Mexican demand for US grain imports has slumped along with the country's sinking peso as buyers withdrew from the market amid soaring costs in the week since Donald Trump won the presidential election, traders and industry analysts said. Corn prices in pesos jumped more than 10 percent overnight for the top US customer as the surprise election result sent the currency plunging to an all-time low against the dollar, they said.
"People are just waiting for the dust to settle and trying to get a better feel of where the currency markets are going," said a US corn exporter who asked not to be named. Trading desk phones that were ringing regularly before the election went quiet in the days that followed, he said.
In the first evidence of the slowdown, the US Department of Agriculture (USDA) on Thursday reported just 164,468 tonnes in corn sales to Mexico in the week ended November 10, the lowest weekly volume in a month. The figure included purchases ahead of the election and two days of post-election trade. Data showing lower sales to Mexico is more likely in upcoming weekly reports, trade sources said.
Mexico bought 709,261 tonnes of US corn in the week prior to the election, three times the average volume over the preceding month, USDA data showed. Traders said it remained too soon to gauge how longer term trade patterns could shift, but stressed that Mexico has few other options for grain and will continue to be largely reliant on its northern neighbor.
"As a country, we are short about 10 million tonnes of corn or more every year. We don't see many imports other than US corn and I don't see how that can change," said an importer at a corn mill in Mexico, who asked not to be named because he is not authorized to speak with media. Cheap rail freight and zero-duty imports typically make US corn much less expensive than grain hauled in bulk ocean vessels from South America or Europe.
Producers of tortillas and other corn-based products will initially absorb the higher cost of grain, but would likely pass them along to consumers if the peso remains weak, he said. Trump has expressed a desire to rip up or renegotiate trade agreements including the North American Free Trade Agreement, or NAFTA, which lowers barriers on trade between Mexico and the United States.
Mexico is the top US market for corn and pork, and a major buyer of US wheat and soybeans. The country surpassed Japan in US corn imports last season and its purchases this year are already 41 percent ahead of the same time in 2015, according to USDA data. "We'll execute the business on the books. But for anything beyond that it's just too early to say," said a US corn exporter who declined to be named because he is not authorized to speak to media.