One of the advantage that Mexican chili pepper has over its biggest competitor (USA) is the cost of labor. Mexico is cheaper compared to US, and there is no apparent shortage of it (except recently due to COVID).
Pricing is more competitive. Mexican chili pepper is highly preferred by industries that uses fresh chili pepper for processing and consumes the biggest share of chilis in the market.
Climate Change
Hard rain or even hurricane have a selective effect on volume and pricing. Too much rain can create breeding grounds for chili pepper pests.
Experienced growers knows how to apply pesticide appropriately without exceeding the US MRL, likewise, other growers tends to struggle with this issue.
Experienced growers can monopolize the market.
Seasonality
Guarantees sales at competitive prices all throughout the season.
Production Supply Chain
How Is the Supply Chain Formed?
Traditional Export Supply Chain: Depends on the region.
The North and West region such as Sinaloa and Chihuahua is where many of the big growers are located, they usually own the processing facilities and warehouses. Sometimes even logistics facilities. Hence the export supply chain is shorter.
In central region such as Zacatecas, there are a lot of small-scale growers who cooperates with collectors/brokers who then forward the shipment to processing centers then deals with importers.
What Is the Production Value Chain for Mexican Chili Pepper?
Growers in the Northern region of Mexico begin to harvest from November to May. The planting season starts from late June to July. These growers also employ technological advances to increase their yield. Large-scale growers prefer to cooperate under program contract deals, as they receive highly valuable inputs from buyers during the planting season. And they do not prefer to engage in fixed pricing. Harvested volumes are consigned to the buyer/importer. Terms of payments depend on the amounts of inputs the consignee provided.
General Product Introduction
What Is the Production Trend for Mexican Chili Pepper?
As of 2020, the total annual production of chili pepper in Mexico reached 3,200,000 tons.
The development of agro-industrial technology increased the production 3 folds (from 1.8 kg/ m2 in 2019 to 12.3 kg / m2 in 2020). The largest area harvested in Mexico for 2019 was Zacatecas covering 23.7%. Of Mexico’s total chili production land.
Sinaloa also had the largest area of chili cultivation using agro-industrial agriculture, with 793 hectares in 2019.
Growers in Mexico's harvest volume range from 4 tons/ha to 54 tons/ ha (2019).
What Are Import Trends for Chili Pepper in Mexico?
USA: Chile Pepper Overview
Ironically, the biggest importer of chili pepper from Mexico is also its biggest competitor.
Domestically produced chili pepper are mainly going to the fresh market.
MY 2019/2020 US market trends: USDA vegetable summary report on 2019 , presented last 2020 indicated the following market overview:
California, Arizona, Florida and New Mexico state are biggest domestic producer of chili pepper in the US with a total combined production volume of 110 K MT (2019).
In 2020, New Mexico became the highest producing state with 68,000 tons (8% increase from 2019).
Average pricing for US chili in 2020 is $6.28/ kg.
Lowest price at Q4 at $2/kg and highest during summer May - Aug at $12/kg.
One major factor affecting pricing is labor costs.
US chili pepper are mainly going to fresh market and food/tourism industry. Drastic 40% decrease in demand since the pandemic.
MY2020/21 trends:
New Mexico is having issues with dry conditions and hail and current year’s production may be lower.
Production in California was delayed due to colder weather but was able to recover.
Trade Overview
Which Are Main Destination Countries?
Target Countries:
- Almost 99% of export production are heading to the USA and the remaining volume goes to Canada (2020)
US ranks 1st in Chili Pepper import
The US imported $1,290,90 M of Chili Pepper in 2019 slightly higher than prev. year 2018 $1,139.55M.
2020 is marked by continuous growing demand from US but issues with export volumes and logistics due to Covid-19, weather issues and labor shortages as a direct result of lockdowns.
Despite the temporary closing of many food-related industries in the US, the demand for products such as salsa and hot sauces have shifted the demand from food industry to retail.
Target Countries: Canada
10,736 tons worth $14M in 2020. the remaining 1% of the total export volume of MX.
Canada ranks second in import, but the amount is very small compared to the US import volume.
Very few direct imports from Mexico and majority of the Mexican chilis are coming from US importers
The market and the demand for Mexican chili pepper in Canada is very small
Mexican suppliers are not confident to export to Canada as the phytosanitary requirements are stricter compared to the US.
Seasonality of Main Producing Regions
What Are Key Varieties of Mexican Chili Pepper?
The varieties in order of preference in the US are: Jalapeno, Serrano, Anaheim, Fresno, Caribe (yellow chili)
What Is the Mexican Chili Pepper Seasonality?
Domestic harvest period: All year long, each region in Mexico has a different harvesting season making the product all year round.
