Right now it’s all talk, but the tensions between President Trump and Mexico could spell bad news for corn farmers in the United States.
Unless you’ve been living under a rock, you know that President Trump has not exactly been besties with our neighbors to the south. During his campaign and now into his presidency, President Trump has utilized some sharp rhetoric aimed at Mexico — from building a wall…and having Mexico pay for it, to implementing trade tariffs, and threatening to pull out of NAFTA. Mexico’s response so far has been a little ho hum….until one of its senators threatened something near and dear to us in the United States.
Mexican senator Armando Rios Piter, a leader on the foreign relations committee, has threatened to propose a bill directing the country to import corn from Brazil or Argentina instead of the United States. Grabbing onto this idea, Mexican Agriculture Minister Jose Calzada will reportedly travel with a delegation to two South American Countries within the next few weeks. The trip will be aimed at discussing quotas and tariffs with those countries in an effort to facilitate more grain imports. Of course, Brazil and Argentina are more than happy to open up additional trade possibilities with Mexico.
That could be a big deal for farmers here because Mexico currently buys a lot of corn from us. In fact, the country is the top importer of United States corn. Mexico purchased roughly 13.3 million metric tons of corn from us in 2015-2016. NAFTA has seemingly encouraged that trend. In 2015, US corn growers sent $2.4 billion of corn to Mexico; in 1995, the year after NAFTA went into effect, corn exports were only $391 million. With additional efforts by Mexican officials to look for other sources of corn, the issue is one farmers should probably start paying attention to more closely.
I’m certainly not an expert on trade agreements and, thus far, I have not said too much on the topic. However, I would encourage farmers that this is the type of issue we need to be vocal about and stay engaged. Of course, we have no idea yet where any of the debates about the border wall will go, or who will pay for it. Nor do we know how negotiations over NAFTA will end up. But there is certainly nothing wrong with reminding our elected officials – of both parties – that this issue is important to us. Corn prices are already at or near the cost of production, and finding ourselves with a surplus that we can’t sell would not be helpful.
Nonetheless, not everyone is quite so worried about all the political noise.
Soren Schroder, CEO of Bunge Limited (a major grain trader in the United States) told analysts last week that the difference in price should prevent any major shifts from occurring. “We don’t really see any change in trade flows. North America, both in terms of corn and soybeans, are obviously more than well supplied, with mounting surpluses, so that will remain the cheapest origin for most of the flows of corn, beans and also wheat, assuming that the flows are normal. So, at this point, I wouldn’t see any dramatic change.”
Todd Hultman, an analyst for DTN, agreed and noted that the U.S. corn is currently about 30 cents cheaper per bushel than corn coming out of Brazil. He said: “I realize there have been concerns this week about the possibility of Mexico taking its corn business elsewhere, most likely to Brazil and Argentina in an act of countering possible new tariffs from the Trump administration. Of course, we do not know yet what specific proposals the White House has in mind yet, but as the situation currently stands, there is little danger of Mexico not buying U.S. corn.”
We’ll be watching…