Analysis-Mexico could struggle to secure non-GM corn imports by 2024, experts say

MEXICO CITY (Reuters) - Mexico could achieve its goal of replacing half its import needs with non-genetically modified corn but would struggle to meet the deadline for a controversial ban and could suffer a bout of fresh inflation for its key staple crop, experts told Reuters.

A small grain farmer cuts corn plants on his farm at La Constitucion Totoltepec neighbourhood, in Toluca, Mexico, August 3, 2022. REUTERS/Edgard Garrido

Mexico, which imports about 17 million tons of mostly genetically modified (GM) corn from the United States, has a presidential decree that would phase out GM corn and the herbicide glyphosate by Jan. 31, 2024. Supporters of the ban say GM seeds can contaminate Mexico’s age-old native varieties, and legal battles alleging glyphosate-based herbicides cause cancer have been fought in U.S. courts for years.

After pressure from the U.S. and threats of a dispute under the United States-Mexico-Canada Agreement (USMCA), Mexican President Andres Manuel Lopez Obrador said in November that imports of GM yellow corn for animal feed would still be allowed, pending an annual permit from health regulator COFEPRIS.

Mexican officials, however, have not stated how much GM yellow corn they will continue to buy and if the plan to dramatically slash imports still stands.

Deputy Agriculture Minister Victor Suarez told Reuters in October that Mexico, a top buyer of U.S. corn, is on track to halve its corn imports in 2024. It would make up the difference by increasing domestic production and seeking deals with U.S., Argentine or Brazilian farmers for non-GM corn, he said.

Reuters interviewed sector experts, traders and farmers about the challenges of securing a supply of non-GM corn large enough for Mexico’s import needs - and in time for its 2024 decree. More than 90% of the corn grown in the U.S., Mexico’s major source of the commodity, is genetically modified, according to the National Corn Growers Association (NCGA).

Ken Dallmier, chief executive of Clarkson Grain, a U.S. supplier of organic and non-GM grains, said that while there isn’t a big enough supply of non-GM crops in the U.S. for Mexico currently, there could be if Mexico acts fast.

“There is still time for market forces to affect the supply and logistics to satisfy Mexico’s needs and desire, but that window is rapidly closing,” Dallmier told Reuters, noting a deal of this scale would take “Herculean efforts.”

The rising trade tension comes as global grain and oilseed demand is strong and supplies are tight, after the conflict in Ukraine disrupted grain exports from the Black Sea region and widespread drought hobbled crops in the U.S. Plains.

But for farmers looking at a potentially lucrative new market, price can be a powerful motivator. Dallmier estimated Mexico would need to pay a premium as high as 20% to make it worthwhile for U.S. farmers to grow non-GM corn, an increase that could fuel Mexican inflation.

Still, the financial incentive might not be enough to convince U.S. farmers to change their production methods, said Andy Jobman, president of Nebraska Corn Growers Association. Switching to non-GM crops implies using more pesticides and more tillage to control weeds, which eventually leads to soil erosion, Jobman said.

“This is like going from using electricity to going back to using candles in terms of technology,” he said.

Mexico’s Agriculture Ministry did not respond to a request for comment.

If Mexico waited until Oct. 2024, it could be more realistic to secure its supply in that year’s U.S. crop, according to Ben Scholl, president of grain buyer Osterbur and Associates.

Mexico will struggle, however, to make the deals directly with farmers and would instead need reliable partners through major commodities traders like Cargill and Archer-Daniels-Midland Co to pull off the switch, he said.

“It takes a long time to earn that relationship and that trust,” Scholl said.

According to one trader at a market-leading firm who spoke on condition of anonymity, it is “totally unrealistic” to expect farmers in the United States, or alternative major suppliers like Argentina and Brazil, to make the needed switch.

It’s difficult to quantify how much non-GMO corn is produced in the U.S., and that data is not tracked by the U.S. Department of Agriculture, said Purdue University agricultural economist Michael Langemeier.

In theory, there is enough U.S. farmland producing some form of non-biotech corn to meet Mexico’s current import demand, according to a Reuters analysis of U.S. Department of Agriculture (USDA) data.

“Certainly the acreage is there,” said Kellee James, chief executive of Mercaris, a commodities data provider. “It’s about getting organized and sending clear signals ahead of time.”

U.S. farmers planted and harvested about 5.7 million acres of non-biotech corn for grain in 2022 – about 7% of the nation’s total corn acres, according to the latest USDA data.

Mexico imported a total of 17.3 million tonnes from July 2021 through June 2022, with 16.9 million tonnes coming from the U.S., according to trade data. To produce that volume of corn would take about 3.9 million acres, if each acre yielded the latest corn yield average of about 172 bushels per harvested acre, according to USDA data.

The remaining volume headed to Mexico came from Brazil, Argentina, and the European Union, said economist Miriam Morath from the International Grains Council.

Reporting by Cassandra Garrison in Mexico City and PJ Huffstutter in Chicago; additional reporting by David Alire Garcia; editing by Diane Craft