The United States has been losing corn export business to Brazil as the South American country continues expanding its output, though top customer Mexico has secured a record volume of U.S. corn for shipment this year.
That is despite an active dispute between the United States and Mexico over Mexico’s proposal to curb genetically modified (GM) corn imports, which if enforced to the most radical extent could severely dent U.S. corn exports.
As of Jan. 18, a record 15.3 million metric tons of U.S. corn were on the books for shipment to Mexico in 2023-24, some 20% more than the date’s previous high set two years ago.
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U.S. corn output was record-large in 2023, causing prices to ease and spurring more export demand versus the previous year. However, the U.S. Department of Agriculture’s full-year export forecast for 2023-24, which ends Aug. 31, is middle-of-the-road compared with other recent years.
That forecast of 53.3 million tons should not be controversial since total U.S. corn export sales as of Jan. 18 covered 61% of it, largely average for the date. Mexico accounts for 47% of those total sales, easily the top buyer with Japan a distant second at 14%.
Mexico’s 47% share of U.S. corn sales is well above recent averages for the date, though the record is 48% at this time a year ago, meaning that Mexico’s heavy booking pace is within historical bounds. Mexico is seen importing a record amount of corn in 2023-24 as consumption expands, and the U.S. is overwhelmingly the top supplier.
Mexico’s large chunk of U.S. sales is aided by the fact that China accounts for just 6% of all U.S. corn sales so far, down from about 17% a year ago and about 28% two years ago. Japan’s 14% is above the recent average but below the pre-2021 levels, before China became a big U.S. corn buyer.
The future of U.S.-Mexico corn trade is uncertain as Mexico in recent years has proposed to ban or limit GM corn imports. GM corn accounts for the vast majority of U.S. production, though the lack of alternative options for Mexico has kept market participants’ concerns at bay.
The United States has challenged Mexico’s efforts under the U.S.-Mexico-Canada Agreement, and a resolution could be reached in March.
Brazil has been a thorn in the side of U.S. corn exporters, especially after taking over as top global supplier last year, encroaching on traditional U.S. business. U.S. exporters have the proximity advantage with Mexico, though the rise in activity at Brazil’s northern ports has made Mexico-Brazil trade increasingly more viable.
But U.S. corn had the advantage in Mexico last calendar year as its 2023 exports to Mexico were up about 18% from the prior year despite a 22% decline in U.S. exports to all destinations.
The opposite was true in Brazil as its 2023 exports were up 29% on the year to a new record, but shipments to Mexico dropped 3% on the year. That could be partially explained by the massive quantity of Brazilian corn claimed by China last year, a volume 14 times larger than in 2022.
Lower costs are helping U.S. efforts. In the first quarter of 2023-24 (September-November), the price of exported U.S. corn to Mexico was down 24% from the same period a year earlier, a three-year low for Q1.
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Brazil corn shipments will be slowing down in the immediate term as soybeans take priority, and shipping data suggests January corn exports will be notably lighter than last January’s record.
Brazil and Argentina also predominantly grow GM corn, so the U.S. will easily remain Mexico’s primary source for now, especially given the volume differences.
In 2023, Brazil shipped about 1.67 million tons of corn to Mexico compared with an estimated 18 million tons of U.S. corn shipped there last year.
Source: Reuters (Writing by Karen Braun Editing by Matthew Lewis)