Latin America is home to hundreds of farming cooperatives and small regional growers associations.   Often these cooperatives and associations are home to as much competition as cooperation.  This represents a challenge when growers seek access to export markets for their produce.  It also represents an opportunity for development that will create sustainable growth in the agribusiness sector.

Mexico’s proximity to the USA, coupled with its climate and the availability of low-cost farm labor, make it a logical source for meeting growing fruit and vegetable consumption in the USA.   The value of U.S. agricultural imports from Mexico is roughly equal to the value of U.S. agricultural imports from all S. American countries combined.  (Source:  USDA Market News)

Orange Case Study

Development banks are willing to invest in infrastructure to support export market development for agribusinesses.  Nacional Financiera, S.N.C. is currently working on such a project with Mangazo SA de CV for exporting oranges from Mexico’s Baja California Sur.   This orange project provides a good template for considering opportunities across Mexico. BCS growers are selling their oranges domestically rather than exporting them to the USA where willing markets await with citrus prices ten times higher than Mexico’s.

In order to take advantage of this attractive price multiple, small growers in the region need to cooperate and invest collectively.   They need more than physical infrastructure such as a USDA-certified packing shed with cooling and sorting equipment and country-of-origin labels with the proper price look (PLU) numbers and bar codes used by retailers in the USA and other countries.

Exporters also need marketing representatives in export markets to plan promotions with retail merchandisers, point-of-sale materials, pricing quotations to be provided five weeks in advance to retail buyers along with volume and sizing forecasts, steady supply through the entire season, reliable freight providers to deliver on-time, and analysis to ensure the produce arrives at the retailer’s warehouse with the desired shelf life for distribution to stores.

Mango Case Study

With the proper physical and professional infrastructure, export programs have been very profitable.  A case study which provides valuable insights into agricultural exports opportunities in Mexico is the mango crop.  Prior to Nafta, mangos were exported to the USA through produce brokers in Florida, Texas, Arizona and California.   These produce brokers maximized the price to retailers, minimized the return to growers, and pocketed a very hefty profit given their minimal value added.

In 1994 a program was implemented by International Market Resources with Mexico’s largest mango grower, Agroproducto Diazteca SA de CV of Sinaloa.  This was the first time retailers in the USA imported mangos directly from the grower.  Within eight years, annual sales for this single grower increased 400% and 80% of the company’s crop was sold directly to retailers in the USA.  By eliminating the middlemen, the grower was able to increase profitability, project consistent growth, and decrease bad debt expenses.

The opportunity is realized when growers are given the tools to manage export sales.  This involves retaining marketing representatives rather than brokers so that control rests with the growers, creating relationships with USDA staff and third party certification agencies, building relationships with retail procurement professionals for planning future yields, pricing, and varieties, investments in an export packing facility, and implementation of  phytosanitary measures from the orchards and fields through final delivery to customers.

Success Stories

The Fresh Produce Association of the Americas is a bi-national organization based in Nogales, Arizona which has benefitted many growers and crops in Mexico.  It success stories include beans, bell peppers, chilies, cucumbers, eggplants, grapes, limes, mangos, melons, squash, and tomatoes. The majority of fresh produce consumed during winter in the western USA comes from Mexico through Nogales, Arizona.

Some of these commodities, like tomatoes, benefit from economies of scale enjoyed by large multinational companies.  Some commodities are still distributed primarily through produce brokers at the border.   More growers are setting up their own distribution operations in the USA.   However, many opportunities remain for regional grower cooperatives and associations to develop export markets on behalf of their members.

Organics

One of the most promising areas for is organic produce.  In Latin America, Uruguay has the highest percentage of organic farm land – much of it in urban areas. But Uruguay is not close enough to the USA to maintain a low carbon footprint for agricultural exports. Organic consumers are very interested in regionally produced foods.

In 2000 Mexico placed 16th in the world and fifth in Latin America for organic land under production. Unfortunately, Argentina’s 3 million hectares certified organic includes unmanaged range land, so the statistic is misleading. “The value of organic production in 2000 was $150 million from Mexico, five times greater than Argentina’s, which puts Mexico second only to Brazil in total value of organic production in Latin America”, according to agriculture researcher Don Lotter from Davis, California.

Mexico’s domestic demand is still small; however, the value of organic production in Mexico is expanding at twice the rate of the USA’s. Coffee is Mexico’s largest organic crop. Buying organic coffee from Latin America helps small rural growers more than most foods you can buy. “Over 50,000 small farmers, with an average holding of 2 hectares produce over two-thirds of organic production value in Mexico. Since it is far beyond the abilities of a producer of that size to seek individual certification, certification is done by farmer groups and cooperatives”, states Lotter.

The Opportunity

The opportunity exists for investors in regional grower cooperatives and associations to provide the infrastructure and professional development required to build export sales directly to Fortune 100 retailers and quality wholesalers in the USA.   With the proper infrastructure and marketing, growers in Mexico can create profitable long-term relationships with the organizations that retail fresh produce in the USA.

Article Source:http://www.articlesbase.com/business-ideas-articles/unexplored-opportunities-agribusiness-opportunities-1598781.html

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