U.S. corn exports to Mexico
have increased dramatically since the implementation of the North
American Free Trade Agreement (NAFTA) in January 1994. Most
of the increased trade has been in yellow corn, used primarily to
feed livestock. But over the past 3 years, about 10 percent of this
trade has consisted of white corn, which is used to produce tortillas
and other traditional Mexican foods.
There are two fairly distinct markets for corn in Mexico: yellow
corn for livestock feed and other industrial uses, such as the
production
of starch and high-fructose corn syrup, and white corn for direct
human consumption. Over the next decade, the growth of yellow corn
exports is largely assured by the anticipated expansion of Mexican
livestock production. Prospects for white corn exports are more
difficult to predict, given the changing structure of Mexico’s
corn, milling, and tortilla industries.
The Mexican corn sector is mostly devoted to the production of white
corn. It continues to feature a large number of very small production
units, typically about 10 hectares (25 acres), marked by low mechanization
and low yields. Corn production has remained fairly stable during
the NAFTA period, in part due to Mexican agricultural supports.
Roughly 45,000 tortilla producers and 10,000 corn millers operate
throughout Mexico. But 90 percent of corn flour production is concentrated
in two of Mexico’s largest food companies, Gruma and Grupo
Minsa. Gruma also produces tortillas and tortilla-manufacturing
equipment and has subsidiaries in Central America, Europe, the United
States, and Venezuela. Gruma’s U.S. operations accounted
for 47 percent of corporate sales in 2002.
Pressures for change come from both the supply and demand sides.
Increased concentration of Mexico’s corn milling and tortilla
industries is likely to narrow the opportunities for small-scale
producers to market their output. At the same time, a shift in
Mexican
diets toward greater meat consumption and away from traditional
foods is likely to limit the growth of white corn demand.
Income growth will not only drive changes in food demand, but it
will also leverage structural change in Mexican agriculture. Improved
nonagricultural job opportunities will draw some producers out
of
farming while supplementing the incomes of other farm households.
The extent to which economic growth boosts tax revenues also may
influence the degree to which the Mexican Government supports its
agricultural producers. For U.S. exporters, these factors will
likely
assure Mexico’s position as an important and growing market
for yellow corn, while export possibilities for additional white
corn sales are more difficult to project.