Crop Protection Market Development in Central America

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 organisations 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 which has been expanding rapidly in recent years.

Dry conditions are a frequent issue for Mexican agriculture,particularly in the north of the country. Over 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 neighbouring Central American countries, benefiting from its trade relationships, particularly with the USA.

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 aresult, the country has blocked the cultivation of 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 US, 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-cyhalothrinand thiamethoxam. Whilst growers in Mexico have adopted 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.

Agriculturein 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 USA, 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 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 increating and maintaining a position as a key exporter of agricultural produce, primarily fruit & vegetables, with this resulting in a shift of focus interms 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, behindonly 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 industrialised economy is that agriculturein 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 US 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 incentivise 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 aless intensive basis than most other countries in the Americas, partly due tothe greater focused placed on fruit and vegetable production.

There moval of glyphosate from the market is expected to result in a shift in weedcontrol practices. This is expected to result in wider use of selectiveherbicides, potentially boosting the overall value of the herbicides market inthe country.

Despite the potential requirement to boost production for domestic demand, the countryis also increasingly looking to expand export opportunities, with exports ofarable produce to Middle Eastern countries, including the UAE, Kuwait, Qatarand Saudi Arabia, rising significantly in the last decade. China is also becoming a key destination for Mexican exports, including for sorghum, the maincereal crop in the country. Generally, exports are more focused on fruit &vegetable crops and livestock, with grains often diverted for use in animalfeed.

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 over 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 stabilised. Agriculture in Guatemala has shifted in emphasis toward plantation crops grown for export, and the slow down in the growth of the agrochemical market corresponds with a period of depressed prices for these commodities. Unfortunately, that price weakness continued in2019.

The country's tropical climate results in Guatemala being consistently listed among the world's ten 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, notablyby 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 & 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 labour costs that allow it to be price competitive in export markets. Average expenditure on agrochemicals on a $/ha basis is relativelyhigh, probably due to the large share of the markets attributable to fruit& 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 EU and USA. 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 favourable.

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 Nino 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 in2019.

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,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 USA 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.