Judge Martin Adolfo Santos Perez’s ruling allows the executive order issued by President Andres Manuel Lopez Obrador late last year that outlines the planned ban to proceed.

If the ban is implemented, it would dramatically upend the current grains trade between the U.S. and Mexico, including some 16 million tonnes of U.S. exports of yellow corn to its southern neighbor, which is nearly all GMO.

The National Farm Council (CNA) said it regretted its legal loss in a statement later on Monday, and warned that if the bans go into effect, food prices will jump and farmers will become less productive.

The CNA said it is most concerned that “radical and unscientific interpretations” of the planned bans will stoke uncertainty, but did not go into detail, and pointed to approvals over many years from government agencies like the U.S. Environmental Protection Agency backing the safe use of glyphosate.

Mexico’s National Council of Science and Technology (CONACYT) is tasked by the president’s order with identifying a substitute for glyphosate, which thousands of Mexican farmers use to clear fields prior to planting.

Lopez Obrador has defended the ban as designed to boost domestic production of corn, used to make the country’s staple tortillas, and promote more sustainable agriculture.

To date, 17 legal challenges have been filed against the planned ban, according to CONACYT, mostly from companies arguing imminent harm if it is allowed to proceed.

Only two challenges temporarily won support from judges, including a case brought by German pharmaceutical and crop science company Bayer. In both instances those brief injunctions were reversed by other courts.

The CNA has previously argued that prohibiting farmers from using glyphosate would lower yields by at least 30 per cent and make the country more dependent on food imports.

— Reporting for Reuters by David Alire Garcia in Mexico City.

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The Mexican industry chalks up the export growth to new safety measures adopted by plants, as well as relatively smaller-scale operations that have so far kept infections at bay and business humming.

In the United States, there has been a surge of cases of COVID-19, the respiratory disease caused by the novel coronavirus, at slaughterhouses and meat processing plants. That has crimped domestic supply, leading to unease among U.S. consumers and even warnings from leading fast-food burger chains such as Wendy’s that popular menu items may soon be discontinued.

In a recipe for popular discontent, those shortages could cause meat supplies to fall by nearly a third by the end of this month, while prices jump by around 20%.

Mexican beef supplies were already a growing part of U.S. sales prior to the crisis, and they are set for even stronger double-digit growth in 2020, said Juan Ley, president of Mexico’s main cattle growers association.

Leading an industry that spans 20 government-accredited beef-exporting companies including Mexican heavyweights like SuKarne, Ley predicts up to 12 per cent growth in U.S. exports this year, compared with last year’s volume.

Sales to U.S. buyers have already jumped 10 per cent this month, he said, and he expects the same in June.

From the beginning of this year through the first week of May, Mexican beef exports to its northern neighbor totaled nearly 87,000 tonnes, up roughly 8,000 tonnes compared with the same period last year, according to data from the U.S. Department of Agriculture.

In 2019, Mexico was the third-biggest foreign beef supplier to the United States, behind Australia and Canada, with exports reaching 232,000 tonnes. The United States accounted for about 86 per cent of total Mexican beef exports, worth $1.3 billion.

“I think we’re going to leap past Canada this year,” added Ley.

Mexico boasts nearly 30 federally regulated processing plants of varying sizes, able to process anywhere from 600 to 1,800 cows in an eight-hour shift, according to industry data. Almost all of them operate only one shift per day, and vary in size from just 20 workers to several hundred.

In contrast, in the United States just four major beef-packing companies — Cargill, Tyson Foods, JBS and National Beef Packing — control more than 80 per cent of the business.

While much of the beef imported into the United States is used to make hamburgers, most of the beef imported from Mexico is higher-end cuts that end up in grocery stores, said Derrell Peel, a livestock marketing specialist at Oklahoma State University.

Leaner industry

The shift toward foreign supplies has angered many U.S. ranchers, who argue the consolidation of the meatpacking sector and shuttering of processing plants is limiting access to their own marketplace.

“There are about a half-million cattle here that cannot get to slaughter,” said Bill Bullard, CEO of Ranchers Cattlemen Action Legal Fund – United Stockgrowers of America (R-CALF USA).

“I know guys who have had cattle to sell for five weeks, and they can’t even get a bid,” he said.

Ley, head of Mexico’s beef exporters association, is sensitive to the complaints. However, he noted Mexico also imports U.S. cuts in what he describes as a “very complementary” trade that he said was up six per cent this year.

Mexican producers’ near-term gains are made possible by meatpacking plants that have not experienced the same levels of COVID-19 outbreaks as their U.S. counterparts.

To date, no more than 20 processing plant workers across the country have tested positive for the coronavirus, according to the cattle growers association, and no plants have been closed.

In the United States, Smithfield Foods, owned by China’s WH Group, as well as JBS and Tyson Foods, have since April temporarily shut more than a dozen U.S. plants after thousands of workers contracted the virus.

The Mexican government’s tally of confirmed coronavirus infections, currently at more than 38,000 cases, does not include industry-specific totals.

Jose Luis Ordoñez, a meatpacking plant manager just outside the city of Culiacan near Mexico’s Pacific Coast, points to a series of new measures his 350 workers have adopted since the crisis struck in March.

Buses used to transport workers to the plant are now sanitized four times daily, up from just once, and run double the daily routes they used to in an effort to boost social distancing among employees.

Workers now clock in at plants using spaced-out painted footprints, which are also in locker rooms and cafeterias. In cutting rooms, new plastic barriers have been erected.

The body temperatures of workers are also checked three times a day.

“All this has helped a lot be able to achieve the results we have until now,” said Ordoñez, whose plant sells packaged meats under the Santara brand.

Since March, three of his plant’s workers who had presented symptoms of COVID-19 were given tests.

“All negative,” he said.

— Reporting for Reuters by David Alire Garcia in Mexico City and P.J. Huffstutter in Chicago; additional reporting by Tom Polansek in Chicago.

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Trump, whose administration has made passing the United States-Mexico-Canada (USMCA) free trade agreement a priority, unexpectedly said on Thursday he would slap tariffs on all goods coming from Mexico unless a surge of illegal immigrants ceased.

Neil Bradley, executive vice-president and chief policy officer at the U.S. Chamber of Commerce, said the move undermined the relationship with Canada and Mexico.

“This is definitely a roadblock to securing passage of USMCA,” he told CNN.

Trump made his threat the same day that Vice-President Mike Pence visited Ottawa and said he was pushing to get the U.S. Congress to ratify the deal this summer after both Canada and Mexico moved to start the approval process this week.

The news rocked markets and prompted a flurry of protests from Mexican and U.S. business groups.

Mexican President Andres Manuel Lopez Obrador told reporters on Friday that ratification efforts would continue.

“The opinion of the executive is that the process of ratification of the treaty continues, that we comply with the commitments that were made and that we finish soon approving the United States-Mexico-Canada Agreement,” he said.

The Mexican and Canadian governments appeared unclear as to how serious Trump might actually be. The USMCA was agreed last year after 15 months of sometimes acrimonious negotiations marked by episodes of U.S. brinkmanship.

“It is a little strange, to say the least, that he decides to resolve the issue of immigration using tariffs,” Mexico’s Deputy Economy Minister Luz Maria de la Mora said in an interview on Friday.

Canada and Mexico both ship more than 75 per cent of all their goods exports to the United States and are heavily reliant on free trade.

“Following through on this threat would seriously jeopardize passage of USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country,” said U.S. Senate Finance Committee Chairman Chuck Grassley.

In Ottawa, Canadian Foreign Minister Chrystia Freeland declined to comment on what she described as a bilateral issue between the United States and Mexico.

“Our intention is, in so far as possible, to move in tandem with our partners,” she told reporters.

Canada moved to ratify the deal by formally presenting it to Parliament on Wednesday.

Roland Paris, former foreign policy advisor to Prime Minister Justin Trudeau, said there was no reason for Ottawa to react immediately to Trump’s latest move given that Mexico was seeking clarification from Washington.

“That said, Trump’s new threats are a reminder that we will need to remain vigilant, because negotiations for him never seem to be final,” he said in an interview.

A Canadian source with direct knowledge of the situation said Ottawa was aware that Trump had not always followed through with previous threats to impose tariffs on trading partners.

— Reporting for Reuters by David Alire Garcia in Mexico City and David Ljunggren in Ottawa; additional reporting by Frank Jack Daniel in Mexico City, Chris Prentice, Susan Cornwell and Brice Makini in Washington and Kelsey Johnson and Steve Scherer in Ottawa.

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Bosco de la Vega, head of Mexico’s national farm council CNA, told Reuters that such retaliatory measures should only be applied as a last resort and that he supports the Mexican government’s efforts to first seek a negotiated settlement to the dispute.

De la Vega criticized what he described as Trump’s unjustified “mistreatment” of Mexico by threatening the across-the-board tariffs on the country’s exports and emphasized that any potential retaliation should seek to cause the U.S. leader maximum political pain.

“In the unlikely event that (the U.S. tariffs are enacted), we will be supporting the government in surgically implementing tariffs aimed at farm products in Republican states,” he said.

Mexico has employed the strategy before as a means of pressuring Trump’s base of supporters in rural America, by seeking to convince them his policies are counterproductive.

Noting that Mexican officials are “drawing up a new map” of potential U.S. targets, de la Vega emphasized that such measures should only be taken as a last result after negotiations between both sides run their full course.

Nevertheless, the president of Mexico’s national farm council, which represents the country’s largest private sector agriculture and livestock companies, ticked off potential targets for the Mexican government’s possible retaliation, including U.S. grains like yellow corn, pork legs, apples, potatoes and whiskey.

“This would be a last resort and we have to wait to see if by June 10 they’ve solved it,” he said, referring to the date Trump said an initial five per cent tariff on all Mexican exports would take effect if Mexico fails to stop the flow of migrants into the United States.

“I’m betting that they’re going to solve it,” he added.

For decades, Mexico and the United States have engaged in complementary agricultural trade in which U.S. farmers sell large volumes of yellow corn and select meat cuts, for example, to buyers south of the border, while Mexican producers send products such as avocados and berries, among many others, north.

Last year, Mexico exported some US$26 billion in agricultural products to the United States, according to CNA data.

— Reporting for Reuters by David Alire Garcia and Sharay Angulo.

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Reuters reported earlier in the day that Canada was increasingly convinced that Trump would soon announce the U.S. intends to pull out of the North American Free Trade Agreement (NAFTA), sending the Canadian and Mexican currencies lower and hurting stocks across the continent.

“I think it’s indisputable that if Trump announces a U.S. withdrawal from NAFTA, well at that moment the negotiations stop,” said Raul Urteaga, head of international trade for Mexico’s agriculture ministry.

The two other sources, who are involved in the trade talks and asked not to be named, said that Mexico remains firm on its position to get up and leave from the negotiating table if Trump goes through with the move.

While a NAFTA termination letter would start the six-month exit clock ticking, the U.S. would not be legally bound to quit NAFTA once it expires. Washington could use the move as the ultimate sleight of hand as it seeks to gain leverage over Canada and Mexico in talks to update the 24-year-old trade pact.

Trump has long called the 1994 treaty a bad deal that hurts U.S. workers. His negotiating team has set proposals that have alarmed their Canadian and Mexican counterparts.

Among the most divisive are plans to establish rules of origin for NAFTA goods that would set minimum levels of U.S. content for autos, a sunset clause that would terminate the trade deal if it is not renegotiated every five years, and ending the so-called Chapter 19 dispute mechanism.

‘Baby seal’

Though observers in Canada and Mexico have become increasingly gloomy in recent weeks about the upcoming Jan. 23-28 Montreal round, some took heart from a recent speech made by Trump to farmers this week in which he held back from provocative comments about the trade deal.

Urteaga, who was a member of Mexico’s original NAFTA negotiating team in the 1990s, said that Trump’s speech was an “interesting signal.”

“No news, means good news sometimes.”

Michael Sabia, CEO for Caisse de Depot et Placement du Quebec, said Wednesday he believes that if Trump abandons NAFTA, the U.S. would then negotiate a new deal with Canada.

Speaking at a Thomson Reuters Breakingviews event in Toronto discussing predictions for 2018, he said his view is that a U.S. pullout would be “just a prelude to another negotiation.

“We need to think about that in the context of making sure that we handle things in a way that we are well positioned for the subsequent negotiation because it’s hard to imagine that there is never another trade agreement.”

Other factors, such as entrepreneurial activity, could help mitigate the impact of the NAFTA talks failing, he said.

“The future sources of jobs and growth in the Canadian economy are going to come from elsewhere,” he said. “It’s not as though Canada is some baby seal waiting to be slaughtered.”

— Reporting for Reuters by David Alire Garcia, Adriana Barrera and Anthony Esposito; additional reporting by Matt Scuffham in Toronto.

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U.S., Canadian and Mexican delegations finished a second round of talks last week to renegotiate the 23-year-old treaty, which U.S. President Donald Trump has threatened to abandon if he could not get a better deal for U.S. workers.

One suggestion U.S. negotiators raised prior to the first round of talks in Washington last month was to protect certain products by making it easier for U.S. seasonal produce growers to launch anti-dumping cases against Mexico, the people said, citing a presentation made by Mexican officials after the Washington talks.

Mexico is looking at creating its own list, that might include pork, in case Washington formally proposes to give seasonal fruit and vegetable farmers added protection, the people briefed on the matter said.

Mexican negotiators are studying the inclusion of pork legs in its counterproposal, including possible limits on the volume of U.S. exports to its southern neighbour, the people said.

The legs account for the bulk of Mexico’s pork imports from the U.S. and are used to make some of the country’s most popular dishes, such as tacos al pastor and carnitas.

Some Mexican agricultural leaders have said that dairy and chicken could also be deemed sensitive, though those products were not mentioned by the sources briefed on the proposal.

In its NAFTA negotiating objectives published in July, the Trump administration said it would seek a “domestic industry provision for perishable and seasonal products” in trade cases. Since then the issue has not come up in official statements and it was unclear whether the idea was brought up again in the latest round of talks.

However, the possibility of a tit-for-tat response by Mexico to a potential U.S. proposal to limit fresh produce trade highlights the risks of granting exceptions to selected interests. Several U.S. retail, restaurant and agriculture groups flagged such risks last week in letters sent to Trump administration officials.

NAFTA gradually eliminated nearly all tariffs for goods from the three countries. But disputes over certain sectors, such as sugar, have led to negotiated agreements establishing regulated trade in the form of minimum prices and export limits.

Mexican officials have repeatedly said NAFTA’s aim should be to increase, not limit market access. New seasonal produce protections that could more easily curb Mexican fruit and vegetable exports but also invite retaliation, went “against the interest of free trade,” said Raul Urteaga, head of international trade for Mexico’s agriculture ministry.

Urteaga told Reuters there have been no proposals “so far” from Canadian or U.S. negotiators to designate certain sensitive products.

Bosco de la Vega, president of Mexico’s National Agricultural Council, an influential private sector chamber representing farmers interests to the government in NAFTA talks, told Reuters that existing Chapter 19 dispute resolution mechanism was sufficient to resolve allegations of illegal dumping or health safety concerns.

U.S. companies with production on both sides of the border said granting special protection to produce growers in the United States’ southeast over the rest of the industry would limit U.S. consumers’ access to affordable produce.

“The proposal to put temporary tariff barriers to protect one sector will lower vegetable consumption,” said Carlos Visconti, CEO of Red Sun Farms which has greenhouses in Mexico and the U.S., during the NAFTA round in Mexico.

In Mexico, pork farmers have similar grievances to U.S. growers of tomatoes, complaining their U.S. rivals dump into Mexico cheap cuts, such as pig legs, that are less in demand in the U.S.

Apples and potatoes, which are major U.S. exports to Mexico, are also caught up in battles between the two countries, with Mexico using health concerns to slow imports.

Total U.S. exports of pork legs to Mexico reached some 690,000 tonnes last year, or nearly 80 percent of total U.S. pork shipments to its southern neighbor, according to data from Mexican pork association OPORPA.

Overall, Mexico relies on imports for about 44 per cent of domestic pork consumption, which last year reached about 2.5 million tonnes. Before NAFTA, Mexico produced about 90 per cent of the pork it consumed.

“I think if you start negotiating at the edges, or designing at the edges, product by product, some things are protected or carved out as special, then it’s not a free trade agreement,” David MacLennan, chief executive of global commodities trader Cargill, told Reuters.

— Reporting for Reuters by David Alire Garcia; additional reporting by Sharay Angulo.

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Cargill CEO David MacLennan said while it was still too early to assess the full impact of the storm on U.S. farm trade from nearby ports, he suspects freight rates have inched up but that the change would likely be minimal.

“I think it’s still early to tell, but I think it will not have a significant impact on freight and the logistics of agriculture products coming down the Mississippi River and into the port of New Orleans,” said MacLennan.

Barge rates are not impacted by adverse weather conditions in the Gulf of Mexico, and ocean container rates “might spike over the short-term” but increases will likely be temporary, Cargill spokeswoman Valeria Olson wrote in an email.

Operations at Houston’s port will not fully re-open until early next week following plant inspections and the resumption of rail freight service, she said.

A notice on the Port Houston website Friday said all its facilities have resumed operations and its BCT and Bayport container terminal gates will be open Monday.

Cargill, which has not experienced any price spikes in rail rates, does expect to see an increase in certain types of freight to the region as relief and rebuilding efforts get underway in Texas and Louisiana, she added.

MacLennan also said he was “cautiously optimistic” that the outcome of talks to redo the North American Free Trade Agreement would be beneficial for Canada, Mexico and the U.S. and that it would be a mistake to ditch the pact.

While he said an updated NAFTA should allow for “greater convergence for food safety and animal health regulation,” the deal overall has been a boon for the region’s farm trade.

The executive said agriculture trade under NAFTA has grown from roughly $9 billion to $39 billion over the 23 years that the accord has been in effect (all figures US$).

— David Alire Garcia is a Reuters correspondent based in Mexico City. Includes files from AGCanada.com Network staff.

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