MercoPress. South Atlantic News Agency

Mexico planning to purchase Brazilian rice ahead of a clash with Trump over a Nafta review

A move announced recently by Mexican diplomats may be a precursor of what could be happening in the coming months with the trading of major commodities involving the country’s trade war talks with the U.S.

 The Mexican ambassador in Brasilia, Eleazar Velasco Navarro, promised that his country would allow rice imports from Brazil in an agricultural fair in Rio Grande do Sul. Rice growers associations in Brazil already give the entrance to the Mexican market as certain and say that only a “a few details lack.”

In 2015, Mexico harvested 158,350 tons of rice, which is 80.4% less than 30 years ago. In this period, consumption has grown from 850,000 tons to 1.1 million metric tons, with most imports coming from the U.S. Brazil is a major player in rice production with 11.8 million metric tons, while the U.S. produces over 8 million metric tons annually.

Also happening: Mexican authorities announced that lemon imports from Argentina are just “a step away” from being permitted, in another setback for U.S. farmers with an estimated 10,000 tons less of California lemons sent into Mexico.

For Mike Zuzolo, president of Global Analytics & Consulting, this topic will become hotter for grain observers in the next 30 days, especially until it is known how fast U.S. corn planting goes. In his opinion, Mexico is trying to show its cards in the case of the Trump administration imposing a border tax.

“My sense is that Mexico would like to have a plan of action ready in case the border import tax takes on a more serious tone from the Trump administration. However, I am of the view, as an analyst speaking to clients, that the blockage and resistance President Trump is feeling on health care is a good indication of how difficult it will be for him to move more aggressively against our trading partners,” Zuzolo said.

Mexican analyst Alfonso García Araneda, general director of Gamaa Derivates in Mexico City, says it’s still important to know how big the South American crop will be in order to know if there will be imports of corn from Brazil or Argentina. “A massive harvest in South America, particularly from Brazil, added to the appreciation of the dollar will ease and reduce the cost of imports, since the Mexican peso has advanced 15.03% since January,” said Araneda.