With China and Canada already hitting back against U.S. President Donald Trump’s tariffs and concerns over more retaliation in the works, agriculture traders are now watching for potential cancellations on crop contracts that would put nearly 8 million tons of American corn sales at risk.
The issue stems from so-called outstanding grain sales — or crop exports that have been booked, but are yet to be shipped. Levies against U.S. goods have the potential to lead to canceled contracts if the cost of the cargoes for foreign buyers rises and as uncertainty over trade policy creates higher risks.
Beijing has already enacted countermeasures on a range of agricultural commodities and Canada has also hit back, including on food products. Mexico plans to make an announcement on Sunday.
“The risk is that Mexico cancels U.S. corn,” said Pat Boova, the director of International Agribusiness Group LLC. “Mexico could put their own import tariffs on — that could reduce the U.S. freight advantage. It’s a matter of how fierce the trade war gets.”
There are 7.8 million tons of outstanding corn sales to Mexico for the current marketing year. Another 4 million tons of soybeans, wheat and sorghum for this season also haven’t been shipped to China, Canada and Mexico as of Feb. 20, the most recent U.S. Department of Agriculture data available show.
Mexico is the biggest buyer of U.S. corn, with purchases last year valued at $5.6 billion. Typically, the shared border between the two countries lowers transportation costs, making it cheaper for Mexico to source from the U.S. The potential for retaliatory tariffs on American corn could change that dynamic.
As of Feb. 20, Mexico had committed to purchasing 17.6 million tons of American corn this season. That’s a record, but is still about 30% short of what the USDA expects the country to import this year — meaning that Mexico will likely have to source more from the US or elsewhere, such as Brazil, where it has bought from in the past.
“Mexico is a bit of a wild card, as they normally will take U.S. grain imports throughout the season, but they don’t have a ton of options,” said Matt Campbell, a risk management consultant at futures and options brokerage StoneX. Continued trade tensions lasting into the fall harvest season would increase risks for American shipments and “could very easily hurt the new crop demand,” he said.
Meanwhile, Chinese contracts for American soybeans “could be on the chopping block,” but there isn’t “a massive amount of unshipped sales so it isn’t quite as bad as it could be,” Campbell said.
China may drop some cargoes “to get some headline impact,” but buyers haven’t purchased a lot yet and may choose to roll existing contracts to the next year, “hoping that we have an agreement by that point,” said Arlan Suderman, the chief commodities economist at StoneX.
More than half a million bales of cotton are also slated to be shipped to China and Mexico. Mexico could cancel some bales, but demand is likely to remain as U.S. cotton is “now the cheapest in the world,” said Louis Barbera, managing partner at VLM Commodities. Cotton futures in New York slumped Tuesday to the lowest intraday price since August 2020 after China announced its retaliatory levies.