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‘No Mas’ to U.S. Corn Imports, Mexico Senator Says
This week, we learned that at least one senator in Mexico is in favor of saying “no mas” to U.S. corn imports.
In response to President Trump’s suggestion of an import tariff on Mexican items to pay for the building of a southern U.S. border wall, Armando Rios Piter, who leads a congressional committee on foreign relations, plans to introduce a bill that would switch Mexico’s corn purchases from the U.S. to Brazil and Argentina.
In Spanish, this ending of U.S. corn imports translates into ‘totalmente terminado.’
Mexico Business Is Important
To date, Mexico is the No. 1 buyer of U.S. corn. For the marketing year September 1 through February 13, 2017, Mexico has bought 25% of the total U.S. corn sales. The next biggest buyer is Japan at 16% of the total.
Jason Ward, director of grains and energy for Northstar Commodity Investment Co., says the trade spat could impact both future and past sales.
“If all future sales get shut off to Mexico, it would be a significant negative to the marketplace for corn, and would easily overflow into other commodities, including pork and dairy,” Ward says.
To this point, in bushels, Mexico has bought 411.4 million bushels of corn from the U.S. this marketing year. Of that total, 197.6 million bushels have been shipped, "so we are talking about future sales and potentially unshipped sales that we have on the books, but haven’t arrived in Mexico yet,” Ward says.
Although this measure could prove to be detrimental to the U.S. corn market, it may look better on paper than in reality, according to market watchers.
Eric Fransen, director, Market360 Grain with Stewart-Peterson, says that the global market effect would kick in, if Mexico stopped U.S. corn imports.
“So, any demand that would shift from the U.S. to South America would cause other world buyers to shift purchases from SA to the U.S.,” Fransen says.
Franzen adds, “Right now and in most years, South America does not have enough excess supply to meet Mexico’s demand. In the last three years, if Mexico would have sourced all of its corn from Brazil and Argentina, South America’s ending stocks would have been more than completely depleted. The price of corn in SA would likely rise sharply.”
Join Farmers In Marketing Talk: Mexico Corn Bill a Market Killer?
Yet another trader, choosing anonymity, points out that multinational grain buyers Cargill and Bunge will find it difficult to operate their entities in the U.S., Mexico, Brazil, and Argentina, with U.S. corn import disruptions in Mexico.
“These companies take 14 million metric tons of corn from the U.S., most railed across the U.S./Mexico border. They (Cargill, Bunge) can’t rail from Argentina. And, the second corn crop (safrihna) from Brazil won’t be available until July/August. Plus, even if you figure the Mexican senator can find a subsidy for $20 to $30 dollars a ton in extra freight and handling costs, this ‘no mas’ corn import measure might be good bluster, and we can all fall on our face for a day... as we listen to the howling,” the Chicago trader says.
If Senator Piter is successful in getting his bill passed, it could impact U.S. farmers’ acreage decisions, the Chicago trader says.
“Start a trade war with corn over the next two months, and you will have 90 million acres of soybeans planted by June 1,” the trader says.
As of February, the trade is estimating that U.S. farmers will plant 3 to 4 million more acres of soybeans vs. a year ago, due to the current market offering profitability for beans, not corn production.
Peter Meyer, PIRA Energy grain analyst, says this news is easy to summarize. “Two words: Fake News,” Meyer says.
U.S. Senator Weighs In
To be sure, Senator Charles Grassley (R-IA) has taken to social media to send messages to the White House. On Tuesday, Senator Grassley tweeted “Mexican senator intro bill that will hurt US Ag Must enter Mexico negotiations w eyes WIDE OPEN Consequences will hurt farmers first.”
Above The Noise
Al Kluis, Kluis Commodities writes in the March issue of Successful Farming magazine that a solid grain marketing plan can help farmers avoid the price impacts of trade war talk.
“I believe the chance of either event occurring is less than one in 10. However, if it did happen, it would be pretty devastating to grain and livestock prices and farm profits. That’s precisely why risk management should be a standard practice,” Kluis says.
Kluis adds, “If you have a solid risk-management plan in place with the right crop insurance, hedges, and puts, you will keep your farm going – even in the face of a trade war.”