Steady growth in Mexico

With the 10th largest population worldwide, Mexico is an attractive market for edible oils, with soyabean remaining the main oil produced domestically Sunder Singh

With a populati on of more than 131M – the 10th largest globally – Mexico is one of the most att racti ve markets in Lati n America for edible oils. Spanning a geographical area of 1.973M km 2 , Mexico is a vast country. As the second most populous nati on in Lati n America and the most populous Spanish-speaking country in the world, it is a vital market for global edible oil producers and suppliers.

Vegetable oil industry Mexico’s economy has been performing positi vely, with a 2.1% growth rate in 2018 and a decline in infl ati on.

However, for the edible oil industry, one of the greatest challenges relates to the country’s high 43% poverty rate, which has deprived it of a huge secti on of the market. According to the World Bank Annual Report of 2018, “The mid-term outlook for the country is rather opti misti c, with projected upward economic growth, driven by private consumpti on; as well as further drops in infl ati on and public debt, which ulti mately may positi vely infl uence public spending.”

Soyabean oil remains the major oil produced in Mexico, accounti ng for 62% of total domesti c vegetable oil producti on. According to a United States Department of Agriculture (USDA) GAIN report, about 96% of domesti callyproduced soyabean oil is extracted from imported US soyabeans. In 2018-19, Mexico produced a total of 0.98M tonnes

Steady growth

of soyabean oil and imported 176,000 tonnes of soyabean oil in 2018.

The USA conti nues to be the main supplier of soyabean oil to the Mexican market and, due to lower freight costs, it is expected to maintain and potenti ally increase this share in coming years. Canola oil is the second largest vegetable oil consumed in Mexico, which imports a signifi cant supply of seed and oil from Canada. Between 1 August 2018- 30 July 2019, Mexico imported 78,100 tonnes of canola oil and 1.27M tonnes of canola seed for crushing from Canada.

Investments in oil palm plantati ons in the past 15 years have made palm oil the third largest oil produced in Mexico by volume. This growth has largely been driven by government programmes encouraging oil palm planti ng in Campeche, Chiapas, Tabasco and Veracruz states.

Palm oil consumpti on in Mexico totalled approximately 676,000 tonnes in 2018. An additi onal 69,000 MT of palm kernel oil (PKO) and 38,000 tonnes of refi ned palm oil were also consumed.

Palm oil has become increasingly important for the food processing industry in recent years since companies began removing trans fats from their recipes. Several snack food companies have also switched to palm oil for products such as potato chips due to its att racti ve pricing. Mexico produced about 237,000 tonnes of crude palm oil (CPO) in 2018, representi ng a nearly 25% increase from the previous year. Approximately 13,000 tonnes of PKO was also produced.

Despite growing palm oil producti on, Mexico is heavily dependent on imports of palm oil to meet domesti c demand. Approximately 65% of CPO consumpti on is supplied through imports. In 2018, CPO imports were esti mated at approximately 439,000 tonnes.

Costa Rica and Guatemala accounted for more than 50% of total palm oil imports into Mexico, while Honduras, Columbia and Nicaragua accounted for about 31%.

Indonesia and Malaysia, the world’s two largest palm oil producers, accounted for just 14% of total palm oil imports into Mexico. The high level of of palm oil imports from South American countries is due to the trade advantage gained by Mexico as a result of the Central American Free Trade Agreement (CAFTA).

Mexico’s appeti te for vegetable oil imports is likely to grow steadily in the coming years as rising disposable incomes drive consumpti on growth at a faster rate than in recent years.

Domestic edible oil producers Large companies such as Agydsa, Ragasa, Proteinas y Oleicos, and Cargill represent nearly 80% of oilseed crushing capacity in Mexico. There is sti ff competi ti on between these companies in the domesti c market. Almost all of them have made signifi cant investments to expanding the scale and scope of their operati ons in recent years.

Currently, Agydsa is building a new plant in Jalisco with a crushing capacity of 4,000 tonnes/day, which is expected to become operati onal in August. Similarly, Cargill recently invested US$16M to install a producti on and bott ling line for vegetable oils at its plant in Hidalgo. As a result, Cargill began parti cipati ng in the vegetable oils and fats retail sector in Mexico. With the new producti on line, Cargill’s Hidalgo plant became one of the company’s largest and most modern

worldwide. The plant itself produces 13,000 tonnes/month of soyabean oil, which is sold in bulk and in packaging.

Major importing ports Bordered by the Pacifi c Ocean, the Caribbean Sea, and the Gulf of Mexico; with the USA to the north, and Belize and Guatemala to the south, Mexico has a total of 102 ports and 15 out-of-port terminals. However, the majority of trade takes place through fi ve major ports –Altamira, Ensenada, Lázaro Cárdenas, Manzanillo and Veracruz.

Manzanillo Port is Mexico’s largest and is located in Colima state, along the Pacifi c coast. The port handles Pacifi c Ocean cargo for the Mexico City area. Most imports desti ned for central Mexico come through Manzanillo Port which, given its locati on, acts as an important port for Asian exporters.

The port presently trades with 74 other ports around the world and has 14 terminals handling containers and bulk products such as palm oil, fi sh oil, refrigerated foods and fl uids, cement, ferti lisers, petroleum products, and wheat. It also has a cruise terminal.

A specialised facility at the terminal handles liquid bulk products such as palm and fi sh oils, with capacity for 13.9m 2 . The 2.8 ha PEMEX refi ning oil terminal has three berths.

Currently, the Mexican government is in the process of upgrading Manzanillo Port with four new terminals. The government expects to collect about US$1.2bn from public and private enti ti es to fund the expansion project. Authoriti es have dredged the navigati on channel and carried out environmental works in the northern area of the port.

The new terminals will feature a specialised container facility, which will have the capacity to handle 1.75M TEUs a year, one for agricultural bulk and

edible oils, another for mineral bulk and a specialised facility for hydrocarbons.

Lázaro Cárdenas Port is the second busiest in Mexico, located on the Pacifi c Ocean basin, and is one of the largest seaports in the area.

This deep-water seaport is equipped to accommodate and handle containerised, dry bulk and liquid cargoes. A new semiautomated terminal, opened in 2017, has the capability to handle more than 1.2M containers per year. With this expansion, the port’s capacity has increased from 27M to 29M tonnes. The port is well connected to Mexico City, located just 620km away, and to the USA through the Kansas CitySouthern de Mexico rail network. Most of the port’s imports and exports are desti ned for neighbouring Canada, Colombia, Guatemala and the USA.

Veracruz Port is Mexico’s third largest port in terms of cargo handling. Located on the country’s eastern coast with direct access to the Gulf of Mexico, this port was Mexico’s largest unti l 2005, when it was overtaken by Manzanillo.

Veracruz is the country’s oldest and most historically signifi cant port. With well-connected railways and highways, the port serves all of central and southern Mexico, with connecti ons to as far north as the US state of Illinois. Given its strategic locati on on the Gulf, it provides ocean freight services to north, central, and south America, Europe and Africa. Veracruz Port dates back to Spanish colonisati on, when it was used to import African slaves to work in shipyards and sugarcane fi elds. During colonisati on, Vercruz was Mexico’s most important port. The port underwent a US$160M expansion recently, which included constructi on of Lati n America’s longest

 Ensenada Port

breakwater at 4.3km long. The new facility has fi ve terminals and 35 berths, which has enabled the port to increase capacity from 28M to 95M tonnes/year.

Altamira Port is located on Mexico’s eastern coast facing the Gulf of Mexico, and is the country’s fourth largest port. It is connected to 125 ports, most of which lie along the Atlanti c coast.

Domesti cally, land and rail connecti ons link the port directly to the northern and central parts of Mexico, including important citi es such as Monterrey, Salti llo, Reynosa, Guadalajara and Mexico City. Half of the cargo at Altamira has origins and/or desti nati ons in the port’s northern zones of Tamaulipas, Nuevo Leo, and Coahuila, while nearly 30% goes to or comes from the central regions Guanajuato, Jalisco, Queretaro, San Luis Potosi and Zacatecas.

Ensenada Port is a deep-water port on the western coast of the Baja California region, located about 110 km from the US state of California.

Given its strategic locati on on the Pacifi c Coast, it has direct connecti ons to 64 ports in 28 countries. Most of the cargo calling at the port hail from Asia, North America and South America.

The three most important land routes for the transport of merchandise to and from the port are the Tijuana-Ensenada highway, and the Tijuana-Ensenada and Tecate-Ensenada federal highways. Most of the cargo arriving and departi ng from the Port of Ensenada use these three routes, which also connect to the key highways in the USA. In additi on, these routes off er direct connecti ons to the citi es of Tijuana, Tecate and Mexicali, which are major US border crossings.  Sunder Singh is a freelance journalist

 Altamira Port