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

5. Source of rice in Mexico

6. 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

7. 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

8. 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)

9. 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

10. 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