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Will Tortilla Tensions Spoil the U.S. Feed Corn Fiesta? | Fourth Quarter Outlook

corn-quarterly-outlook

This is an abridged version of the corn outlook for Q4 2024 from Terrain™, our service for agricultural insights. For the full text of this article, visit terrainag.com.

The U.S. corn market has had more bearish than bullish news lately, with looming large stocks and flat domestic demand. Maintaining and growing export markets like Mexico are critical for corn prices.

For crop year 2023/2024, over 40% of U.S. corn export volume has been to Mexico. The U.S. could see additional demand from Mexico for the 2024/2025 corn market, but there is a risk to the trade relationship stemming from a tortilla war tied to white corn imports.

Corn Controversy

Mexico recently elected a new president, Claudia Sheinbaum, who took office on October 1. She is a climate scientist and supports nearshoring (greater regionalization of supply chains to decrease costs and lower climate impacts), which should benefit U.S. producers regarding future grain exports to Mexico.

The ongoing battle over U.S. corn imports began under Sheinbaum’s predecessor, Andres Manuel Lopez Obrador (AMLO). In 2020, AMLO banned glyphosate and genetically modified (GM) grains. Three years later, the policy was relaxed with a decree applying only to corn in tortillas for human consumption (which is primarily white corn grown domestically in Mexico).

The decree also indicated GM corn as acceptable for feed and industrial use (predominantly yellow corn imported from the U.S.). For context, thus far in crop year 2023/2024 (September through July), corn exports from the U.S. to Mexico are 99% yellow corn and 1% white corn (see Chart).

The controversy has been hard to follow with all the bans, decrees and other updates. Mexico claimed it is protecting the biodiversity of its domestic corn crop and voiced concerns about the health risks associated with GM products, which continue to be debated. Since AMLO’s ban on GM corn, the United States Trade Representative has insisted on technical consultations with Mexico concerning biotechnology in agricultural commodities.

Chart-Corn-Q4-2024-1024x552

Additionally, the U.S. National Corn Growers Association argues there is no scientific evidence to support these claims, and currently the U.S. government is arguing that Mexico's position on banning GM corn is protectionist and not in compliance with the U.S.-Mexico-Canada trade agreement terms. While a third-party panel is set to rule on the dispute in November, both countries align on GM corn used for livestock feed.

Julio Berdegue, Sheinbaum's incoming agriculture minister, has gone on record indicating Mexico is not trying to reduce corn imports or become self-sufficient in domestic yellow corn production. Combined with the potential influence of Sheinbaum’s scientific background on Mexico’s stance on GM corn, there is hope that the U.S.-Mexico trade relationship can improve under the new presidency.

Continue reading outlook at TerrainAg.com.

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