Mexican grain importers wary of what Trump will do on NAFTA

17.05.2017

Felipe Basarte learned the hard way that words can hurt.

Basarte watched helplessly late last month as corn prices on the Chicago Board of Trade spiked on rumors of President Donald Trump’s desire to withdraw the U.S. from the North American Free Trade Agreement.

Basarte’s company every month imports into central Mexico thousands of tons of U.S.-grown corn and other grains used to feed dairy cattle and swine.

For Basarte and thousands of other Mexicans working in and around agribusiness, a full U.S. withdrawal from the trade agreement would be disastrous, advocates say.

Mexico is the top importer of corn grown in the U.S. No other country buys more corn from Nebraska farmers, who sold $287 million worth of the crop across the southern border in 2015. Mexico accounted for 29 percent of total corn exports of $987 million that same year.

Trump has since softened his stance on NAFTA, which he assailed on the campaign trail as unfair to American workers, particularly in the manufacturing industry. He now says he’s open to renegotiating the agreement.

But, Trump tweeted on April 27: “If we do not reach a fair deal for all, we will then terminate NAFTA.”

The ripple effects from that rhetoric have generated waves of concern in agriculture circles both in Mexico and in the U.S.

“I have not seen in some time the level of concern and the active reaction by our growers to such a rumor,” said Jon Doggett, executive vice president of the National Corn Growers Association. “This rhetoric is making a difference — and not a good difference — and if we continue down this road, it’s going to have a negative impact.

“How much, we don’t know, but we need to be very careful about what we say and how we do it.”

Accordingly, Basarte, Doggett and a group of officials representing Nebraska and U.S. agricultural trade groups at a press conference with Nebraska Gov. Pete Ricketts at the State Capitol on Tuesday made their case to leave the trade agreement’s agricultural provisions alone.

In his opening comments, Ricketts cited the magnitude of trade relations between Nebraska and Mexico. Later, he even batted down the notion that other industries in the state have suffered as a result of NAFTA, which was signed in 1993 and significantly reduced trade tariffs among the U.S., Canada and Mexico.

“No industry in Nebraska has approached me and told me there’s a problem with NAFTA,” he said.

Yet market volatility in the wake of Trump’s threats against the deal has already prompted Basarte and associates in Mexican agribusiness to consider how to continue doing business in the face of such volatility that hits importers squarely in the wallet.

“Any rough comments make us as buyers wary of a decision to buy (U.S. grains),” Basarte said.

In fact, some of Basarte’s associates trekked to Brazil last week to scout out potential new sources of grain imports as a contingency.

Perhaps most troubling to industry advocates like Tom Sleight, president and chief executive of the U.S. Grains Council, is that NAFTA has greatly benefited American farmers.

Since the agreement took effect, agricultural exports to Canada and Mexico have grown by factors of three and five, respectively, Sleight is quick to point out. And through more than 20 years of lower cross-border trade barriers, infrastructure has sprung up to support continued trade among member countries, he said.

“They have really come to depend upon a reliable source of quality grain from the U.S. They have developed a just-in-time inventory management system,” Sleight said of Mexican importers. “You don’t replace those systems overnight.”


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