Economic Tidbits

Trouble in Mexico’s Corn Market…

Trouble could be afoot for Nebraska corn exports to Mexico. Mexico published a decree in 2020 requiring a phase-out of the use genetically modified (GMO) corn, seemingly including imports of GMO corn. The phase out was to occur no later than January 31, 2024. The decree was short on details and the Mexican government at the time did not provide any implementation particulars. At the time it was feared the decree could affect U.S. corn exports to Mexico as nearly all exports consist of GMO corn. Shortly thereafter, after meetings with Mexican officials, USDA secretary Tom Vilsack said the decree would not apply to grain used for livestock feed. Because most of U.S. corn exports to Mexico are used for livestock feed it appeared a major market for U.S. corn would remain unimpeded.

Recently, though, the Mexican government has hinted the ban could apply to GMO corn imports and says it is considering direct contracts with non-GMO corn producers in other countries for corn. Naturally this has raised questions regarding U.S. exports. Mexico imports around 40 percent of its corn needs, with 90 percent coming from the US. Mexico accounts for more than a quarter of all U.S. corn exports.

Mexico is the largest foreign buyer of Nebraska corn. Nebraska corn exports to Mexico since 2015 have ranged from $209-$589 million (Table 1). According to the USDA, Mexican purchases of corn accounted for 97 percent of Nebraska’s corn exports in fiscal year 2021. Nebraska’s geographic location, it’s the western-most major corn producing state and located in the middle of the county, and its accessibility to rail transportation into Mexico provide the state an advantage into the Mexican market.

Table 1. Nebraska Corn Exports to Mexico  

            Source: Graphic by NEFB based on U.S. Census Bureau data

Kenneth Smith Ramos, Mexico’s former chief negotiator for the USMCA, said at a recent Yeutter Institute trade symposium that implementing the GMO import ban would be “suicidal” for Mexico. The numbers back his assessment. According to estimates cited in the Van Trump Report, Mexico would pay $9.73 billion more to import corn under a GMO over the next 10 years. Prices for tortillas would increase sharply, increasing 30 percent and 42 percent in the first and second year of a ban. The total impacts of added costs for consumers, costs to import grain, and the contraction of the livestock sector would reduce economic output in Mexico by $19.39 billion over 10 years. Clearly, if enacted, the decree would have economic consequences for the U.S., Nebraska, and Mexico. Hopefully common sense will prevail.

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