Some U.S. farmers say a Mexican lawmaker’s plans to introduce a new bill requiring the country to stop buying American corn and shift those purchases to South America seems more like tough talk than anything else.
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Mexico currently buys nearly all its corn from the U.S., totaling a quarter of all U.S. corn exports. While it’s a big market, American corn farmers describe it as a mutually beneficial relationship.
“It’s not going to make sense for Mexico to buy from South America, from what they’re saying because they are going to see 10 –12 --15% increase in their costs. And, then you’re [going to] have to ship it on top of that,” Chad Etheridge, CEO of Growing America and Founder of Farmers for Trump, told FOX Business. “The likelihood of them actually doing that and spending an extra 15%, just because they’re unhappy with us, doesn’t make a lot of sense,” he adds.
Currently, Mexico, which is the largest buyer of U.S. corn at 27%, (surpassing Japan last year, which fell to 22%), is also getting the crop at a very cheap price as the U.S. is seeing a surplus of the commodity in recent years.
“Corn prices are now below the cost of production. There is just a lot of corn sitting around because we’ve had several good years of corn yields,” Kurt Hora, a corn farmer from Washington, Iowa and president of Iowa Corn Growers, told FOX Business.
Additionally, Mexico is able to get U.S.-grown corn quickly because of the close proximity.
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“We do rail, truck and ship access for them. Yes, other markets can do this but it will be harder for them logistically. From the U.S., they can buy it in a variety of different ways in terms of volume, too,” U.S. Grains Council CEO and President Thomas Sleight told FOX Business.
Last week, during an anti-Trump protest in Mexico City, Mexican Senator Armando Rios Piter said 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. Piter later told CNN that the bill is a “good way to tell [Trump] that the hostile relationship has consequences.”
This isn’t the first time Piter threatened to stop buying corn from the U.S. In late January, when the White House said Trump was considering a 20% tax on Mexican imports to help pay for the border wall, Piter told MSNBC, that he was on his way to an emergency meeting with Mexican lawmakers to discuss ways to stop collaborating with the U.S. (A border adjustment tax is currently still being debated by GOP lawmakers, and whether it will be included in the promised soon-to-come tax reform in any shape or form remains unclear.)
"I think we will retaliate in the states of the Corn Belt. I think we should start thinking of not buying any more corn [from] those states," Piter told MSNBC at the time.
While Sleight doesn’t think Mexico would make good on the threat, he said he wouldn’t want to test them to find out.
“When you’re making your top consumer angry that gets noticed and it’s something that has got [farmers] attention,” Sleight adds. “We have built these relationships with buyers from Mexico for decades and they buy from the United States for a good reason because it’s a good buy right now and it is very competitive and most buyers—we don’t think—will pay an extra—whatever it is $10 a ton more—to buy from our competitors. But it is getting political and we all know strange things can happen.”
Hora also adds that Mexico is helping to keep U.S. corn farmers afloat, as incomes have dropped for the past four years and are expected to decline another 8% this year on low crop prices.
“To keep that market open to us is extremely important. It helps to bring money into our communities and create jobs here at home,” Hora said.
Mexico and Canada purchased an estimated $2.68 billion worth of corn from the U.S. in 2016, according to National Corn Growers Association. Mexico is also the number one market for U.S. soybean meal, oil and the second largest market for U.S. whole soybeans.
Etheridge also adds that a majority of farmers that he has talked to say “they are not worried about this,” and "they are very confident in President Trump and his Agriculture Secretary pick Sonny Perdue."
“The duo will get the right trade deals in place for farmers,” Etheridge said. “When we first started Farmers for Trump, every farmer that we talked to said that we need a businessman in office because if we have another two or three years of all the heavy regulations and trade policies that we have currently, we’re going to go out of business.”