A new export data analysis shows that U.S. free trade agreement (FTA) partners continue to be consistently large buyers of U.S. grains in all forms (GIAF).
The U.S. has 14 FTAs in place with 20 countries. These trading partners continue to represent some of the largest and most loyal customers for U.S. corn, sorghum, barley, ethanol, dried distillers grains with solubles (DDGS), corn gluten feed/meal and other co-products.
FTA partners purchased 59.4 million metric tons (2.34 billion bu. in corn equivalent) of U.S. GIAF in the 2018-19 marketing year, representing 55% of total GIAF exports, according to U.S. Department of Agriculture trade data and the analysis by the U.S. Grains Council (USGC). That slice of the overall demand pie, USGC said, has stayed consistent in the first six months of the 2019-20 marketing year, with FTA partners purchasing 56% of U.S. GIAF exports, equal to 24.7 mmt (972 million bu. in corn equivalent).
“The enduring strength of demand from FTA partners once again demonstrates the importance of the market access provided by these agreements,” USGC director of trade policy and biotechnology Floyd Gaibler said. “Working to defend and expand markets allows the council to do what it does best: capture short-term market opportunities and build long-term demand for U.S. coarse grains and co-products.”
North American trading partners top list
According to USGC, Mexico and Canada continue to represent the largest FTA trading partners, thanks to geographic proximity and duty-free access provided by the North American Free Trade Agreement (NAFTA) and maintained in the U.S.-Mexico-Canada Agreement (USMCA). Since the NAFTA’s inception in 1994, U.S. agricultural exports to Canada and Mexico tripled and quintupled, respectively, bolstered by these comparative advantages, well-developed North American supply chains and robust market development work by USGC and its members.
In the current marketing year, Mexico continues to rank as the top market for U.S. corn, barley and DDGS, the second-largest market for U.S. sorghum and the ninth-largest market for U.S. ethanol. Canada is the second-largest buyer of U.S. ethanol buyer and barley, the fourth-largest buyer of corn and the seventh-largest buyer of U.S. DDGS.
Central America represents growing demand
USGC said the proximity of Central American markets also facilitates the movement of U.S. agricultural goods, supported by market access advantages built into the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR).
CAFTA-DR is a regional free trade agreement between the U.S. and Central American trading partners: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. The agreement allows favorable tariff treatment for more than 95% of U.S. agricultural products, including corn.
The agreement entered into force in 2006, and USGC has worked since then to emphasize U.S. origin advantages to regional buyers and end users. As a result, U.S. corn exports to CAFTA-DR countries have increased more than three-fold since the agreement went into effect.
Three of these markets -- Guatemala, Honduras and Costa Rica -- all rank in the top 10 U.S. corn buyers for the 2019-20 marketing year thus far, continuing growth from 2018-19. Guatemala ranked as the eighth-largest buyer, at 1.22 mmt tons (48 million bu.) in 2018-19, the first time the country purchased more than 1 mmt. Costa Rica continued an upward streak for the last four marketing years, purchasing 885,000 mt (34.8 million bu.) in 2018-19.
New Japan agreement strengthens trade relationship
While the U.S.-Japan Trade Agreement, which went into effect on Jan. 1, 2020, is not a comprehensive trade agreement, USGC said it does provide important market access provisions for U.S. coarse grains, co-products and ethanol.
The agreement solidifies trade with Japan by maintaining a zero duty on imports of corn for feed and eliminating a 3% tariff for corn other than feed. Japan will eliminate U.S. sorghum tariffs, which are as high as 3%, and reduce a markup on barley for feed. The agreement also includes a staged reduction for U.S. ethanol, corn, barley and sorghum flour. It preserves duty-free market access for U.S. feed and food corn, corn gluten feed and DDGS.
So far in the 2019-20 marketing year, Japan ranks as the second-largest market for U.S. corn, third-largest market for U.S. barley/barley products, fourth-largest market for U.S. sorghum and sixth-largest market for U.S. DDGS. If these purchases were added to the FTA trading partner total, USGC said it would further strengthen the market share offered by the closest of U.S. grain buyers.