Mexico targets corn market

Legislator calls for end to U.S. purchases

Mexico is upping the ante in its escalating war of words with President Donald Trump over trade policy by aiming squarely at the nation’s midsection: the corn belt.

And that’s making U.S. corn farmers nervous.

In response to Trump’s threats of a border tax, Mexican Sen. Armando Rios Piter said last week he plans to introduce a bill requiring the country to stop buying corn from the U.S. and shift those purchases to Brazil and Argentina.

Citing Trump’s “antiMexican position,” Rios Piter said in an interview, “It’s time to think about how to shift the place where we are putting our money. If we

stop buying their corn, farmers would have a good idea how important Mexico is” and realize “that taking this position is not a good idea.”

Trump has proposed a 20% tax on Mexican imports to pay for a border wall. He also signed an executive order to renegotiate the North American Free Trade Agreement with Mexico and Canada as part of his efforts to close the massive U.S. trade deficit and encourage manufacturers to bring production back to the U.S. or keep it here.

But that could harm sectors such as agriculture that enjoy a trade surplus with the rest of the world. About 15% of the record 15.1 billion bushels of corn produced in the U.S. last year was exported, and Mexico recently surpassed Japan to become the top buyer, said Paul Bertels, chief economist of the National Corn Growers Association. About 27% of U.S. corn exports annually, or $2 billion worth, is shipped to Mexico, mostly for livestock feed.

“You are going to have winners and losers in Wisconsin because we have cash-grain farmers and dairy and livestock farmers,” said Bruce Jones, an

agricultural economist at the University of Wisconsin-Madison.

Wisconsin is one of the top corn-producing states in the nation, with about 573 million bushels of the ubiquitous crop harvested in 2016.

More than 15,000 Wisconsin farmers grow corn, sold as a commodity, on approximately 3 million acres. The counties with the highest production are Dane, Grant, Rock, Lafayette and Columbia.

About 10% of Wisconsin’s corn crop is exported.

A global market awash in agricultural commodities has weighed heavy on Wisconsin farmers, hampering exports of their products that are anchors of the state’s rural economy.

If Mexico stopped buying U.S. corn, it could send commodity prices plummeting, because the U.S. already has an oversupply of corn, soybeans and wheat.

The lower prices would hurt farmers who raise the crop for grain, but it would help farmers who buy it for animal feed.

Uncertainty over the latest skirmish may prompt some farmers to switch acreage from corn to soybeans as they plot their spring plantings over the next couple of weeks, said Chad Hart, an agricultural economist at

Iowa State University. And that temporarily could nudge corn prices marginally higher. Already, he said, the premium has increased for options that pay off if corn futures prices tumble.

At least to some extent, Rios Piter is likely posturing to give Mexico negotiating leverage with the U.S., some economists say.

“Mexico wants to show that they are going to drive a hard bargain,” Hart said. The country, he said, is demonstrating that it’s “ready to respond to policy changes in the U.S. definitively and quickly.”

Rios Piter said he’s “not bluffing. It’s important to stand up and say this has consequences.”

Marshaling support for the bill in the Mexican legislature could be an uphill climb. A shift to South America would not be easy or inexpensive for Mexico. Midwest corn is mostly delivered to northern Mexico by rail while product destined for the southern part of the country largely arrives by ship from the Gulf of Mexico, Bertels said.

Overall, Hart estimated, the switch would add 40 cents to 50 cents a bushel to the price Mexican buyers pay for corn.