June 13, 2019 / 8:43 PM / 5 days ago

UPDATE 1-Trump trade blows fail to slow Mexican demand for U.S. wheat

(Recasts headline, adds quotes and details on trade)

By David Alire Garcia

MEXICO CITY, June 13 (Reuters) - Mexican bread and flour tortilla makers will likely use significantly more wheat sourced from the United States this year despite growing unease with President Donald Trump, according to Mexico’s main wheat chamber.

Wheat shipments to Mexico from Russia are also expected to repeat last year’s big jump in volume, while Argentine wheat is seen gaining a new foothold as the Mexican industry continues to diversify its suppliers.

Mexico relies on wheat imports to supply about two-thirds of domestic demand.

Overall, Mexican wheat imports will “very likely” be between 5.1 and 5.2 million tonnes, up from 4.9 million tonnes in 2018, boosted by a 4 percent jump in domestic demand, said Jose Luis Fuente, head of the CANIMOLT wheat chamber.

The big jump in U.S. wheat imports, forecast by the chamber to reach between 3.5 million and 4 million tonnes this year, or as much 40 percent higher than last year, is noteworthy given Trump’s threat to slap tariffs on all Mexican exports and the possibility of Mexican retaliation.

Trump suspended the threat last week after reaching a deal with the Mexican government to curb the flow across the border of migrants, mostly from Central America. He has since revived the tariff threat if Mexico cannot meet his demands.

Fuente said U.S. suppliers are more convenient and that opposition to Trump does not play a major role in the industry’s calculations.

“I’d love to send him a message that we’re not going to buy more American wheat, but that’s not viable,” Fuente told Reuters in an interview on Wednesday.

Still, he said he expects more U.S. wheat this year because it is logistically more attractive, especially when moved by train, as well as due to the quality and price stability traditionally associated with American supplies.

Last year, U.S. wheat imports totaled 2.8 million tonnes, down nearly 20% from 2017, central bank data show.

For years, Mexico has been American wheat farmers’ top export market.

“We have to learn to live with (Trump’s) threats,” said Fuente, adding that he expects them to continue, calling the U.S president intolerant and likening him to a “spoiled child.”

CANIMOLT, which represents around 80 percent of Mexican millers, held talks with representatives of the U.S. Wheat Associates, a major export group, at the Mexican beach resort of Cancun in the days after Trump’s tariff threat on May 30.

“The Americans arrived very worried about the tweet from President Trump,” said Fuente, noting that both sides pledged to lobby their governments to defuse the spat. “We’re in the business of trade and we have to focus on that.”

While he emphasized that weather in the United States and elsewhere could scramble the forecasts, Fuente said wheat imports from Russia, which last year overtook Canada to become Mexico’s second biggest foreign supplier, is likely to reach around 1 million tonnes this year, similar to 2018 shipments.

Last year, the Black Sea suppliers, including those from Ukraine, increased wheat exports to Mexico nearly three-fold compared to 2017.

Argentine wheat farmers, meanwhile, are seen selling around 100,000 tonnes to Mexican buyers this year, Fuente said, up from a 33,000 tonne cargo delivered in 2017.

Fuente attended a wheat conference last week in Argentina, and said he may return for more talks in November. He is also considering a separate trip to meet Russian and Ukrainian exporters later this year. (Reporting by David Alire Garcia; Editing by Richard Chang and Sandra Maler)

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