NAPERVILLE, Illinois, Oct 30 (Reuters) - A recent deluge of U.S. corn and soybean export sales has prompted some market-watchers to question whether the demand boost is tied to uncertainties over the outcome of next week's U.S. presidential election.

U.S. grains have been competitive on the global market this year amid bumper 2024 harvests and smaller output from rival suppliers, so healthy demand should be expected.

Unfortunately for U.S. exporters, interest from key trade partner China has been lackluster, though they have sold enormous quantities of corn for delivery to top customer Mexico.

This is noteworthy since trade with Mexico was targeted under the administration of former President Donald Trump, who is now the Republican candidate for president. Trump has proposed massive tariffs on Mexican vehicle imports as well as 60% tariffs on Chinese goods and 10% tariffs on those from all countries.

Trump faces Democratic candidate Kamala Harris in next Tuesday's election.

Trump's threats will not enthuse China, but could Mexican grain importers be front-loading U.S. exports due to fears of a possible trade war? Maybe, though there is no conclusive evidence to suggest this is the case.

However, Mexico depends heavily on U.S. corn, which is probably why it continued importing large volumes of the U.S. grain the last time the two countries got caught in a trade dispute.

MEXICO, USA AND CORN

Trump spent much of his 2017-2021 presidential term working to revamp the previous North American trade pact, resulting in the U.S.-Mexico-Canada Agreement (USMCA) which took effect in 2020. But tariffs, retaliatory tariffs and escalation threats were all involved in the process.

Although Mexico prepared to retaliate against all U.S. farm goods under a worst-case scenario, it generally continued at that time to secure and import record volumes of corn from the United States, retaining its overall share of U.S. corn exports.

This is largely due to the proximity advantage of U.S. corn as well as its abundance. U.S. corn accounted for more than 85% of Mexico’s corn imports last year.

There were fears a few years ago that Brazil could imminently steal a big portion of Mexican corn business from the United States. While this could pose a legitimate threat, Mexico has yet to account for more than 4% of annual Brazilian corn exports.

Bolstered by an expanding livestock sector, Mexico is projected to be the world’s top corn importer in 2024-25, with volumes dropping slightly from record 2023-24 levels on a stronger harvest.

Trump earlier this month said he would renegotiate USMCA if elected, which could stir up tensions between the two countries with historically strong trade relations.

In 2022, cars accounted for 8% of the value of all Mexican exports to the United States while corn accounted for 1.6% of the total value of U.S. imports into Mexico. Refined petroleum was the top U.S. import by value at 13.4%.

Behind China, Mexico was the No. 2 destination last year for U.S. bulk agricultural products such as corn and soybeans. That trade exceeded $10 billion in value and accounted for 17% of the annual total.

CHINA

Considering the U.S.-China trade war that began during Trump’s first term, some traders have said that Chinese buyers are shunning U.S. soybeans for January delivery and onward over tariff uncertainties, opting for sometimes-pricier Brazilian offerings.

They are certainly not front-loading. As of mid-October, China’s U.S. soybean bookings for 2024-25 stood at a 16-year-low if excluding the two trade-war years. Only 43% of total U.S. soybean sales so far are explicitly to China, an 18-year, non-trade-war low.

On the flip side, it might have appeared that China was stocking up ahead of the 2020 U.S. election, especially as it burst onto the U.S. corn market mid-year. But China’s domestic corn prices were surging as stockpiles dwindled, and global corn prices that year had dropped to decade-plus lows.

In other words, China’s own interests were likely behind its rampant U.S. corn and soy export bookings in 2020. Additionally, Beijing gained some goodwill by appearing to fulfill the Phase 1 trade agreement it signed with Washington in January 2020.

President Joe Biden maintained Trump-era tariffs on Chinese goods and even implemented new ones, so many analysts believe trade policies will remain status-quo should Harris win the election.

Regardless, if the next U.S. president takes tougher measures against Chinese imports, it may not result in direct retaliatory tariffs on U.S. agriculture.

But the move could instead motivate Beijing to further invest in South America and other key agricultural suppliers while phasing out U.S. ones, and the same logic could extend to Mexico or other U.S. trade partners if U.S. policies become a hindrance.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

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https://www.reuters.com/markets/commodities/are-election-fears-causing-top-us-corn-soy-customers-stock-up-early-2024-10-31/