Which States Would Feel the Effects of Mexico’s GMO Corn Ban?

Mexico issued a proposed ban on GMO corn in 2022, putting the U.S. in a position to lose out on 17 million metric tons of corn exports to Mexico, effectively violating the U.S.-Mexico-Canada Agreement (USMCA). So, where could the corn dispute end up?

The Backstory

Mexican President Andrés Manuel López Obrador declared in 2020 that Mexico will be phasing out certain ag biotechnology product imports, including GMO corn, in 2025. 

After being approached by the U.S. in January about the issue, Mexico replied with a proposal that would put the ban in immediate effect, as opposed to the initial 2025 proposal. 

Related story: U.S. Nears USMCA Dispute With Mexico Concerning GMO Corn

The new decree “does not represent any impact on trade or imports, among other reasons, because Mexico is greatly self-sufficient in the production of white corn free from transgenics,” said Mexico’s economy ministry.

Where is the U.S. in Mexico’s GMO Corn Dispute?

As of the writing of this article, the U.S. has begun the first step of the USMCA dispute process, which includes consultations. 

If consultations do not remedy the issue, the U.S. will move to the next steps which include establishing a dispute panel, examining evidence and resolving the dispute. 

So, who would bear the brunt of this corn disagreement?

Effects on the U.S. Corn Market

According to research from Ohio State University (OSU), most U.S. states will experience a “limited effect” of the dispute in the short term. 

However, OSU found the top-six states that could feel a shift from Mexico’s corn ban, which include Illinois, Louisiana, Iowa, Nebraska, Kansas and Missouri.

To put those numbers in perspective, Mexico accounted for more than 70% of Illinois corn exports in 2021 and 2022, according to OSU researchers, as opposed to Ohio which exported only 2% of its corn to Mexico.

Export numbers aside, OSU’s researchers anticipate two “substantial” indirect impacts on U.S. producers.

1.    Market aftershocks

“There would likely be a 'ripple effect' as additional supplies are diverted to the domestic market, driving down corn prices,” the OSU researchers said. “As a result, U.S. corn farmers would likely see increased risk of a squeeze on their margins.”

2.      Regulatory uncertainty

“If this dispute is not resolved in favor the U.S., it would introduce considerable regulatory uncertainty, with the potential of undermining the stable operation of commodity markets,” the researchers said. 

According to their research, the two impacts could increase the cost of risk management tools like hedging and options, and compound “financial strain” on U.S. grain producers as a whole.

The Upside

The good news is OSU’s researchers don’t foresee producers experiencing these two problems, as they expect a dispute panel would rule in favor of the U.S.

“Ending the dispute matters to U.S. farmers from states that have significant corn exports to Mexico, as well as to other farmers whose margins would likely come under significant pressure if the ban is enforced,” the researchers said.