In just over a year, genetically modified (GM) corn imports may no longer be allowed by Mexico, one of the biggest buyers of the grain from US producers. Under Mexico’s President Andrés Manuel López Obrador (aka AMLO), the country is poised to phase out GM corn imports by the beginning of 2024. Despite reassurances that this policy would not impact yellow corn imported for use in animal feed, the Mexican government says it is now considering direct contracts with non-GMO corn producers in what industry insiders fear is an effort to phase out all GM corn imports. I’ve provided some background below for those not familiar with this long-running saga, as well as more details about recent developments. Some of the info includes updated research from consultancy World Perspectives, Inc. (WPI), on behalf of Crop Life International, which attempts to estimate the financial impacts of Mexico’s new policy.
What Is Mexico’s GM Corn Import Policy? Soon after taking office in 2020, Obrador signed a decree to phase out GM corn imports, which was very light on details and has left the industry largely guessing how far the ban might go. Since that time, the Mexican government has failed to provide explicit clarification as to which classes of corn and/or corn-derived products would be impacted. Some officials have implied that the ban will not apply to corn used for animal feed while others have insisted it is an “outright” ban on all GM corn and derived products. If a total ban is realized, the impact could be far-reaching as everything from meat, to pharmaceuticals and industrial products, to DDGS could technically fall under that umbrella.
How Much Corn Does Mexico Import? Mexico imports around 40% of its corn needs, with 90% of that coming from the US. Mexico in turn accounts for more than a quarter of all US corn exports, which is primarily used for animal feed. Mexico imported 15.6 million metric tons of US corn in 2021, and over 9 MMT during the first half of 2022, according to the US Department of Agriculture (USDA). Animal feed accounts for approximately 59% of Mexico’s total corn use. Of that, 22% corresponds to Mexico’s white corn use and 78% is yellow corn use, most of which is imported. USDA notes that animal feed also accounts for a growing proportion of Mexico’s total corn use due to growth in animal industries, especially pork, poultry meat, and eggs. Most Mexican food products for human consumption are made with white corn. Mexico also imports significant volumes of DDGS, corn starches, and sweeteners from the US. In 2021, the US shipped 3.3 MMT of corn-derived products (excluding consumer-oriented products) to Mexico, according to WPI.
Where Will Mexico Get Non-GM Corn? As WTI notes, in the first year of the ban (Year 0), US farmers have limited ability to switch acres from GM corn or other crops to non-GM corn. In subsequent years, however, US (and other producing countries) farmers are expected to be motivated by higher prices to plant more non-GM corn acres. According to WTI, the US non-GM corn price would rise +48 percent from the prior year (+20% above the baseline forecast) to $8.14/bushel in the first year of the ban due to the added demand from Mexico. During Year 1 (the first full marketing year after the ban) WTI estimates US non-GM corn acres will expand +5% in response to the +33% premium that non-GM prices are forecast to hold over GM prices. However, WTI says non-GMO corn acres could be constrained due to limited non-GM seed supplies.
Additionally, Mexico’s Deputy Agriculture Minister Victor Suarez says the country is considering direct agreements with farmers in the United States, Argentina and Brazil to secure non-genetically modified yellow corn imports. At the same time, Suarez says Mexico is on track to halve its US yellow corn imports, with Mexico farmers expected to make up the difference. Suarez says the government is working to make agreements with domestic growers to increase yellow corn production. Mexico could make announcements in the second half of 2023 clarifying the import policy but said he does not expect any modifications to the decree.
Economic Impact to US Corn Industry Estimated at -$3.56 Billion: WTI’s study found that a total ban on GM corn by Mexico will result in a loss of billions for America’s farmers and higher prices for Mexican consumers. WTI expects GM corn prices would fall -10% over three years following the ban and these price changes would fundamentally alter crop acreage and the US grain handling system. The net economic loss for the US corn industry in the first year of the ban will be -$3.56 billion. The US ethanol industry, including DDGS, will incur a net loss of -$521.5 million after accounting for gains from lower GM corn prices. Overall, the US economy would lose -$73.89 billion in economic output over the 10-year forecast period.
Mexican Tortilla Prices Could Rise Sharply: Over the 10-year forecast period, WTI estimates Mexico would pay $9.73 billion more to import corn than it would otherwise, an increase of +19% over baseline forecasts. WTI estimates tortilla prices, a staple food in Mexico, would increase sharply, peaking at +30% above baseline forecasts and averaging +16% higher over 10 years. Additionally, the Mexican livestock sector would see feed costs increase by +13.7%, on average, which would cause the industry to contract by -1.2% annually. The total impacts of added costs for consumers, costs to import grain, and the contraction in the livestock sector mean that a policy banning GM corn would create a contraction of -$11.72 billion and reduce economic output by -$19.39 billion over 10 years.