Big Mexican farmers fear cuts will hit harvests

Mexico’s most productive farmers fear they may not be able to meet growing demand after state funding cuts, warning of a rising reliance on imports of the white corn used for staples such as tortillas and tamales.

Under President Andres Manuel Lopez Obrador, the agricultural budget has been cropped by a third, with subsidies aimed at larger farmers, who account for two-thirds of corn production, almost entirely eliminated.

Mexico has historically been self-sufficient in white corn, but Jose Cacho, vice-president of Grupo Minsa, warns that these changes could force Mexico’s second biggest corn flour miller to buy imported supplies in the medium term.

“There’s a risk we won’t be able to source enough,” Cacho said, referring to the 800,000 tonnes Minsa buys annually, adding that it had not bought imported corn for years. Mexico’s agricultural ministry and the president’s office did not respond to Reuters requests for comment. Although the government says it considers all farmers important, its agriculture minister said last month that with limited resources available it must prioritise the most vulnerable in the country’s many poor rural regions. Rural poverty has been a driver of immigration to the United States and social unrest for decades and Lopez Obrador, who ran on a pledge of helping the poor, has imposed a sweeping austerity programme and tried to reassign resources to tackle it.

The government says new programmes supporting smaller farmers with price guarantees will eventually reduce imports. Mexico City-based GCMA forecasts that white corn production will to dip 3.4 per cent to 23.5 million tonnes this year, before recovering in 2021. However, the consultancy sees Mexico’s overall corn crop only inching up by about a million tonnes by 2024, the last year of Lopez Obrador’s term in office. That is far short of demand growth of a million tonnes each year, or about 2.5 per cent annually.

Steadily growing use of yellow feed corn to fatten Mexico’s livestock has for decades come from cheap US supplies, with imports now making up more than a third of national corn demand. While this has kept prices down, it has also undercut farmers in Mexico, where leading industry players say subsidy cuts are set to exacerbate the problem. “Corn is no longer good business because it is cheaper to import,” said Juan Pablo Rojas, who heads the National Confederation of Corn Farmers and grows corn himself near the Pacific coast in western Mexico.

“They are disincentivising national production.” Importing corn for tortillas could potentially make them cheaper, but a decline in national production for a product at the heart of Mexican identity would be a blow to its pride. Beyond such symbolism, Mexico is still scarred by US President Donald Trump’s threat of a tariff war, which led corn importers to reconsider how reliable US supplies were.

“It affects our national sovereignty,” said Rojas, adding that when farms fail, workers tend to migrate to look for work in cities or north of the border. Many support programmes have been eliminated, including $300 million to promote exports and subsidies to help farmers pay into a price hedging mechanism, while about $700 million in help for equipment has been cut to $70 million in the 2021 budget.

And without more government support, larger corn farms cannot compete against the US government’s aggressive payout schemes for its own corn farmers, Minsa’s Cacho said. The US Department of Agriculture last month released details of a second round of its coronavirus crisis aid for farmers, including an estimated $3.5 billion for corn farmers alone, the American Farm Bureau Federation said.