Mexico-US Potato Trade about to Increase Exponentially

Published 2022년 5월 27일

US fresh potatoes have begun to be exported to Mexico after decades-long limitations on Colorado-grown potatoes ended earlier this month. Colorado, the only US state authorized to export to Mexico, had been limited to just within 26 km of the US-Mexico border due to fear of pest diseases. As of the 11th of May-22, however, the USDA and SENASICA had reached a long-awaited agreement, allowing Colorado potatoes to access Mexico’s entire territory beyond the border area. The new market access will provide a market potential of USD 250M per year for Colorado potato growers.

The US Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) and Mexico’s national plant protection organization (SENASICA) announced that the US has already begun exporting potatoes beyond the 26 km border zone that previously marked the limit of their export. The countries reached an agreement late last year to expand that market access for US potatoes, something that the US has pursued for more than 25 years.

Exponential Growth for Colorado’s Potato Exports

For US Colorado potato farmers, the agreement brings substantial market access to the rest of the Mexican territory. Furthermore, the agreement also means that US potato exports to Mexico could more than quadruple over the next five years. According to the USDA, about 10% of Colorado potatoes, grown primarily in the San Luis Valley, are exported to Mexico. In 2021, that was about 125K mt of potatoes worth USD 56M, while US exports of fresh potatoes to the global market totaled USD 258M.

Despite the restriction to the 26 km border region, Mexico is the second-largest market for fresh potato exports after Canada. Furthermore, according to the US Potato Council, Mexico is the largest export market for US potato-related products, valued at USD 394M in 2021. As a result, the US potato industry estimates that nationwide access to fresh US potatoes in Mexico will provide a potential market of USD 250 million per year within the next five years, an increase of USD 194M from the current export value of USD 56M. Exports to Mexico will likely surpass the once to Canada within the next two years, which represented USD 100M in 2021.

According to the Colorado Potato Administrative Committee, potato exports to a broader Mexican market represent an opportunity for approximately 70 million new customers that US exports didn’t have before.

Possible Risks and Threats

Since 1996, potato exports from Colorado and the rest of the US have been hampered by several factors. Negotiations over the North American Free Trade Agreement (USMCA) trade deal and legal litigations by Mexican farmers have delayed market access for decades now. Additionally, concerns from Mexican farmers about possible disease and pets from US potatoes have further delayed the negotiations.

The USMCA originally opened up Mexico to US potato imports. Sanitary authorization, however, was never implemented as Mexico's Potato Union filed a lawsuit against the government in 2014, claiming the government has no authority to decide whether agricultural exports were legal, then, in 2017 a lower court ruled in favor of the farmers. The fact that numerous litigations have happened over the last years has made US farmers look at the agreements with skepticism, not knowing for sure if the ban will enter into place at any time.

Another major possible risk to take into consideration is the latest droughts in Colorado potato fields. The San Luis Valley, where most of the potato exports in the state are grown, has gone through several years of drought continuing until this year. The droughts have raised questions about whether producers will be able to increase their production capabilities to fulfill the Mexican market.

Not being able to supply the Mexican market with substantial volumes for the following years poses a significant threat to the US market, as domestic prices could potentially increase due to producers opting to export their products for better profits and leaving the domestic market with a shorter supply.