GRAIN
WORLD
A changing market
Mexico buying not as predictable as previous years
18
By Joe Kelley
It seems like each year the grain buyers from Mexico begin their corn buying later and later . Five years ago , you could usually rest assured that Mexico would enter the local market in September or October . This year , it was the middle of February before we saw evidence of significant purchases from our neighbors to the south . No doubt improvements in weather and a strong Mexican domestic crop contributed to Mexico ’ s later entry into the south Texas grain market . This year , Mexico also had to contend with an unfavorable exchange rate — hovering around 20 to 24 pesos to one U . S . dollar .
Recently , the Mexican government did away with subsidies of refined fuel products . The elimination of that program saw fuel prices increasing approximately 20 percent literally overnight . South Texas markets have had their own marketing challenges in trying to compete against the Midwest shuttle train market and cheap ocean freight rates . With millions of yellow corn bushels sitting on the ground in America ’ s Heartland , farmers who were able to enjoy stronger yields are becoming a victim of their own success — big harvest coupled with a lackluster demand equates to lower prices .
Fortunately , we are beginning to see demand increase with Mexico ’ s truck market .
This market is typically made up of buyers in Nuevo Leon and Tamaulipas states — the two northeastern states in Mexico . These grain buyers have the ability to purchase grain from Mexico ’ s domestic market , and definitely do to a large extent . However , many of these grain buyers also buy in unit trains , and to some degree vessel of U . S . and / or South American grain depending on pricing and quality . These buyers are buying for the cattle feedlot markets , poultry operations , dairies and swine production operations .
Another concern that is front and center with the U . S . agriculture producers and Mexican buyers is the uncertainty with the North American Free Trade Agreement . Markets generally do not like uncertainty , and agricultural markets are no exception . The NAFTA agreement has been in place for approximately 20 years between the United States , Canada and Mexico . Various news agencies and trade organizations have reported — on both sides of the borders — that Canada and Mexico are not opposed to reviewing the existing agreement and making modifications . However , most would agree that these two countries might have been taken aback by the rather abrupt delivery of the message from the U . S .
By all accounts , U . S . agricultural sectors such as beef cattle producers , grain producers and dairy farmers have seen a tremendous benefit to being a part of NAFTA since its inception . As an example , Mexico is the largest U . S . dairy customer . Additionally , it has been asserted by the National Cattlemen ’ s Association that U . S . beef producers have seen a seven fold increase in beef exports to Mexico under NAFTA . Other U . S . agricultural organizations report that approximately one of every ten acres of grain produced in the U . S . is exported to Canada or Mexico .
It is easy to get complacent , as the “ natural flow of grain ” from the U . S . to Mexico has been a historic , well-established norm . However , at the end of the day , Mexico is a customer , and customers will look to companies and countries that provide value . All other factors equal , people tend to do business with those with whom they can establish relationships . All in all , I am hopeful that American agribusiness can resume its business of selling grain , co-products and products to our southern neighbors .