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Mexico buys cheaper Brazil corn as NAFTA talks loom: official
May 19, 2017 / 12:02 AM / 2 months ago

Mexico buys cheaper Brazil corn as NAFTA talks loom: official

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Corn cobs and yellow corn are on display at a market in Mexico City, Mexico May 19, 2017.Henry Romero

MEXICO CITY (Reuters) - Mexico expects to import a record amount of yellow corn from Brazil this year after its livestock producers secured lower prices in deals with suppliers on a recent visit to South America as NAFTA talks loom, a Mexican official said Thursday.

Alejandro Vazquez, a government official who was part of a Mexican delegation that visited Brazil and Argentina last week, said Mexican livestock companies on the trip had negotiated directly with suppliers and cut out commodities traders such as Cargill Inc and Louis Dreyfus that normally arrange shipments.

Following repeated threats by U.S. President Donald Trump to pull out of the North American Free Trade Agreement, Mexico, a net grains importer, has been eager to show the United States that it has options to trade elsewhere.

It has touted an upcoming visit to China and trade talks under way with the European Union, Brazil and Argentina, while looking for new suppliers for the U.S. grains that make up most of its imports of corn, wheat and soybeans.

The Trump administration launched the process for opening NAFTA for revisions on Thursday and will likely face pressures from the politically connected U.S. corn industry to maintain market access to Mexico, one of its biggest customers.

Higher costs and longer shipping times have in the past limited Mexican imports from South America. Before the trip, yellow corn from Brazil cost about $15 per tonne more for Mexico than U.S. corn.

Yellow corns are on display at a market in Mexico City, Mexico May 19, 2017.Henry Romero

But Mexican companies signed deals in Brazil for two shipments of 30,000 tonnes each for delivery in August that were only $3 to $5 per tonne higher, part of the 300,000-tonne total they plan to import between August and October at roughly the same price, Vazquez said.

"If prices become even more attractive, they could import even more," Vasquez said, adding that bigger deals could cut margins further. "And in some regions of Brazil, yellow corn is even cheaper than in the U.S." for Mexico.

Vazquez, the head of Aserca, an agency in the Agriculture Ministry that promotes Mexican products, said the livestock companies chose to pay more for Brazilian yellow corn as an investment in case NAFTA unravels and disrupts the cheap access to U.S. corn they use for animal feed.

"For them, it's not an option to be closing their plants," Vazquez said.

The 300,000 tonnes of yellow corn from Brazil this year would be a tiny fraction of the 12.75 million tonnes that Mexico imported from the United States last year. But it would be nearly five times more than it imported from Brazil last year and a record, Vazquez said.

Vazquez said Mexico should have shopped around for alternatives to U.S. grains long ago.

"Mexico was in a comfort zone," he said. "We didn't need to go and seek these opportunities that we're finding now."

Reporting By Mitra Taj; Editing by Bill Trott

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