Importance of Rail For Moving Grain to Mexico

This article has been reprinted from USDA's March 22 Grain Transportation Report.

Mexico is the second largest importer of U.S. grain (corn, wheat, and soybeans), behind China. 

According to USDA’s Foreign Agricultural Service, grain and feed accounted for $5.1 billion of the $17.9 billion in agricultural products the U.S. exported to Mexico, in 2016.1 

Corn and soybeans were the top two commodities exported at $2.6 billion and $1.5 billion, respectively. 

Because of Mexico’s proximity to the U.S., through their shared land border, Mexico imports roughly 80 percent of U.S. grain by rail and 20 percent by ocean vessel.

The rail link offers Mexican importers a cheaper alternative to ocean vessels. 

It also gives U.S. exporters a competitive advantage over other countries, that must rely exclusively on more distant and expensive ocean shipping, to reach


Rail transportation represents about 95 percent of the transportation costs for shipping grain to Mexico from the U.S. 

As a result, the cost of rail service significantly affects the competitiveness of U.S. shipments to Mexico.

This article looks at average rail rates through time, by origin-destination routes, shipment geography and cost-effective incentives for shipping grain between the two countries.

Rail Rates

In the last quarter of 2017, the transportation share of the landed costs for shipping grain by land, from the United States to Guadalajara, Mexico, ranged from 23 to 42 percent (See March 1, 2018 Grain Transportation Report). 

However, the rail cost alone accounted for 94 to 95 percent of the transportation costs, depending on the commodity and the shipping origin-destination pairs. 

Since 2014, average rail rates for shipping grain from the U.S. to Mexico have been stable and shown only small variations (figure 1).

However, a few exceptions are worth noting. 

Rates for Texas and Montana wheat have gone up by 11 and 6 percent, respectively (see table 1). 

In contrast, rail rates for wheat from Iowa, Nebraska, and Oklahoma have gone down by 9, 7, and 6 percent, respectively. 

Unlike shipments from the Corn Belt, shipments from Texas locations travel shorter distances to various destinations in Mexico. 

Average rail rates are typically higher on shorter distance movements than longer ones, because fixed operational costs, on shorter routes, cannot be averaged across as many miles.

However, in some States, a much greater percentage of tonnage moves at higher rates because under the law railroads are allowed to “differentially price” and charge higher rates for customers, with fewer alternative
transportation options. 

For wheat, these captive States include Montana, North Dakota, and Texas.

Shipment Geography

Most of the grain shipped to Mexico originates in the Corn Belt (see map below). 

However, shipments can originate as far north as Billings, MT, and as close to the border as Corpus Christi, TX. 

Laredo, Eagle Pass, and El Paso, TX, are the main rail entry points of U.S.
grain to Mexico. 

The destination regions for the largest shipments are located in the center of the country, close to the major processing and consuming areas, such as Cuautitlan, Guadalajara, Queretaro, Salinas Victoria and Torreon. 

The map shows rates are lower closer to the border, such as $60.46 per ton for Salinas Victoria. 

Rates gradually increase for more distant cities like El Castillo, where average rates for 2017 were $91.55 per metric ton. 

In addition to distance, other factors, such as the commodity, proximity to modal competition (captive shippers) and equipment availability are also considerations when determining railroad shipping rates.

Cost-effective Incentives for Grain Shipments

There are several U.S.-Mexico incentives used to promote or facilitate cost-effective cross-border shipments of grain that benefit U.S. producers.

Under NAFTA, U.S. grain can enter Mexico tariff-free. Another incentive is Despacho Previo; a process developed for clearing southbound rail shipments into Mexico and reducing congestion and interchange delays at the border. 

Despacho Previo allows for the interchange of runthrough trains, rather than individual cars; expediting southbound shipments. 

The process applies to all car types, except for intermodal equipment. 


Historically, grain rail rates to Mexico have been relatively stable. 

This has helped make U.S. grain shipments to Mexico very competitive. 

Even though U.S. production costs are higher than South American costs, the price of U.S. grain in Mexico is cheaper because of lower transportation costs, allowing U.S. grain to compete favorably.

Rail will continue to be an important mode of transporting grains to Mexico as long as the transportation costs continue to provide a competitive advantage.