Mexico’s attempts to diversify its supplies of corn could threaten a crucial market for U.S. farmers who are increasingly dependent on exports to unload record stockpiles that are depressing prices.
Mexico buys nearly all its corn imports from the United States – shipments that totaled 13.603 million tonnes in the year ending Aug. 31, 2016. The sales account for about 28% of total U.S. corn exports, according to the U.S. Department of Agriculture.
But now Mexico wants to lessen that dependence as U.S. President Donald Trump threatens to upend trade between the countries. On Thursday, Mexico’s agriculture minister revealed plans to visit Argentina and Brazil to buy yellow corn.
A grain buyer at a corn mill in Mexico told Reuters in an email on Thursday he had already asked for price quotes from Brazilian and Argentine exporters for corn shipments to Mexico.
Mexico tends to import grain from South America or countries other than the United States only when it is cheaper or supplies are tight.
U.S. corn prices of around $190 per ton are about $10 to $15 lower than South American grain delivered to Mexico, trade sources said.
“The extent to which there is any switching that takes place (by Mexico) to South America frankly all depends on price. At the moment it doesn’t work so there would have to be something else that triggers it,” Soren Schroder, chief executive of grain trader Bunge, said on a call with analysts on Wednesday.
U.S. farmers are concerned that the new administration’s early maneuvering on trade threatens exports, which are a rare bright spot in an agricultural economy where farm income could fall to its lowest since 2002 in inflation-adjusted terms.
Trump, who was supported by many Midwest grain states when he won the presidential election in November, has already withdrawn the United States from the Trans-Pacific Partnership deal. He has raised the prospect of renegotiating the North American Free Trade Agreement with Canada and Mexico, which food producers say has quadrupled U.S. agricultural exports in the region during the past two decades.
“We are concerned that growing rhetoric is creating an environment in which Mexican buyers feel they need to look at alternate suppliers, which could affect U.S. market share,” the U.S. Grains Council, a trade group that develops export markets for corn and other grains, said in an email to Reuters.