U.S., South American Ag Trade Issues Stack Up
The Trump administration, since its beginning and prior to the election, has been criticizing trade agreements and what it calls unfair practices, mostly toward the U.S. manufacturing complex and allegedly those coming from Mexico.
Nevertheless, undesired consequences have been seen, and the most affected sector is U.S. farm business.
Mexico, one of the top buyers of U.S. food, has been announcing new sources for supplies of several products from major competitors, attempting to minimize purchases from the U.S., before any type of change in the North American Free Trade Agreeement (NAFTA) is made.
Argentina has been negotiating the entrance of fresh eggs. Mexican diplomats already announced future imports of Brazilian rice. Again, Argentina hopes to get its lemon juice to Mexican tables.
On Thursday, April 20th, the Argentina Rural Association estimated that it expects to sell to Mexico nearly US$ 9 billion on agricultural products, next year. Of those, it would be US$ 1.6 billion on dairy products, US$ 1.6 billion on soybeans, US$ 1 billion on poultry, US$ 980 million on wheat, US$ 800 million on beef and US$ 238 million on wine.
Sourcing beef from both South American countries is also being considered, but one question remains relevant: Will Brazil and Argentina really be able to supply corn and soybeans to Mexico, replacing the U.S.?
Mexicans already say South American corn will be duty-free.
Tom Sleight, president and CEO of the U.S. Grains Council, believes that the U.S. still has significant logistical advantages, like shipping to Mexico by truck, rail, and ship, compared with its South American counterparts, but he admits some damage is already done to U.S. farm exports.
“We still have to wait and see to learn what is going to happen. We have been talking every day with the Trump Administration, and I’m sure they have understood the risks involved. It is possible that in the coming years Mexicans will buy more corn from other sources,” Sleight told Agriculture.com by phone.
A Cargill operator from Argentina says exporters at this moment are not seeing as many possibilities of Argentina selling corn to Mexico. “A third of the Mexican purchases from the U.S. go in rail, which is hard to compete with through maritimal ways,” he said.
On the other hand, some assess that Argentina has a potential of exporting more grains to Mexico in the coming years with the reactivation of old railways for merchant transportation.
“Argentina has sold for years three raw products: corn, sorghum, and beans. These were important volumes until NAFTA was signed. I’m sure that with tariffs we won’t be competitive again,” said Gustavo López, Agritrend director of consultancy from Buenos Aires.
East of Argentina, Brazil expects to harvest a volume close to 100 million metric tons of corn this year, if the weather helps. Though the harvest of the second corn crop is far from completion, experts see a great potential in Mexico.
“Mexico may give preference to the expansion of volumes of purchases from Brazil, including grain, beef, poultry, and more,” pointed out Professor Marcos Fava Neves, professor of planning and strategy at the School of Business University of São Paulo and an expert on global agribusiness.
The U.S. announced on Thursday that it would start an investigation into imports of biodiesel from Indonesia and Argentina for possible dumping. The U.S. International Trade Commission is scheduled to make a preliminary decision by May 8 on whether such imports harmed U.S. farmers.
López thinks that perhaps this issue will be resolved by an official visit of the president of Argentina, Mauricio Macri, to president Trump on April 27. “It is convenient to all to have a good level of biodisel exports to sustain soy prices,” said López.