Traders say the purchase is a sign of global anxiety
Mexico raided the U.S. corn market by making the biggest one-day purchase in over two decades earlier this month, the first clear sign of global anxiety over the decimated U.S. crop.
Mexico, the No. 2 importer of U.S. corn after Japan, bought 1.516 million tonnes, the U.S. Agriculture Department said Aug. 2, a move traders said could touch off a frenzy of buying by other countries that have been caught flat footed by the worst U.S. drought in 56 years.
“The corn sales to Mexico seem like desperation to get some coverage in place,” said Bill Nelson of Doane Agricultural Services in St. Louis, Missouri.
The deal comes at a time when global consumers are on high alert for a repeat of the 2008 buying spree that many blame for exacerbating the surge in food costs. Gregory Page, chief executive of global grain giant Cargill, warned this week that importers must refrain from racing to stockpile extra grain if the world is to avoid a further damaging spike in prices.
Mexico is particularly sensitive about corn. It is used there to make tortillas, a food staple, the price of which has already risen nearly 18 per cent since January, according to Mexico’s Economy Ministry. Riots broke out over surging tortilla prices in 2008.
While Mexican importers have regularly made large one-day purchases around this time of year, this week’s deal was twice as large as recent buys, traders said. In fact, it was the biggest ever by Mexico and the largest by any country since the Soviet Union bought 3.72 million tonnes in January 1991.
About two-thirds of the 1.5-million-tonne purchase will be corn that is harvested this autumn, a crop that has shrunk by more than a quarter since initial estimates early this year.
The rest of the corn will be from the 2013-14 year that will be planted next spring, according to the USDA.
Mexico is already low on supplies after suffering its own devastating drought in 2011, sending the price of meat and domestic food staples higher.
Large purchases by Mexico are not unprecedented. The USDA announced an 822,900-tonne U.S. corn sale to Mexico on June 7, 2011, and an almost identical volume on Oct. 7, 2010.
“It happens pretty much every year around this time, a big rail program that gets put together,” a U.S. corn exporter said.
By law, exporters must report promptly the sale of 100,000 tonnes or more of a commodity to the same destination within a day. Sales of smaller amounts are reported on a weekly basis.