enjoyed a record spike in 1999.
Soybeans for Mexico’s Livestock
Most of Mexico’s growing demand for soybeans will undoubtedly be filled by U.S. farmers for the near term. Domestic soybean production is currently declining, thanks in part to a 28-percent decrease for 2000 caused by dry conditions in the north, as well as low prices.
But the United States does not by any means have a stranglehold on this market. It faces competition not only from domestic producers but also from Brazil and Argentina.
Mexico buys based on proximity, and banks the savings in transportation costs. It also imports based on credit opportunities.
FAS’ Export Credit Guarantee Program (GSM-102) covers credit terms up to three years. The Intermediate Export Credit Guarantee Program (GSM-103) covers longer credit terms up to 10 years.
The two programs underwrite credit extended by the private banking sector in the United States (or, less commonly, by the U.S. exporter) to approved foreign banks using dollar-denominated, irrevocable letters of credit to pay for food and agricultural products sold to foreign buyers.
Quality Still Counts
When the managers of Mexico’s crushing mills order U.S. soybeans, what will they want? Pedro González, with the American Soybean Association in Mexico, has some ideas.
"Industry managers usually look for a soybean that is high quality," said González. "U.S. soybeans are widely recognized to be among the world’s best."
Of all the oilseeds that can be made into meal, soybeans accounted for 83 percent of total production in 1999, and that percentage won’t change much this year.
Selling Mexican Consumers on Soy
When it comes to the consumer and retail sale of soybean oils and other products from oilseeds, marketing appears to be increasingly important.
Canada aggressively pursues Mexico’s consumer market, offering many products.
"Canada is very active in promoting canola oil in Mexico," said González. "The promotion is not just to consumers, but also to distributors and supermarkets. Key industry people are invited to come to Canada and see the oil produced."
González said now that new research has supported health claims for soy flour and other soybean products, it’s time for promotion.
"When it comes to human consumption, we need to get the message out that not only is soybean flour of high quality, it may actually be healthier for you and cost less," said González.
However, when he makes the case for the thriftiness of soybeans, he has to choose his words with care.
"In Mexico, if you lean too hard on the economy factor, consumers incorrectly assume that the product is cheap because it is inferior."
Reaching Out to
Consumers 
One thing that U.S. exporters have got to realize, said González, is that in Mexico, oilseeds are processed and distributed differently than they are in the United States.
"In the United States there are maybe six or seven companies involved in the chain from processing to retail; in Mexico, however, there are far fewer. These companies also charge less for their labor. As a result, the product is less expensive and the distance between processor and seller is smaller."
This close-knit production line is one reason U.S. exporters need to promote the product not only to importers, but also to processors and retailers.
The food and snack industry also needs technical training in measuring oil temperature as well as cleaning and maintaining equipment. This kind of educational outreach is essential to the future of U.S. soybeans and all oilseeds, according to González.
"Two-thirds of the soybeans grown in the United States are sold to people in other countries," he said. "And that figure is only going to grow along with the world’s population."
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The authors are agricultural specialists with FAS at the American Embassy in Mexico City. Tel.: (011-52-5) 525-6743; Fax: (011-52-5) 208-2115; E-mail: AgMexico@fas.usda.gov
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