One of the biggest beneficiaries of the USMCA is the perishables business and improvements in cold storage and transport pave the way for greater efficiencies.
From a trade perspective, there’s no doubt the borders dividing North America’s three largest countries have all but disappeared.
The USMCA ratified four years ago completed what NAFTA started; transforming Canada, the United States and Mexico into a boundaryless economic superpower.
“We’ve witnessed significant advancements in our cold storage and transportation capabilities along the border. These improvements have enhanced our ability to serve the growing bilateral trade in perishable products,” said Carlos Mendoza, a senior marketing coordinator with The ILS Company, a Tucson, AZ-based 3PL. “The USMCA has created a more streamlined, efficient trade environment...The U.S. cold chain market is valued at nearly $39 billion, while Mexico’s is approximately $4.78 billion. This disparity highlights the potential for expansion in Mexico, particularly in key states like Nuevo León, Sinaloa, Guanajuato, Jalisco, and Mexico City.”
The Mexico cold chain industry is estimated at $4 billion in 2024, and is expected to reach $6 billion by 2029, growing at a CAGR of 12.4%, according to an analysis by Mordor Intelligence.
The cross-border trade is dominated by fresh and frozen produce (avocados, tomatoes, cucumbers and bell peppers lead the way) shipped north from Mexico while beef, dairy, chicken, and pork travel southbound from the United States. Although commerce has slowed a bit in 2024, several trade records on both sides were set in 2022 and 2023. For example, in 2022, bolstered by the strong peso, Mexico became the largest dairy export market for U.S. farmers with $2.5 billion worth of product exchanging hands.
Date, a Clearwater, FL-based supply chain management solutions provider, said in a recent report the COVID-19 crisis exposed the weaknesses of the U.S.-Mexico cold chain and forced market discipline.
“…Not only did cold chains face challenges such as vaccine mandates, inventory fluctuations, and labor shortages, but also the increased demand for cold storage warehousing. This created a perfect storm that resulted in cold chain companies modernizing processes to combat disruptions and propel the industry forward.”
On the Border
Joseph Mendiola, VP of Business Attraction & Retention at the Laredo Economic Development Corp., said border cities such as Laredo, TX are benefitting big time.
Last year, Mendiola said the Port of Laredo outpaced Los Angeles, Chicago, and New York and is now the number one port in the United States based on trade value. Major companies such as Mission Produce, U.S. Cold Storage, Mastronardi Produce, Fresh Farm, and Lineage Logistics have all helped create a cold chain cluster, he said.
Mendiola said the strategic location of Port Laredo near major U.S. and Mexican interstate highways is a primary factor contributing to the explosive cold chain growth. He said Mexican avocados play a huge part. The fruit, which is grown mainly in the states of Michoacan and Jalisco, is in high demand in the U.S. and Canada.
With expansion comes congestion and in the case of Mexico-U.S. trade, border congestion is a way of life. Border users including refrigerated shippers are now focused on how to alleviate truck gridlock at many of the biggest ports of entry.
The National Customs Agency of Mexico has implemented a cloud-based system that utilizes technology to clear truckloads. Combined with RFID tags and IoT-sensors, the so-called “crossing notices” will allow trucks to drive directly through ports of entry.
Mendoza is hopeful the new technology will streamline congestion.
“We are leveraging technologies powered by 5G and the Internet of Things (IoT) to improve temperature monitoring and optimize our processes. Temperature sensors, RFID devices, and telematic tools are being utilized in both cold storage warehouses and transportation vehicles, ensuring safer products and faster transit times.” he said.
Mendoza said other factors affecting capacity and efficiency include driver shortages in Mexico and the United States.
“In Mexico alone, there will be a shortfall of 54,000 drivers by 2023, an issue that will affect delays and reduce the availability of heavy trucks for transport. In addition, a huge gap between young and old drivers is growing. One reason we believe that there are no new drivers is because of the increase in insecurity in the country, it is increasingly common to hear this type of news, and more serious for operators,” he said.
Intermodal Option
Intermodal transport is an emerging option for cross-border trade. One year ago, Canadian Pacific Kansas City (CPKC) unveiled MMX, a single-line rail service offering refrigerated shipping from the Midwest to Mexico. Not long after, CPKC partnered with Americold Realty Trust to co-locate Americold warehouse facilities on the CPKC network. The first facility in Kansas City, Mo. is under construction and expected to be completed within a year. Additional facilities are on the way.
CPKC CEO Keith Creel talked about the completion of Americold’s Kansas City warehouse at the RBC Canadian Industrials Conference May 14.
“…once that happens, that’s a whole other tranche of business that comes on top of 180/181[train pair] that’s going to allow us to take proteins going south, that’s going to allow frozen vegetables to come north, frozen vegetables that come to the Midwest, frozen vegetables even come to Toronto.”
“You partner with retail customers that move the needle here in Canada like we do with a Loblaws and create an ability for them to source their vegetables or bring them to the Toronto markets where they’re doing it by truck today by rail. Again, that starts to build success on to success.”
To increase capacity, CPKC is building a second span of the international rail bridge in Laredo, expected to be online by the end of 2024.
Alonso Erik Fernandez Flores, General Manager at Seaboard Foods de Mexico and President of Mexico’s National TIF Plants Association (ANETIF), said he expects the U.S.-Mexico cold chain to develop beyond food products. He said the pharmaceutical sector represents an increasing frontier, particularly veterinarian pharmaceuticals.
“We are actively engaged in initiatives to strengthen cold chain integrity and compliance, ensuring that temperature-sensitive pharmaceutical products are transported safely and efficiently across borders. This entails strict adherence to regulatory standards, investment in specialized infrastructure, and continuous innovation in cold chain logistics.”
“We can anticipate growth in other types of temperature-sensitive goods such as chemicals, cosmetics, and electronics. These sectors are increasingly recognizing the importance of maintaining product integrity throughout the supply chain, prompting investments in advanced cold chain technologies and infrastructure upgrades to support their evolving transportation needs.”
