A lawmaker from Mexico is verbal about authoring a bill which would have Mexico buying corn from other countries besides the U.S. Whether it’s a credible threat or not, the U.S. agricultural industry is watching.
Since his time on the campaign trail, President Donald Trump has not been shy regarding his views on renegotiating the North American Free Trade Agreement (NAFTA).
“I have serious concerns about NAFTA,” said Trump. “NAFTA has been a catastrophe for our country.”
Those in farm country have mixed reaction to Trump’s stance, especially since Mexico is one of our largest agricultural trading partners. The country is the largest importer of U.S. corn.
“He has stated at every opportunity he’s not anti-trade. He is anti-those agreements and pro-trade,” said Don Close, a senior analyst with Rabo AgriFinance.
“NAFTA is a relatively old trade agreement,” said Tom Sleight, president and CEO of the U.S. Grains Council. “There are things that can be done to improve it. We like the surgical approach to making improvements because there is a lot at stake with that Mexican market.”
Sleight says all U.S.-feed grains such as sorghum, barley, DDGs, ethanol and corn are all impacted by Mexico.
“Talking with our staff down in Mexico City, it’s frosty down there with our end-users,” said Sleight. “They’re actively looking at alternative supplies. They’re worried they may lose U.S. supplies and they are a little bit agitated by the fact that they’re seeing all of this friction. It’s definitely having an impact on the attitude of right now our best customers of U.S. corn.”
Currently, there’s talk of buying corn from Brazil and Argentina in response to President Trump’s tough stance on Mexico.
It’s a topic Sen. Chuck Grassley (R-Ia.) addressed during a series of closed door meetings in Washington D.C. to Trump’s top two trade advisors last week.
“You have to make sure with what you do, that there’s no retaliation against American agriculture because American agriculture is the only segment of the economy where we have a positive balance of trade,” said Grassley.
Mexican lawmakers are planning on taking action. Jose Calzada, Mexico’s agricultural minister, Jose Calzada, says he will lead a business delegation to Brazil and Argentina within the next couple of weeks to potentially buy more yellow corn. He said the Mexican government is open to a quota and tariff changes as well.
It’s a move that’s yet to happen, but watched closely by farm country.
“The trade deals that were made, they're hard for me to understand which side got the better deal on it,” said John Kennay, a farmer from Ashton, Ill. “I don't think it's going to be a problem. When people want food, they'll buy it. They're positioning themselves and testing the new president to see what they can get away with, but I don't think in the end it's going to make much difference.”
Grain vessels arrive at several Gulf Coast and a few Pacific terminals in Mexico: Veracruz, Coatzacoalcos, Altamira, Tuxpan, Progreso, Mazatlán, Lázaro Cárdenas and Chiapas.
But the Inland Waterways Council, Inc. says majority of U.S. grain is shipped to Mexico by rail. The council says two-thirds of corn from the U.S. to Mexico is moved by rail while the rest is by water. The council says Mexico buys corn from South America and will likely again this year April through August. It all depends on harvest and price.
Some analysts say if the move does happen, the U.S. will send that grain to other countries.
“If Mexico shuts imports from the U.S., they’re going to get it from South America, which ultimately opens the door for the United States to export our grain to the places that we’re replacing,” said Jarod Creed, senior director of customer risk management of Gavilon. “Instead of South America exporting to those countries, the U.S. will do it. It just changes the world trade grid. People still need to eat.”
Feeding people is what will ultimately dictate trade on both sides of the border.