The doors are open
Mar 02, 2017
MEXICO CITY, MEXICO – Yesterday, the Government of Mexico (GOM) officially announced permits of up to 150,000 MT of rice (all types) originating from non-free trade agreement countries, opening the door for Vietnamese milled rice to enter Mexico duty free. The permits will be issued to Mexican companies and be valid through December 31, 2017.
The announcement, which was rumored for months and reported here (see USA Rice Daily, February 2, 2017), was published in Mexico's Official Gazette.
Viet Nam last had duty free access to the Mexico market from 2008 through December 2014. During that period sales were zero from 2008 through 2012; in 2013 sales rose to 11,676 MT; in 2014 sales were 66,642 MT; and in 2014 sales fell to 2,096 MT. All rice sold by Viet Nam to Mexico is long grain milled rice as there is no phytosanitary protocol between the two countries that allows paddy rice to be imported.
The Mexican trade does not expect an immediate surge in milled rice imports from Viet Nam or a displacement for U.S. rice. Traders report that price spreads are not currently large enough to favor Asian rice over U.S. rice and that these spreads need to be significant to offset foreign exchange risks, increased delivery times, and potential phytosanitary issues. In addition, aggressive pricing by Mexican millers has also contributed to decreased need for Asian rice. However, the threat of increased Asian imports does exist, especially as the potential for price spreads widens.
“For a long time, Mexico has been an almost exclusively paddy market and a lock for U.S. exporters,” said Brian King, chairman of USA Rice and of USA Rice’s Western Hemisphere Promotion Subcommittee. “But Mexican imports have diversified over the past decade, where milled rice now makes up approximately 25 percent of the total. While the U.S. still dominates the paddy market, Uruguay has supplanted U.S. as the leading milled rice origin for what the trade reports as having better quality.”
In 2016, the U.S. delivered 48,750 MT of milled rice for only a 32 percent market share, the lowest on record. Viet Nam had very minor deliveries to Mexico in 2016 as the 20 percent duty was in effect.
According to data from the GOM, in the first month of 2017, Mexico reported deliveries of U.S. milled rice of 19,214 MT, the largest sales month on record. Uruguayan rice deliveries fell 26 percent (compared with January 2016) to 7,622 MT. No milled rice imports were recorded for other origins in January 2017.
“Talk in Washington of renegotiating NAFTA has clearly gotten Mexico’s attention, and the government there is looking to diversify sources of supply for products like rice. Our prices and proximity make us competitive today, but competition is increasing, especially in the value-added milled rice market. We’ll continue to educate the new administration on the importance of NAFTA and engage with our partners in Mexico to strengthen ties in our number one export market,” concluded King.