Policy & Markets

Top Ag Export Market Under Threat

Policy shifts in Mexico signal deep decreases in ag trade with the U.S.

January 2022 | By darcy maulsby

On December 31, 2020, Mexico’s President Andrés Manuel López Obrador issued a decree with major implications for American farmers. He announced Mexico was phasing out the use of genetically modified (GM) corn for human consumption and banning the use of glyphosate. So much for a “Happy New Year.”

“It’s a serious threat to American agriculture,” says Kevin Ross, a sixth-generation corn grower from Minden, Iowa, and chairman of the board of the National Corn Growers Association (NCGA). “It’s something we haven’t seen before in our relationship with Mexico, which is a top export market for U.S. corn.”

Obrador’s goal in signing the decree, the equivalent of an American presidential executive order, is to help Mexico achieve self-sufficiency and food sovereignty. The decree calls for the phasing out of GM corn by January 2024.

The GM announcement is just one troubling factor in the U.S. relationship with its southern neighbor. Trade with Mexico also is slipping because of other regulatory action – or inaction.

Mexico has been one of our most reliable markets for corn and is almost always our No.1 or No.2 export market.

Rosy Brummette Manager of Public Policy at NCGA

High-level government officials in Mexico have put together a list of 80 crop-protection products — including atrazine, 2,4-D, neonicotinoids and pyrethroids — that Mexico considers hazardous. They will likely be put, like glyphosate, on a ban list. Currently, 2,000 delayed pesticide registrations are awaiting approval in Mexico. “These delays have created an estimated $500 million loss in U.S. sales of crop protection products from 2015 through 2019,” says Mary Kay Thatcher, senior manager of Federal Government and Industry Relations at Syngenta.

The Mexican government hasn’t approved any biotech traits since Obrador took office in 2018. “Like some European leaders, Obrador follows the precautionary principle,” says Ryan LeGrand, president and CEO of the U.S. Grains Council (USGC). The precautionary principle, often used by the European Union, bases decisions on potential hazards rather than science.

Obrador’s decree is not based on a comprehensive risk assessment. “This is a troubling shift within Mexico’s regulatory processes because it sidesteps science,” says Rosy Brummette, manager of public policy for NCGA. “We don’t want this to set a precedent.”

While Mexico wants to become self-sufficient in corn production, without glyphosate or biotech traits, Obrador’s decree doesn’t follow international trade rules. “Mexico’s failure to approve any biotech traits, and Obrador’s decree regarding GM corn and glyphosate, are contrary to the United States-Mexico-Canada Agreement (USMCA),” LeGrand says. “This can’t stand.”

The Stakes are High

Mexico provides a major market for U.S. corn and policies that potentially impede this are very concerning. “Mexico has been one of our most reliable markets for corn and is almost always our No.1 or No.2 export market,” Brummette says.

During the 2018-2019 marketing year through April 2020, U.S. corn exports to Mexico accounted for nearly 40% of total U.S. shipments and hit record-high values, according to the U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS). In addition, the United States supplied 96% of Mexico’s total corn imports in 2018-2019.

Of the 20.4 million metric tons of corn Mexico imported from the U.S. during 2018-2019 marketing year through March 2020, 95% was yellow corn, ERS adds. To replace these imports, Mexican farmers would need to dramatically increase domestic production.

The USGC has no plans to stop promoting U.S. corn in Mexico. “We’re moving full speed ahead with export marketing programs,” says Heidi Bringenberg, assistant director for Mexico, USGC.

This approach provides important benefits for Mexico, where more than half of its citizens live in poverty. Since Mexico is a feed-deficit country, U.S. corn imports help feed poultry and swine, providing protein sources that boost the food security of the Mexican population.

Despite Obrador’s decree, there have been no trade disruptions yet. “In fact, U.S. corn exports to Mexico have increased in the past year,” says Cary Sifferath, senior director of global programs for USGC.

What’s Next?

Going forward, America can’t cede U.S. trade policy to foreign governments, Ross says. “The NCGA is working with our industry partners to push a unified message through the appropriate diplomatic channels and educate members of Congress about this key issue.”

Agriculture and agribusiness leaders, including Syngenta, are working with the Office of the U.S. Trade Representative (USTR), the USDA and industry partners to challenge Obrador’s decree. Thatcher says there are, unfortunately, unique complications since no one has yet been nominated, let alone approved, to serve as the USDA Undersecretary for Trade and Foreign Agricultural Affairs. She goes on to say no one is currently serving as Chief Agricultural Negotiator for USTR. “The World Trade Organization’s Dispute Settlement Body has essentially been nonexistent since the fall of 2020,” Thatcher adds. “We must resolve the Mexican trade dispute. Ensuring that major export markets are willing to buy U.S. grain let’s us continue developing new technologies that benefit farmers.”

Sifferath is cautiously optimistic that the situation will resolve itself in a way favorable to U.S. growers. “Through the years, I’ve heard many world leaders say their countries are going to become self-sufficient,” he says. “I’ve yet to see anyone do this successfully.”