U.S. food and agriculture exports to Mexico reached US$31.4 billion in 2024, just slightly behind the $32.4 billion shipped to Canada, according to a research brief by CoBank.

“Exports to Mexico have surged 65 per cent over the past four years, making it the fastest growing export market for a host of American agricultural commodities and products,” stated the brief.

Mexico’s economy has been booming since the COVID-19 pandemic, allowing consumers to expand their traditional diet. There is a growing demand for meat, poultry, dairy, processed food and feedgrains.

“Mexico will likely surpass Canada to claim the top spot for the first time in 2025 despite some emerging headwinds,” CoBank said in a news release about the brief.

Not displacing Canadian exports

MarketsFarm analyst Bruce Burnett isn’t too worried about Mexico’s rapidly rising consumption of U.S. agricultural products.

“It would be a concern if they were displacing Canadian exports to a great extent,” he said.

However, that is not the case. Mexico’s overall demand is expanding, and the types of products it buys from the U.S. are not the same as what it buys from Canada.

Mexico is purchasing a lot of U.S. corn and soybeans and their byproducts due to its thriving livestock sector.

Canada’s main feedgrain is barley, but Mexico has always preferred corn.

“They’re used to feeding corn to their animals; it is sort of invented in Mexico,” said Burnett.

In addition, Canada tends to export more malt and malting barley rather than feed barley.

Mexico’s proximity to the U.S. also plays a big role in where it conducts business.

Grain, feed, oilseeds and related products led the way for Mexico’s imports of U.S. agricultural commodities, accounting for $13.9 billion in sales in 2024.

“Strong recent growth is largely attributable to rising feed demand for the country’s expanding animal protein industry and severe drought, which is limiting domestic crop yields and grazing conditions,” said CoBank.

“Given the ongoing trade tensions between the U.S. and China, Mexico will almost certainly overtake China as the largest export market for U.S. grain, feed and oilseeds in 2025.”

U.S. dairy exports to Mexico have risen by 76 per cent since 2020, driven by the steadily increasing appetite for cheese.

Mexico’s meat and poultry consumption is also expanding faster than production, leading to increased imports from the U.S.

Purchasing power to be challenged

But the outlook is not all rosy. There are a few risk factors that could slow the pace of growth in U.S. sales to the Mexican market.

“Mexico’s economy has been slowing, and the unusually strong peso over the last couple of years has weakened by about 15 per cent since early 2024,” said CoBank.

“Mexican consumers’ purchasing power will be more challenged in 2025.”

Burnett said a resumption of the tariff war between the U.S. and its Canada-United States-Mexico Agreement partners could cause increased trade between Canada and Mexico.

It is unlikely that would generate increased sales of Canadian soybeans and corn to Mexico because it would likely turn to South America for those commodities.

However, it could result in rising sales of wheat and canola to that marke, if the tariffs cause the U.S. to lose its grip on the Mexican market.

“We could take advantage of it, especially on the wheat side,” he said.

That trade could happen by ocean vessel, but it could also take place on rail.

The merger of the Canadian Pacific and Kansas City Southern railways has made it easier for Canadian exporters to directly access the Mexican market by rail.

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“Europeans are deeply concerned,” said Brussels, Belgium-based U.S. consultant and canola trade expert Angela Dansby. “Trump has made steps toward all the threats he’s made in the past.”

In this early stage of the U.S. presidential campaign, Trump has often invoked his threat to place a 10 per cent tariff on imported goods and an even larger tariff on Chinese goods.

Most Canadian farm commodities trade in world markets so anything that affects world trade will affect the flow and the price of Canadian crops and meat and have direct impact on farmgate earnings.

“It’s not clear if that 10 per cent tariff would apply” to canola, said Dansby, who follows the issue closely.

Canada and the U.S. are part of the North American trade deal, the USMCA, and renegotiation of that deal is proclaimed by Trump as one of his successes in office. He might not touch it in a second term.

Dansby notes the U.S. imports 75 per cent of the canola it needs for industrial and food uses, almost all of that coming from Canada. Hitting those imports with a tariff would boost costs to American companies and consumers.

The European Union had a fraught relationship with Trump during his first presidency, with tit-for-tat sanctions on some goods. Trump took a special interest in automobiles.

His threats to quit or back away from the North Atlantic Treaty Organization rattled many Europeans who view America as a protector against rogue states like Russia. Since those days, Russia has invaded Ukraine, threatened EU states and caused Europeans to re-invest in military production capacity. Trump has done little to allay the concerns.

The impact of a renewed or expanded trade war with China is hard to estimate, Dansby said, but it would have “ripple effects” in commodity markets.

“We can definitely assume that he will make good on some sort of a tariff assessment” against China, Dansby said.
For Canada, staying on friendly terms with a second Trump administration would probably be the best way to duck any muck flying in future trade wars.

“It’s doing as much as possible to strengthen good relations,” said Dansby.

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Extreme weather events such as early spring frosts, floods, and summer heat have affected this year’s harvest outlook in some key producing areas of Russia, the world’s biggest wheat exporter.

“Despite the extremely challenging climatic conditions of 2024, the grain harvest forecast remains at 132 million tons,” Patrushev told an industry meeting. This is down from a record 158 million tons in 2022 and 145 million tons last year.

The agriculture ministry officials have said earlier that the current forecast can be revised depending on the progress of the harvest.

Patrushev said farmers in 55 regions of Russia have begun harvesting the new crop, and the pace of harvesting is twice as fast as last year, with 40 per cent of the grain and legume fields already harvested and almost 64 million tons collected.

—Reporting for Reuters by Gleb Bryanski

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Ukraine saw several record high temperatures last month, and up to 39-40 degrees Celsius in some regions, according to the state hydrometeorological centre.

Taras Vysotskyi, the acting minister, told national TV that the early crop yield had not been critically affected by the heat. Southern and eastern regions saw a 10-15 per cent fall, which had been partly offset by increases in other regions, he added.

“On average in the country, the [early crop] result will be somewhere around five per cent less,” he said.

Earlier this month, state weather forecasters and producers forecast there could be a 20-30 per cent decline in the harvest of late crops in central, southern, and eastern regions due to extreme heat.

As of Friday, Ukraine had harvested around 20 million metric tons of grains, according to the farm ministry.

In June, the ministry raised its forecast for the 2024 grain harvest to 56 million tons from 52.4 million. Together with oilseeds, the crop could total 77 million tons, it said at that time.

—Reporting for Reuters by Yuliia Dysa

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The global stocks-to-use ratio for the major crops, excluding China, has been trending down since 2018, Jason Newton, Nutrien’s chief economist, told delegates attending the 24th International Farm Management Association Congress in Saskatoon.

Global crop consumption has been growing by 2.2 per cent per year since 2020, but yields have not kept pace.

“We’ve had four consecutive years of below trend yields globally,” he said.

That is due to adverse weather conditions and high input costs, which led to low fertilizer applications rates.

Global crop area has also plateaued, which hasn’t helped matters.

“As a result, global grain supply and demand has been tight,” he said.

China is a big reason behind the steady increase in consumption. The country’s corn and wheat yields have fallen below trend line in recent years, and it has run out of arable land.

The result is that a country that produced a 34 million tonne surplus of major grains 10 years ago is expected to have a 49 million tonne deficit in 2024.

“That has been a major factor that has contributed to support for crop prices,” said Newton.

Another factor is the explosive growth in biofuel demand.

U.S. renewable diesel production is forecast to grow to 7.4 billion gallons post-2025, up from 4.1 billion gallons in 2023, although that now appears to be wishful thinking.

“That is likely not going to happen because the crush capacity for that is not there,” he said.

U.S. sustainable aviation fuel production is forecast at three billion gallons by 2030, up from 25 million gallons in 2023.

North America’s crops are off to a good start because of plentiful early-season rainfall. Crops are green and lush, and crop condition ratings are higher than average for this time of year.

“As a result, we have seen pretty significant declines in crop prices over the last month or so,” he said.

The next month or two will make or break the Northern Hemisphere crops.

Ukraine and Russia are two interesting markets to watch.

Ukraine’s production has fallen 30 per cent from pre-war levels, while its exports have only dropped four per cent by comparison.

“Obviously that’s not sustainable,” said Newton.

Ukraine has drawn down its inventories to critically low levels, which will eventually have to be reflected in the country’s export numbers.

Russia’s exports kept a lid on wheat prices in 2023-24, despite tight global supplies of the crop. However, record heat combined with dry conditions will decrease winter and spring wheat production in that country in 2024-25.

Brazil is the key driver of corn and soybean markets. It is the one major source of cropland growth in the world, with cultivated area increasing four per cent per year over the last decade.

Global crop prices have dropped, but they are still in line with the 10-year average, which has led to a rebound in fertilizer demand.

Ammonia production costs spiked in the European Union in 2021 due to high natural gas prices. Costs have since come down, but 20 per cent of the EU’s production capacity has been idled and is unlikely to return.

China has been restricting exports of urea and phosphate fertilizers as it attempts to become self-sufficient in crop production.

The other big factor in the phosphate market is low U.S. inventories.

Distributors reduced stocks in anticipation of a flood of Moroccan imports due to what was expected to be drastically reduced duties on the product in early 2024. That did not happen, and they were caught off guard.

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The move had been expected, after the agriculture minister said this week that she hoped it would be introduced and that it would pave the way for insurance claims by farmers.

The emergencies ministry said it applied to 10 regions including Luhansk, a part of eastern Ukraine that Russia claimed as its own territory in 2022, months after launching its invasion.

The ministry said commissions had been created in the affected regions to assess damage.

Russian Deputy Agriculture Minister Andrei Razin said earlier on Friday that the impact of weather problems on agricultural output would be minimized and that Moscow would fulfil all of its export commitments, the state TASS news agency reported.

Agricultural consultancy IKAR has cut its forecast for Russia’s wheat crop this year to 81.5 million metric tons, a drop of 12 per cent since mid-March. Last year’s harvest was around 93 million tons.

“It is a question of speeding up the procedure for farmers to receive compensation, as well as knocking out additional money for them,” IKAR head Dmitry Rylko said this week before the emergency was introduced.

Andrey Sizov of the Sovecon consultancy said rapidly deteriorating prospects for the crop, combined with rising domestic prices, meant the risk of additional restrictions on grain exports had, however, increased.

“I don’t think the Ministry of Agriculture itself wants such restrictions,” he added.

Sovecon this week cut its wheat crop forecast to 80.7 million tons. Back in March, it was projecting a crop of 94 million tons.

Russia banned grain exports in 2010 after drought and wildfires devastated its harvest, leading to a surge in global prices. The wheat crop that year, however, totalled just 41.5 million tons, according to the U.S. Department of Agriculture, around half the projected total for this season.

—Reporting for Reuters by Mark Trevelyan; Editing by Toby Chopra

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