Mexico Argentina wheat alliance
WASHINGTON, D.C., U.S. — Mexico, the largest importer of U.S. wheat in the last two years, will import and assess cargoes of wheat from Argentina, partly in reaction to uncertainty over North American Free Trade Agreement renegotiation. That portends the harm awaiting U.S. growers if the United States withdraws from NAFTA or a revised trade agreement results in impediments to Mexico’s ability to import U.S. wheat, according to U.S. Wheat Associates (USW), the export market development organization working on behalf of U.S. wheat producers.

The U.S. agricultural trade office in Mexico City in an Oct. 23 report confirmed Mexican millers will import 30,000 tonnes of Argentine wheat in late December. The transaction had been announced earlier, but the agreement was finalized only after Mexico’s phytosanitary authority approved the import. Eight companies purchased the pilot shipment to appraise the wheat in terms of moisture and protein content.

Steve Mercer VP of Communications for USW
Steve Mercer, vice-president of communications for USW.

“NAFTA is working for the United States,” said Steve Mercer, vice-president of communications for USW. “We understand why Mexico is looking around; it’s for protection. But Mexico needs the right kind of quality wheat that the U.S. can provide.”

Mexican millers also were considering the purchase of a second cargo of Argentine wheat to take advantage of Argentina’s current competitive pricing versus U.S. wheat, according to the agricultural trade office.

Under NAFTA, U.S. wheat may enter Mexico tariff-free. Mexico lifted its non-NAFTA wheat import tariff following the 2007-08 world wheat price shock, and began to receive small shipments of wheat from France and other regions. Eight years later, non-NAFTA imports comprised a quarter of all Mexico’s wheat imports.

But U.S. wheat has a freight cost advantage over competitors, provided Mexico-U.S. trade remains unencumbered.

“Clearly, Mexico wants U.S. wheat,” Mercer said. “Argentina is a long way away. Mexico has looked to other suppliers in the past, which is their right, but this feels like a political situation. They’re concerned about the rhetoric and the potential of what will happen with NAFTA.”

US winter wheat harvest
Mexico surpassed Japan as the top importer of U.S. wheat in marketing year 2016-17 when Mexico’s flour millers imported more than 3.3 million tonnes, about 39% more than in the previous year. The association representing Mexican flour millers said a rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70% of the country’s wheat consumption. To supply these baking companies, Mexican millers generate strong demand for U.S. hard red winter wheat.

Some U.S. farmers said wheat export sales to Mexico, which returned more than $633 million to hard red winter wheat producers across the Plains states and soft red winter wheat growers east of the Mississippi river, are essential.

“I need foreign markets to stay in business, and on my farm, there’s no market more important than Mexico,” said David Schemm, a wheat farmer from Sharon Springs, Kansas, U.S. “We have the strength of NAFTA to thank for that.”

Mexico’s proximity to U.S. hard red winter wheat and its ability to import a large share of it by rail from the Plains states is an advantage for the country’s buyers, which include Grupo Bimbo S.A.B. de C.V., the world’s largest baked foods company, and a growing number of other cookie and cracker companies. Mexico also imported more U.S. soft red winter wheat in 2016-17 than any other nation.

“I cannot emphasize enough how important our Mexican customers are to U.S. wheat farmers,” said Jason Scott, a wheat farmer from Easton, Maryland, U.S., and past chairman of USW. “There is nothing wrong with modernizing a 23-year-old agreement, but that must be done in a way that benefits the food and agriculture sectors in both countries.”