Trade quarrel between Mexico, US could benefit Brazilian sugar

A trade dispute over corn purchases between Mexico and the United States could indirectly benefit the export of Brazilian sugar.

According to consultant Leder Batista, in December 2022, the President of Mexico, Lopez Obrador, reaffirmed the intention to ban imports of white and yellow GMO corn from the United States.

“It’s a somewhat controversial move since both countries are part of the USMCA trade agreement. Under this arrangement, Mexicans buy corn from the United States and export their sugar. However, this dispute could favor the export of another Brazilian agricultural commodity, which is sugar,” the consultant assesses.

Batista explains that the United States exported approximately 8 million metric tonnes of corn to Mexico last year. “If these bans really do come to fruition, the United States would have to find another place to offload its production. But in return, they could retaliate by restricting the purchase of Mexican sugar. Under the USMCA trade agreement, Mexico exports about 1.4 million metric tons of sugar to the United States. Approximately 70% of this sugar is raw,” he said.

The chart below shows exports of sugar to the US from the Brazilian ports that most handled this type of cargo between 2019 and 2023. It should be noted that the data for 2023 only extends until July. The data is from DataLiner.

Sugar Exports to US by Port | 2019 – 2023 | WTMT

Source: DataLiner (click here to request a demo)

According to the consultant, Brazil could take advantage of this dispute between the two countries. “The United States would reallocate part of this sugar quota to Brazil, increasing the volume exported to North America. It’s worth noting that the United States adopts a Sugar Tariff Rate Quota (TRQ) regime for sugar imports from various countries. This involves two layers that combine two conventional policy instruments (quota and import tariff) to regulate imports. In other words: protectionism,” Batista points out.

Under the TRQ regime, a lower tariff is allowed to be imposed on sugar imports within a specified quantity. However, a higher tariff is applied when imports exceed the quantity specified in the TRQ.

Batista recalls that last season, Brazil had a 52.6 thousand metric tons limit in the TRQ. “In July 2022, the US Department of Agriculture’s Foreign Agricultural Service (FAS) declared an additional extra quantity for Brazil in the TRQ quota for raw cane sugar for the remainder of fiscal year 2022: 16.3 thousand metric tons. This quota is totally taken up by sugar mills in Brazil’s northeast,” Batista states.

Source: Jornal Cana

To read the original news article, see: https://jornalcana.com.br/entrave-entre-mexico-e-eua-pode-beneficiar-acucar-brasileiro/

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