Western Railroad Discussion > US to Mexico rail shipments of corn, soybeans facing trouble

Not good for BNSF, UP, KCS...

Mexico, long the biggest export market for US corn and the second largest export market for soybeans, has increased by 10x its purchases of Brazilian agricultural products in just one year. That amount is expected to increase in 2018.

Although the US still has a huge advantage, and actually increased ag exports to Mexico, experts view this as very troubling. The Mexican import cycle goes back to the early days of NAFTA, and has been helpful to both sides. Lower costs in Mexico, more sales from the US. Observers on both sides of the wall view this as a diversification by Mexico, protecting against a tariff or restriction by the US, and also opening new purchase channels. Argentina is also shipping more wheat to the Mexican states.

The US is no longer a reliable export partner, said one senior official.

Cheaper prices for Brazilian corn drove some of the sales. But in other cases, Mexican buyers bought Brazilian corn even when it cost more than U.S. supplies, executives and traders told Reuters.

“We bought from Brazil for two reasons,” said Edmundo Miranda, commercial director of Grupo Gramosa, one of Mexico’s top grains merchants. “One, because it was competitive. Two, to see how practical and profitable it was to buy from Brazil or Argentina given the possibility of trade tariffs because of NAFTA renegotiations.”

Gramosa and its domestic rival Comercializadora Portimex didn’t import any Brazilian corn in 2016. But last year, they imported nearly 260,000 metric tonnes of it - worth about $44 million at current prices - between September and December. The deals have not been previously reported.

https://www.reuters.com/article/us-trump-effect-corn-exclusive/exclusive-as-trump-trashes-nafta-mexico-turns-to-brazilian-corn-idUSKCN1G61J4

"The market works," said my economics instructor. People will buy where the price is best; where volume is not a problem; where transportation costs are best; etc.

If Brazil and Argentina can sell at lower cost, so be it.

Oh well nothing will force Mexico to raise the wages as its a third world country with very little law enforced there. If they paid livable wage there the reason why companies move there would vanish. They are just trying to put the squeeze on the US.

Exactly, NAFTA has worked in their favor since it was put into law and they're not about to let that go.

Out

I smell some political motives here on the part of the Mexican government. Exporting grain to Mexico is a big deal for Midwestern US farmers, so having Mexico buying some from Brazil and Argentina is a good shot across the bow to get Midwestern congressmen to be a little less enthusiastic about scrapping NAFTA. It's a divide and conquer strategy, and I suspect it will be effective. If I ran the Mexican government, it's what I would be doing.

The biggest losers from NAFTA so far have been Mexican farmers, who can't compete with imported cereal grains from the US, and potentially from South America as well. It took some political courage on the part of the Mexicans back in the 1990s to support NAFTA, knowing that a lot of small farm operations in Mexico were going to be severely hurt by its passage.

Mexican farm output for grains has been low enough that they've had to import to provide food sources. The other
thing that's hurt is that industrial production has lured a large percentage of the farm workforce to better paying
jobs leaving what was farming to many small operations.

Out

'Walls' come in different shapes and form.

Then there's TPP. The remaining eleven partners are signing a TPP on March 8 in Santiago, Chile. Many of these countries have found/are finding other markets for their products and goods and importing less from the US. When at least six ratify the deal, it goes into effect. Then there's China, at whom the original TPP was aimed at, signing infrastructure and trade deals all over Latin America. Not a good trend for the US.

The eleven countries in the new TPP, led by Japan include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.



Edited 2 time(s). Last edit at 02/22/18 14:22 by utwazoo.

rail shipments from the u.s. to mexico allow grain to be delivered where it is needed on 1 mode of transportation.

my question is, will it be cost efficient for mexico of "offload" grain from ships at their ports and then LOAD it back into either rail cars or trucks for delivery?

66

goneon66 Wrote:
-------------------------------------------------------
> rail shipments from the u.s. to mexico allow grain
> to be delivered where it is needed on 1 mode of
> transportation.
>
> my question is, will it be cost efficient for
> mexico of "offload" grain from ships at their
> ports and then LOAD it back into either rail cars
> or trucks for delivery?
>
> 66

That answer likely depends on the tariffs etc which might be imposed. How big, covering what, etc.

The Mexicans have already begun constructing refineries for their crude, which will cut demand for US made gasoline.

Trade retaliation often has a lot of collateral damage.

Posted from Android

I would consider this to be more of a warning move by the Mexican Government. I wouldn't be too concerned about American grain shipments to the northern Mexican states like Chihuahua. There just isn't a cheap way to get imported (other than American) grain there. Most likely this would effect grain moving further south into south central Mexico.

What hasn't been discussed are the protesting dairy farmers currently blocking the Ferromex Ciudad Juarez - Torreon main line. This has been going on for 11 days (so far). Shipments are being diverted to other gateways. The Ferromex mainline south of Torreon is open.


Allen



Edited 2 time(s). Last edit at 02/22/18 17:36 by bradleymckay.

does anybody know where the ports are in mexico that would be "off loading" any imported grain shipments?

66

goneon66 Wrote:
-------------------------------------------------------
> does anybody know where the ports are in mexico
> that would be "off loading" any imported grain
> shipments?
>
> 66


I know corn from Brazil is currently being unloaded at Tuxpan, which is near Tampico and KCSM is shipping it inland to San Luis Potosi. That's nothing unusual but the amount shipped this year probably will be. As far as I know most of the current shipment goes south from SLP. I don't know if Ferromex is moving any grain from Tuxpan to Monterrey but its possible.

The Ports of Vera Cruz and Manzanillo can handle grain in varying amounts.



Allen

thanks for the info. it will be interesting how much of an impact this has on our grain exports to mexico.....

66

utwazoo Wrote:
-------------------------------------------------------

>
> The eleven countries in the new TPP, led by Japan
> include Australia, Brunei, Canada, Chile,
> Malaysia, Mexico, New Zealand, Peru, Singapore and
> Vietnam.

The U.S., under the Trump administration, is no longer seen as a reliable partner in trade or diplomacy by the rest of the world. Both Mexico and Canada will now look elsewhere in order to diversify as a hedge against the craziness in Washington. NAFTA (even unchanged) is a lot better than the alternative.

newtonville150 Wrote:
-------------------------------------------------------

> The U.S., under the Trump administration, is no
> longer seen as a reliable partner in trade or
> diplomacy by the rest of the world.

Pure bull manure. The US is no longer going to cave in to the demands of its trading partners...they don't like it.

Both Mexico
> and Canada will now look elsewhere in order to
> diversify as a hedge against the craziness in
> Washington.

Trying to get the best deal for your county in trade negotiation is not craziness. It's smart. Too many jobs have gone overseas or over the border within the last 20 years and little has been done to stem the tide.

NAFTA (even unchanged) is a lot better
> than the alternative.

Maybe. Maybe not. I seriously doubt the goal of the Trump administration is to gut NAFTA. They want to tweak it so American workers can benefit for a change, not the other way around.



Allen