Mexico is ready to hit the U.S. where it hurts: Corn, and that’s making U.S. corn farmers nervous
Mexico is upping the ante in its escalating war of words with Donald Trump over trade policy by aiming squarely at the nation’s midsection: the corn belt, and that would surely hurt corn farmers
America is the world’s largest producer and exporter of corn. American corn shipments to Mexico have catapulted since NAFTA, the free trade deal signed between Mexico, America and Canada. Mexico is one of the top buyers of American corn in the world today. American farmers sent $2.4 billion of corn to Mexico in 2015, the most recent year of available data. In 1995, the year after NAFTA became law, corn exports to Mexico were only $391 million.
About 15% of the record 15.1 billion bushels of corn produced in the U.S. last year was exported, and Mexico recently surpassed Japan to become the top buyer. About 27% of U.S. corn exports annually is shipped to Mexico.
In response to Trump’s threats of a border tax, Mexican senator Armando Rios Piter, who leads a congressional committee on foreign relations, says he will introduce a bill where Mexico will buy corn from Brazil and Argentina instead of the United States.
Rios Piter’s bill is another sign of Mexico’s willingness to respond to Trump’s threats. Trump has proposed a 20% tax on Mexican imports to pay for the border wall. He also signed an executive order to renegotiate the North American Free Trade Agreement (Nafta) with Mexico and Canada as part of his efforts to close the massive U.S. trade deficit and encourage manufacturers to bring production back to the U.S. or keep it here.
American corn goes into a lot of Mexico’s food. In Mexico City, from fine dining restaurants to taco stands on the street, corn-based favorites like tacos can be found everywhere. It is also used for livestock feed.
It’s one of the first signs of potential concrete action from Mexico in response to Trump’s threats against the country.
“I’m going to send a bill for the corn that we are buying in the Midwest and . . . change to Brazil or Argentina,” Rios Piter, 43, told CNN’s Leyla Santiago weeks ago at an anti-Trump protest in Mexico City.
He added: It’s a “good way to tell them that this hostile relationship has consequences, hope that it changes.”
Citing Trump’s “anti-Mexican position,” Rios Piter said in an interview:
“It’s time to think about how to shift the place where we are putting our money. If we stop buying their corn, farmers would have a good idea how important Mexico is” and realize “that taking this position is not a good idea.”
Ross Piter says he’s “not bluffing.” “It’s important to stand up and say this has consequences.”
Experts say such a bill would be very costly to U.S. farmers.
Darin Newsom, senior analyst at DTN, an agricultural management firm, said:
“If we do indeed see a trade war where Mexico starts buying from Brazil . . . we’re going to see it affect the corn market and ripple out to the rest of the ag economy”
Trump also wants to renegotiate NAFTA. He blames it for a flood of manufacturing jobs to Mexico. A nonpartisan congressional research report found that not to be true.
Still, Trump says he wants a better trade deal for the American worker, though he hasn’t said what a better deal looks like.
Trump says if negotiations don’t bear the deal he wants, he threatens to withdraw from NAFTA.
Such tough talk isn’t received well by Mexican leaders like Rios Piter. He’s not alone. Mexico’s economy minister, Ildefonso Guajardo, said in January Mexico would respond “immediately” to any tariffs from Trump.
“It’s very clear that we have to be prepared to immediately be able to neutralize the impact of a measure of that nature,” Guajardo said January 13 on a Mexican news show.
Sen. Charles Grassley, R-Iowa, was among the lawmakers who met last week with Peter Navarro, head of Trump’s fledgling National Trade Council. In an interview, Grassley says he stressed to Navarro that if Nafta is overhauled, “you better have strong agricultural provisions . . . Mexico is a big importer of American corn and we want to be sure we don’t lose that market.”
If that happened, the country almost certainly would pick up other overseas customers. Brazil and Argentina couldn’t meet both the fresh Mexican demand and current orders, forcing their existing buyers to turn to the U.S. But the higher shipping costs would dampen demand and suppress U.S. corn prices just as farmers have started to recover from a two-year downturn. After peaking near $7 a bushel in 2013, corn futures prices bottomed out at about $3.30 last year.
Uncertainty over the latest skirmish may prompt some farmers to switch acreage from corn to soybeans as they plot their spring plantings over the next couple of weeks, says Chad Hart, an agricultural economist at Iowa State University.
“Mexico wants to show that they are going to drive a hard bargain,” Hart says. The country, he says, is demonstrating that it’s “ready to respond to policy changes in the U.S. definitively and quickly.”
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