Mexican bread, pasta and flour-tortilla makers are seeking alternative suppliers of wheat to reduce their dependence on the United States as trade relations between the two neighbors deteriorate.
Mexico, the top importer of U.S. wheat, is increasingly turning to cheaper supplies from Russia, which surpassed the United States as the top global wheat supplier in 2016.
Now the U.S. market share decline is accelerating as Mexico casts about for more alternative suppliers in Latin America and elsewhere to hedge against the risk that U.S. grains will get more expensive if the Mexican government imposes tariffs, according to interviews with three large Mexican millers, international grains traders, the top Mexican government agricultural trade official and government and industry data analyzed by Reuters,
“It’s important to send signals to Mr. Trump,” said Jose Luis Fuente, head of Canimolt, a Mexican trade group which represents 80 percent of Mexican millers. Mexico will keep buying American wheat because of its proximity, he said, but “we can’t continue to have this absolute dependence.”
The shifting supply deals are alarming for the U.S. industry, which has supplied the vast majority of Mexico’s wheat since the 1994 North American Free Trade Agreement (NAFTA) took effect.
U.S. wheat exports to Mexico dropped 38 percent in value, to $285 million, in the first five months of 2018. U.S. wheat exports to all countries, valued at $2.2 billion, dropped 21 percent.
“The Mexico market ought to be just an extension of our domestic market,” said Justin Gilpin, CEO of the Wheat Commission in Kansas, the nation’s biggest wheat-producing state.
Instead, Mexican buyers plan to import as much as 100,000 tonnes from Argentina – worth about $20 million based on current prices – when it harvests wheat later this year, Fuente told Reuters. Mexico imported a test cargo of 33,000 tonnes in late 2017 after the its government financed a trade mission of grain buyers to find alternatives to U.S. wheat in Latin America.
Source: Reuters
