Strong sales to Mexico and Canada continued six months into the 2018-19 marketing year (September 2018 to February 2019), according to recently released data from the U.S. Department of Agriculture and an analysis by the U.S. Grains Council (USGC). This year’s sales underpin the importance of the duty-free access provided by the existing North American Free Trade Agreement (NAFTA) and the ongoing efforts to finalize the U.S.-Mexico-Canada Agreement (USMCA), USGC noted.

Mexico remains the top customer for U.S. corn exports, at 8.59 million metric tons (338 million bu.) thus far, up 26.3% year over year, and it is the top buyer of U.S. dried distillers grains with solubles (DDGS), at nearly 978,000 tons thus far this marketing year. Mexico has also purchased 16.59 million gal. of U.S. ethanol in this marketing year, in addition to significant quantities of sorghum and barley.

USGC reported that Canada continues to rank as the second-largest buyer of U.S. ethanol, at 159.2 million gal. so far this year, up nearly 5% on the year. It is also the sixth-largest buyer of U.S. corn, at 1.18 million tons (46.5 million bu.) so far, up nearly 77% from the same time period in the previous year, and is the seventh-largest buyer of U.S. DDGS, at 316,000 tons.

The well-developed North American supply chains and robust market development work by USGC and its members have established this strong export growth, making USMCA a critical component of maintaining and expanding these top markets.

The U.S. International Trade Commission (ITC) released its economic analysis of USMCA on April 18 -- an important step in the procedures required for congressional approval of the agreement under trade promotion authority (TPA).

The report concluded that USMCA would boost U.S. gross domestic product by $68.2 billion and add roughly 176,000 jobs. According to the analysis, the combined effect of all USMCA provisions would increase total U.S. agricultural and food exports by $2.2 billion when fully implemented.

“The ITC report shows how important USMCA will be to maintaining crucial market access for U.S. grain farmers and exporters to Mexico and Canada,” USGC chairman Jim Stitzlein said. “We look forward to continuing to help expand markets with our long-term business partners and friends in both countries.”

Typically, ITC reports under the TPA process measure the economic impact of new trade agreements. Because USMCA maintains NAFTA's zero tariffs on U.S. feed grains, co-products and ethanol, the ITC report, by itself, could not fully capture the full economic benefit of USMCA. A similar analysis done before NAFTA went into effect also showed likely growth for feed grains, but at a much smaller order of magnitude than the combination of strong trade policy, robust market development and grain markets has created over the past 25 years.

Beyond maintaining duty-free access to the Mexican and Canadian markets, USMCA also provides the highest enforceable sanitary and phytosanitary standards in any agreement to date, includes an enforceable biotechnology chapter – the first ever in a U.S. trade agreement – and creates a rapid response mechanism to address trade challenges. Furthermore, the agreement addresses regulatory equivalence, science and risk analysis, transparency and cooperative technical consultations.

These aspects of the agreement are more difficult to quantify but are significant wins for the agriculture industries in all three countries and pave the way for continued partnerships and trade growth, USGC noted.

Stitzlein testified before ITC in November 2018 on the importance of USMCA, saying the pact would remove remaining barriers to grain trade in the region and bolster continued growth in North American markets for commodity grains and value-added grain products like meat and ethanol.

“Trade agreements hold the key to opening markets and resolving tariff and non-tariff barriers to allow movement of coarse grains, co-products in all forms and other agricultural exports where they are demanded,” Stitzlein said in his testimony. “With effective policies in place and followed, trade works, and the world wins.”

USGC said the next step in the TPA process is for the Trump Administration to submit to Congress a draft Statement of Administrative Action and the final text of the implementing legislation of the agreement, which is required 30 days before a bill can be formally introduced.