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US rice trade with Mexico: Integrated Supply Chain or Just Exports?

US rice trade with Mexico: Integrated Supply Chain or Just Exports?. Eric Wailes University of Arkansas. US rice trade with Mexico. Mexico as an import market for US rice US as a competitive supplier to Mexico Development of an integrated supply chain. Source of rice in Mexico.

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US rice trade with Mexico: Integrated Supply Chain or Just Exports?

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  1. US rice trade with Mexico:Integrated Supply Chain or Just Exports? Eric Wailes University of Arkansas

  2. US rice trade with Mexico • Mexico as an import market for US rice • US as a competitive supplier to Mexico • Development of an integrated supply chain

  3. Source of rice in Mexico

  4. Drivers of growth in rice trade • NAFTA preferences • Tariffs were eliminated on US rice compared to: • MFN rates: • 9% paddy • 20% brown and milled • 10% brokens • Decline in Mexican rice production • Switch to higher value fruit and vegetables • Demand growth driven by GDP growth (2.9%) • Income elasticity of demand 0.46

  5. Competitiveness of US paddy • US is one of few exporters willing to export paddy (along with Argentina and Uruguay) • Phytosanitary barriers maintained by Mexico against Asian rice • Logistical advantages of US

  6. Why paddy exports vs. milled? • Tariff escalation and implicit subsidy for Mexico rice mills • Previous research has suggested that there would be a switch to milled exports with harmonization/elimination of tariffs in NAFTA • Mexican milling industry is competitive • Mexican mills have strong brands in retail market • By-product values are much higher in Mexico than US, especially bran and brokens. • Continuation of countervailing duties on much of US milled rice (all but 2 US mills)

  7. Why the lack of supply chain integration? • US mills viewed as a threat • countervailing duties imposed since 1999 • Mexican partners viewed as too risky • Dominance of few large Mexican mills in branded rice with distribution advantages • Growth of supermarkets who limit SKUs makes these brands valuable and competitive • Greater likelihood in the future that Mexican mills will invest in the US

  8. Summary/conclusions • Yes. US rice is just exports (paddy) • Lack of deeper supply chain integration a result of tension between the Mexican and US millers • May well see integration come from Mexican side as in the case of the baking industry

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