U.S.-Mexico Corn Dispute Could Drag on All Year

If the United States takes its complaint against Mexico’s ban on imports of GMO white corn to a USMCA panel, it could take 155 days — until late December or even January — for a final resolution, although a U.S. victory is likely, said three Ohio State University (OSU) analysts. Mexico would then have the option of keeping the ban in place and accepting U.S. sanctions.

“If a panel investigation goes ahead, our expectation is it will rule in favor of the United States,” stated Ian Sheldon, Seungki Lee and Chris Zoller, the three OSU analysts, in a recent report. “Crucially, ending the dispute matters to U.S. farmers from states that have significant corn exports to Mexico, as well as to other farmers whose margins would likely come under significant pressure if the ban is enforced.”

A 30-day period for technical consultations between the nations ended on Friday. The consultations were the first step toward a formal USMCA challenge. There was no immediate announcement about the outcome of the consultations. The Biden administration says the ban is not justified on scientific grounds and it should be removed. Mexico originally targeted all GMO corn but narrowed its focus to genetically modified white corn in February.

White corn, used in making tortillas and other food, accounts for around 4% of Mexico’s imports of U.S-grown corn. Mexico is the largest customer for U.S. corn, buying 27% of corn sold to foreign buyers in the 2021/22 marketing year.

Under USMCA, a dispute panel, once it is requested and appointed, is expected to make an initial report within 150 days. The report would become public 60 days later. “Assuming the panel rules against Mexico, resolution of the dispute should then occur within 45 days, Mexico either removing its GM corn measures, providing compensation to the United States, or provision of some other remedy,” wrote the analysts. If Mexico refuses to implement the panel ruling, the United States would be allowed to suspend trade benefits with Mexico equivalent to the damage caused by the latter’s GM corn measure, such as tariffs on imports of Mexican products.

Mexico is the source of most U.S. food and ag imports, accounting for more than $1 of every $5 of imported goods, and is forecast by USDA to be the second-largest export market, after China, for U.S. agriculture products this year.

Most states would feel little impact from the corn dispute, at least in the short term, according to the OSU analysts. Illinois, Louisiana, Iowa, Kansas, Nebraska and Missouri are the states with the largest volumes of corn shipments to Mexico, overwhelmingly yellow corn that is fed to livestock.

“If the United States did not prevail, it would introduce considerable regulatory uncertainty, with the potential of undermining the stable operation of commodity markets. This could increase the cost of any risk management measures such as hedging and options, placing further financial strain on US grain producers,” said Sheldon, Lee and Zoller.

EDITOR’S TAKE:

This controversy, although not a huge potential impact on the U.S. corn market, has taken on a life of its own. The U.S. contends that GMO corn will not harm humans, and that is supported by scientific evidence gathered over several decades. Mexico is asserting that GMO corn should not be allowed into their country and their food supply. All that said, assuming a USMCA panel is fair and impartial, the U.S. should prevail. It’s not just about the small amount of GMO white corn, it is really a battle for all GMO products. Farmers and ranchers rely on genetics and modified plants and animals to help fight diseases, increase yields and provide a growing world population with a clean, safe and relatively inexpensive food supply. This case has much larger implications for trade and the future of GMO. Farmer and rancher incomes depend on winning this case. After all, it is their income that allows them the opportunity to purchase that new truck from you.