North America: Corn trade war between Mexico and the US could affect badly Canadian barley growers

A brewing corn trade war between Mexico and the United States could have dire consequences for Canadian barley growers, an analyst was quoted as saying by the Western Producer on December 2.

Mexican president Andres Manuel Lopez Obrador issued a presidential decree on Dec. 31, 2020, that would ban the import of genetically modified corn starting in 2024 and phase out the use of glyphosate.

On Nov. 28, 2022, the United States threatened legal action against Mexico if it proceeds with that plan.

“The president’s phase-out decree has the potential to substantially disrupt trade, harm farmers on both sides of the border and significantly increase costs for Mexican farmers,” U.S. Secretary of Agriculture Tom Vilsack said in a tweet after meeting with Lopez Obrador.

“We must find a way forward soon, and I emphasized in no uncertain terms that, absent acceptable resolution of this issue, the U.S. government would be forced to consider all options, including taking formal steps to enforce our legal rights under the USMCA.”

Following the meeting, Lopez Obrador indicated there could be a compromise, with Mexico allowing imports of yellow corn, used for livestock feed, while blocking white corn, imported for human consumption.

That proposal did not sit well with U.S. National Corn Growers Association president Tom Haag, who said that a decision to block any biotech corn violates the terms of the USMCA deal.

“Eliminating white corn will in no way resolve this conflict,” he said.

Mexico is by far the largest buyer of U.S. corn, purchasing 16.8 million tonnes in 2021-22.

More than 90 percent of the U.S. corn crop is genetically modified, so the Lopez Obrador decree would essentially eliminate that crucial market.

The presidential decree would mean the U.S. would have to find a new home for some or all of that 16.8 million tonnes of corn.

MarketsFarm analyst Bruce Burnett doubts that Canada would be the relief valve. It would be more efficient for U.S. corn to make its way down the Mississippi River and be exported to a large feed grain consumption market like China.

Canada typically purchases about two million tonnes of U.S. corn per year, however in 2021-22 it bought a whopping 6.1 million tonnes.

“Last year was an exceptional circumstance,” said Burnett.

“We were short feed grain.”

That is not typically the case. Canada usually produces a surplus of the commodity. U.S. corn has a tough time competing with Canadian feed barley in most years.

If the U.S. suddenly had an excess 16.8 million tonnes of the crop that would drive down corn prices, which in turn would pull down Canadian feed barley prices.

However, Burnett does not think that is going to happen because he doubts Mexico is going to stick with its plan.

“If they only want to import non-GMO corn it is going to be incredibly expensive for them to do that,” he said.

But if Mexico somehow does stick to its guns, then it will be incredibly costly for U.S. farmers.

A study prepared by World Perspectives determined that the ban would result in losses to U.S. corn farmers of US$3.56 billion in the first year and $13.61 billion over 10 years.

03 December, 2022