Mexico turns to Russia for cheaper wheat amid trade tensions with US

27.07.2018

Mexico's grain millers are reportedly shifting their trade priorities to be less dependent on U.S. exports ahead of possible retaliatory tariffs by the Mexican government in response to the Trump administration's trade moves, a decision that could have major effects on the domestic grain market.

Reuters reports that three major grain milling companies in Mexico that have purchased the vast majority of their wheat and other grains from the U.S. are looking at Russian suppliers and other options in Latin America.

Mexican companies fear U.S. grain prices could rise if their government responds to U.S. tariffs on steel and aluminum with reciprocal tariffs targeting U.S. wheat and other grain exports, the news service added.

Canimolt, a Mexican trade group that represents 80 percent of Mexican milling companies, told Reuters that pre-emptively shifting import priorities away from U.S. suppliers is a way to send a "message" to President Trump over tariffs that many U.S. allies have denounced.

“It’s important to send signals to Mr. Trump,” Canimolt chief Jose Luis Fuente said, adding: "We can’t continue to have this absolute dependence" on the U.S.

One U.S. farmer based in Kansas told Reuters that grain prices had dropped 50-60 percent since the  beginning of the year.

“It’s frustrating. Mexico’s a natural market for us,” farmer Ken Wood told the news service. “Break-even might be our best hope this year.”

U.S. wheat exports to Mexico have reportedly dropped 38 percent in value to $285 million since the beginning of the year, while global U.S. wheat exports have decreased by a total of 21 percent. The Trump administration has signaled that it will use a Depression-era law to provide up to $12 billion in aid to farmers hurt by its trade policies.

Trump and his officials have asked for patience, promising that trade negotiations will pay dividends.

“Negotiations are going really well, be cool,” Trump tweeted Wednesday. “The end result will be worth it!”


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