Recent headlines have centered on President Trump’s plan to slap tariffs on steel and aluminum. It’s bad news for farmers. For proof, look no further than what’s happening with corn in Mexico.
Two years ago, Brazil’s corn exports to Mexico were basically nothing. Then, President Trump began talking up protectionist policies and his desire to rip up the North American Free Trade Agreement (NAFTA). Given that Mexico was the single largest export market for U.S. corn, ending this deal that ensured the free flow of U.S. agricultural commodities was a bad idea.
After all, the United States is not the only game in town when it comes to corn. And, the world is already awash in the commodity. It’s not like people are purchasing a difficult crop to cultivate and ship in bulk.
As we noted, politicians in Mexico were pushing a movement to plant more domestic corn, a factor that certainly fueled a downturn in expected U.S. shipments to the country. But the other shoe dropped after economists counted up a damning number out of Brazil.
In 2017, Brazil shipped 561,242 MT to Mexico.
This year, Brazil could potentially push that figure beyond 1 million MT. Brazil’s trade ministry announced that it shipped 96,823 MT of corn to Mexico in January.
The uptick comes at a time that Brazil is preparing for another massive crop of corn. Its 2017 crop of 97 million MT is poised to make it an even larger player in global exports.
Keep in mind that NAFTA isn’t the only trade spat that U.S. farmers are facing. Trump pulled the U.S. out of the TPP last year, which could affect its reach into a number of key export markets in Asia and South America.
Trump has also announced steel tariffs and aluminum tariffs on a variety of other countries that are key export markets. He claims to be targeting China. His bargaining chip: He might eliminate them if the U.S. gets “a better deal” of NAFTA. This doesn’t look positive.
This week, we might see U.S. export numbers reflect the trend.
That would not offer support to prices.
Brazil corn exports to Mexico surge on Trump, NAFTA fears
Brazilian corn exports to Mexico jumped to 561,242 mt in 2017 from close to zero in 2016, according to Brazil’s trade ministry.
The rise in imports came as US president Donald Trump sought to renegotiate the North American Free Trade Agreement, sending its southern trade partner scrambling to source other suppliers of corn, a staple for its citizens.
In January, Brazil exported 96,823 mt of yellow corn to Mexico, after having shipped none in the same month of 2017, the ministry data showed.
The increase in corn trade between the two Latin American nations comes after Mexican officials visited Brazil and Argentina in mid-2017.
Mexico is the second largest importer of US corn but is expected to further expand its sourcing of the grain in 2018 with Brazil high on the list of possible originations.
Brazil’s corn inventories built up after a record 97 million mt harvest in 2016/17 and the country is now harvesting another large crop this season.
In 2017, Brazil exported a record 29.24 million mt of corn, up from 21.83 million mt the year before, making it the second largest exporter of the grain after the US.
Total exports of Brazilian corn reached 3 million mt in January 2018, twice as much as the 1.45 million mt shipped in the same month last year, trade ministry data showed.
Japan and Spain are among the largest importers of Brazilian corn, importing 2.95 million and 2.87 million mt in 2017, respectively.