How NAFTA Could Affect US and Mexican Pecan Prices

How NAFTA Could Affect US and Mexican Pecan Prices.jpg

The US, Mexico and Canada have shared an open and free trade zone for more than 24 years when the North American Free Trade Agreement was signed into law on January 1, 1994.

Since then many American companies have Utilized the lower labor rates and cost of producing goods and services in Mexico as well as the abundant purchasing power in the Canadian economy. The US and Mexican pecan industries are no different. The US has long utilized the lower labor rates in Mexico to send In-shell pecans to Mexican shellers for pecan shelling at much cheaper rates than can be accomplished in the US, and US pecan shellers also purchase the majority of the Mexican pecan crop to market in the US and around the world.

Now this free and open trading zone is at risk with the renegotiation of NAFTA. US President Donald Trump has called for a renegotiation of NAFTA citing that the US has been losing manufacturing jobs to Mexico, and that Canada does not purchase enough of our goods compared to what we import from them. So how does all this affect the pecan industry, you might ask. For starters, the end user of pecans is likely to see an increase in pecan prices. Since a large majority of pecans are shelled in Mexico due to cheaper labor rates, a new tariff for products crossing the US Mexico border would cause an increase in the cost of production. Then there is the in-shell pecans; the US markets most of Mexico’s pecan crop whether in-shell or shelled pecans, most of the Mexican pecan crop is marketed via US pecan companies. Some US shelling companies even go as far as labeling Mexican Pecans as Made in the USA before shipping them out to customers, but that’s another story. The Trump administration said they were hoping to have NAFTA negotiations completed by the end of 2018, however that is almost certainly not going to happen. Mexico has just elected a new President, Andrés Manuel López Obrador, and he is expected to be “tougher” on “Trump Policies” than his predecessor. It is highly likely that negotiations will be stalled at least until the new Mexican president takes office in 2019.