Riding the Rails: Mexico second largest HRW buyer

Posted October 22, 2014

Mexico Second Largest HRW Buyer Thanks to Kansas Wheat

Enough bushels of Kansas hard red winter (HRW) wheat rides the rails south of the border to make Mexico the second largest HRW market in the world. In fact, more than 80 percent of the HRW delivered by rail to Mexico in marketing year 2013/14 (June to May) originated in Kansas. 

“Obviously, Kansas plays a big part in supplying Mexico with HRW,” said Chad Weigand, assistant regional director for the U.S. Wheat Associates (USW) Mexican, Central American, Caribbean Region. “Given the growth in food wheat demand and decreases in production, Mexico will continue to be a major buyer of HRW to meet its wheat needs.”  

According to USW, the industry’s export market development organization, Mexican investment in rail infrastructure means rates are competitive to ocean freight — even with the current stress on the American rail system. In 2001, Mexico had just eight shuttle train unloading facilities in operation. By 2010, BNSF reported 26 facilities. 

These increased rail shipments favor U.S. wheat and constitute the majority of shipments. According to the Federal Grain Inspection Service, 60 percent of 2013/14 HRW sales, equaling more than 31 million bushels, were delivered via rail to Mexico. 

Trade and Consume

Trade policies also favor U.S. HRW wheat. Under the North American Free Trade Agreement, there is no tariff, quota or limit on U.S. wheat entering Mexico. 

As a result, Mexico is the third largest buyer of all classes of U.S. wheat in the world, purchasing an average of 106.92 million bushels each of the past five years — more than 55 percent of which was HRW. 

Those imports help feed the second largest wheat consuming population in Latin America, behind only Brazil. Mexico’s wheat foods consumption has increased more than 11 percent since 2009/10 and 60 percent of that is bread wheat, thanks to a growing middle class. 

According to the World Bank, Mexico’s middle class jumped 17 percent from 2000 to 2010. A 2012 survey indicated that 65 percent of Mexicans now perceive themselves as middle class. This includes young, urban consumers that want to consume wheat-based products that are easier to prepare and more economical. 

To feed those consumers, Mexico has 50,000 bakeries, according to CANIMOLT, the Mexican flour millers association. Additionally, Mexico is home to the world’s largest baked goods manufacturer — Grupo Bimbo. Retail outlets are also rapidly expanding. For example, Wal-Mart of Mexico opened its first store in 1991 and now has more than 2,031 retail outlets. Many of these retail stores have in-store bakeries that produce Mexican artisan-style bread goods.

The combination of all these factors indicates continued growth in Mexico’s wheat imports, as Mexico’s domestic production is mostly “cristalino” or durum wheat. 

According to Weigand, “Mexico will continue to be a dynamic and growing market for U.S. wheat because of free trade policies, population and economic growth and a comparative advantage in transportation logistics.”

And that is good news for Kansas wheat farmers.