MEXICAN MARKET IS GROWING, BUT WILL THE U.S. CAPTURE THAT DEMAND?

DECEMBER 2017

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(Posted Thu. Dec 7th, 2017)

Mexican Market Is Growing, But Will the U.S. Capture That Demand?

 

Increasing demand in Mexico could mean big business for U.S. agriculture, but U.S. farmers and agribusinesses may have to work harder to capture a share due to the renegotiation of the North American Free Trade Agreement (NAFTA).

 

Mexican customers and government officials conveyed that message to officers and staff leaders from the U.S. Grains Council (USGC) and National Corn Growers Association (NCGA) who traveled to Mexico last week as part of a joint officers’ mission.

 

The group met with agriculture officials, grain association representatives and top buyers of U.S. grain products.  Mexican customers emphasized the United States will always be an important supplier, but organizations are moving forward with plans to diversify imports to not be solely reliant on the United States.

 

“Twenty-five years of history with the United States cannot be easily replaced,” said Jim Stitzlein, USGC vice chairman. “But the NAFTA renegotiation was a wake-up call for the industry that they needed to diversify their sources for imports and find new export opportunities.”

 

While in Mexico, the team also learned more about the Council’s grain and ethanol focused programming. Mexico is already the largest customer for U.S. corn, DDGS and malt (both roasted and non-roasted) as well as the second largest customer for sorghum and tenth largest market for U.S. ethanol in 2016/2017.

 

Customers reported that Mexican consumption of protein, and the feed ingredients needed to supply it, will keep growing, resulting in the continuation of record imports of corn. However, key partners relayed that capturing this increased global demand will require innovation, collaboration and open trade.

 

“Mexican customers have made significant investments in infrastructure as well as grain and oilseed purchases for the 2018,” Stitzlein said. “These investments were made assuming the United States would be the main supplier, so our customers hope for a smooth outcome to the NAFTA negotiations.”

 

In addition, recent regulatory changes in Mexico signal significant opportunities for U.S. ethanol exports. The Council has strategically focused its promotion of ethanol as the fuel component of choice for a more environmentally-friendly Mexican gasoline that helps reduce greenhouse gas pollution. Those efforts started to see real results in 2016 as the Mexican government began privatizing the petroleum market for gasoline and diesel imports.

 

To capture this potential demand, however, will require access to the Mexican marketplace, currently provided through the NAFTA framework. Mexican customers expressed continued concerns with the negotiations, particularly with the broader, global impact a potential withdrawal would have, and called for continued involvement by U.S. farmers and agribusiness in sharing the importance of trade.

 

“Our customers emphasized the importance of U.S. farmers truly understanding how important trade is and how much of their crops eventually end up in Mexico,” said Kevin Skunes, NCGA president from North Dakota. “They really want to hear from the United States about what we are doing and that we all are on the same page.”

 

The delegation traveling to Mexico included Stitzlein; Skunes; Chip Councell, USGC past chairman from Maryland; Chris Novak, NCGA chief executive officer; Kim Atkins, USGC vice president and chief operating officer; and Melissa Kessler, USGC director of communications.