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Potential response of Mexican consumers to a Ban on genetically modified Maize imports [1]

['Mcfadden', 'Brandon R.', 'Mcfadden Uark.Edu', 'Department Of Agricultural Economics', 'The University Of Arkansas', 'Fayetteville', 'Nalley', 'Lawton Lanier', 'Durand-Morat', 'Yang']

Date: 2024-10-29

On December 31, 2020, the Andres Manuel Lopez Obrador administration published a decree calling for Mexico to phase out glyphosate and genetically modified (GM) maize for animal and human consumption by January 31, 2024.Footnote 1 A total ban on GM maize would have widespread implications across the Mexican economy, particularly impacting the production and consumption of livestock products and tortillas. Mexico has the highest per capita consumption of eggs globally, averaging 409 eggs per person in 2021 (WATTPoultry, 2022). Eggs are the second largest (17%) source of protein in the Mexican diet, only behind poultry meat, which accounts for 39% (Union Nacional de Avicultores, 2022). Tortillas provide around 13–20% of the daily caloric intake for Mexicans, who eat an average of six daily (World Perspectives, 2022). Per capita, tortilla consumption in Mexico is approximately 75 kg per year (USDA FAS, 2022).

The potential impacts of the decree on Mexican consumers are still being determined. A World Perspectives (2022) study estimated that implementing a ban on GM maize for livestock feed would lead to an increase of 66.7% in poultry meat prices in Mexico and reduce consumption by 78%, as maize represents 60–73% of the cost of production of broilers (Union Nacional de Avicultores, 2022). The World Perspectives (2022) study also estimated that tortilla prices would increase by 30% in the third year after the ban and by an average of 16% in the decade following the ban’s implementation. The increase in tortilla price is mainly driven by the response to the decreased availability of yellow maize via the ban, resulting in increased area planted to yellow maize in Mexico for livestock feed, reducing the supply and increasing the price of white maize (and tortillas). Further, given an average Mexican tortilla is estimated to consist of approximately 82% white maize flour and is blended with 18% yellow maize flour, there are direct (yellow maize) price impacts on tortilla prices as well (USDA FAS, 2023). Moreover, prices may rise for Mexico’s poorest populations to the point where eggs become a luxury item, even given that Mexico is the largest per capita consumer of eggs globally.

Approximately 45% of Mexicans live in poverty, and 23% are food insecure (Shamah-Levy et al., 2017). If the estimated price changes reported by World Perspectives (2022) are correct, the ban will likely exacerbate food insecurity. Engel’s Law asserts that low-income consumers spend a greater proportion of their disposable income on food than higher-income consumers, which holds in countries with lower poverty rates like the U.S. (Lusk and McFadden, 2021). For example, the lowest-income decile in Mexico spends 52% of its income on food, and lower-income Mexican consumers spend a larger proportion of their relative and absolute income on tortillas than the wealthiest decile (Otero et al., 2015).

Satter’s Hierarchy of Food Needs (Satter, 2007) posits that individual or household food needs can be described by different sequential levels (i.e., enough food, acceptable food, ongoing access to food, good-tasting food, novel food, and instrumental food) and the needs at lower levels must first be satisfied before progressing to the next level. It could be argued that banning the imports of GM maize into Mexico is attempting to provide “novel food” in the form of more expensive products derived from non-GM maize, which is at odds with sourcing “enough food” for the many consumers at the lowest level of Satter’s Hierarchy of Food Needs. Understanding the needs of lower-income consumers is also important because previous research has shown that the preferences concerning GM food and the associated risks and concerns perceived by consumers are diverse, so the “average consumer” analysis can be misleading (Hu et al., 2004).

Before imposing the decree, government officials in Mexico did not consult with consumer groups or livestock producers who rely on GM maize imports to survive economically. One of the primary reasons President Obrador gave for the decree was to “… use agroecological practices and inputs that are safe for human health” (USDA FAS, 2021). Juan Cortina, the president of the Mexican National Farm Council, expressed concern about the ban on GM maize for the livestock sector in Mexico: “Even if we wanted to import it [maize for feed] from somewhere else, it does not exist, transgenic or non-transgenic. Those volumes do not exist for importation from somewhere else, especially efficiently, as it is currently acquired from the United States” (Reuters, 2021). President Obrador also failed to meet with Mexican maize producers as he suggested: “…replace the use of glyphosate by workers who can clean up the crops with machetes” (Dominguez, 2021). As such, the decree can be seen as an expression of political will rather than a reflection of the needs and desires of farmers, producers, scientists, and consumers (Ventura, 2022).

Maize is Mexico’s most important crop in production and consumption, accounting for over 80% of all cereal production, 14.5% of the agricultural gross domestic product, and 20.9% of the household food expenditure (Secretary of Agriculture of Mexico, 2017). Mexico bought more than 20 million metric tons of maize from the United States in the 2021-22 marketing year, second to only China, with an estimated value of $4.92 billion (USDA FAS 2023). Maize in Mexico can be segregated into two main markets: yellow maize, which represents 39% of the maize market and is mainly used for animal feed, and white maize, which represents around 61% of the total maize demand and is destined for human consumption. Mexico imports over 75% of the yellow maize (which represents only 13% of the domestic production) and white maize (which represents 87% of the domestic production) (Secretary of Agriculture of Mexico, 2017). Mexico relies heavily on U.S. maize imports, mainly yellow maize, for livestock production. Over 90% of U.S. maize is GM, which would drastically impact bilateral trade should the GM ban be implemented. Over the last five marketing years (2017/2018–2021/2022), yellow maize accounted for an average of 95% of U.S. exports to Mexico, with white maize traditionally used for tortillas accounting for the remaining 5% (Williams et al., 2022). An average Mexican tortilla is estimated to consist of approximately 82% white maize flour and is blended with 18% yellow maize flour (USDA FAS, 2023).

On February 13, 2023, the Mexican government published a new decree clarifying that the ban applies to the sale of GM maize seed and GM maize for human consumption in Mexico and added an exemption for GM maize for animal feed (Mexico, 2023). U.S. maize exports to Mexico in 2022 were worth about $5 billion, and maize for human food use comprises about 21% of Mexico’s maize imports from the U.S. (Garrison, 2023). The newly revised decree states that Mexican authorities will carry out “the gradual substitution” of GM maize for human consumption (The Associated Press, 2023a). Still, it sets no date for doing so and says potential health issues will be the subject of study by Mexican experts “with health authorities from other countries” (The Associated Press, 2023b).

The revised decree clarifies that Mexico reserves the right to take precautionary measures it considers essential to protect public health and the environment, including the genetic integrity of its diversity of native maize (Mexico, 2023). U.S. industry representatives and government officials have repeatedly insisted that Mexico’s actions are based not on science but on protectionist policies and that the decree contradicts Mexico’s commitments under the Sanitary and Phytosanitary (SPS) Measures chapter of the United States-Mexico-Canada Agreement (Lawder, 2023). GM import bans have been used to protect local agriculture in other places. For example, Heilongjiang, China’s largest producer of non-GM soybeans, banned GM imports in 2016 despite the central government’s plan to commercialize GM varieties. The import ban was used to protect the Heilongjiang non-GM soybean sector after the importation of GM soybeans caused several non-GM crushing plants to close in the region (Zhang & Wu, 2024). Other countries (e.g., European Union member states) have enacted slow, stringent approval processes for importing GM varieties that can implicitly ban imports (Kerr, 2015).

Interestingly, one of the tenets of Article 6 of the Presidential Decree claims that it aims to contribute to food security. Still, it is difficult to see how increasing the price of yellow maize under the first version of the decree, estimated to increase by 81% in some studies, in Mexico will enhance food security (Macall et al., 2021). Food security risks associated with GM bans have played out in other countries. For example, in 2020 Zimbabwe lifted an import ban on GMs that had been in place for 12 years after the worst drought in decades that resulted in more than half of the population needing food aid (Ndlovu, 2020). Similarly, Kenya banned GM crops in 2012 and then lifted the ban in 2022 after experiencing its worst drought in 40 decades and soaring food prices (Oloo, 2022).

There is some literature on the impacts of the presidential decree on producer and consumer prices (Macall et al., 2021; World Perspectives, 2022). Previous literature has shown that marginalized Mexican maize producers refrain from discounting GM maize relative to non-GM varieties (Birol, Villabla, and Smale, 2009). Still, a gap exists on whether Mexican consumers support the ban and would be willing to pay (WTP) for the impacts of its implementation. To our knowledge, research has yet to be conducted on what consumers are WTP for non-GM maize products, specifically for the potential price increases associated with implementing the initial decree.

Given that the decree was not a referendum, this study sets out to survey Mexican consumers about their knowledge of the potential GM import ban, if they support the ban, and if they are WTP, the estimated price increases on three staples (chicken, eggs, and tortillas) which will likely be affected by the decree. Maize has cultural and dietary importance in Mexico, and this study fills this gap by first determining which consumers (by socioeconomic group) would be WTP for the ban and if that premium is large enough to offset the predicted price impacts of the ban. Importantly, this study focuses on whether more affluent consumers drive support for the ban and if their WTP differs from low-income Mexican consumers. One large contribution of this study is to estimate if the ban is being forced on low-income consumers who could likely not afford to pay the necessary premium for non-GM maize products, leaving the poor with even fewer options to try and alleviate food insecurity. The results of this research will provide policymakers with important information about whether Mexican consumers support the decree and if they are WTP the expected price increases by its implementation. More generally, this study’s findings can serve as a roadmap for future studies about the economic impact of agricultural policies and the importance of assessing consumer preferences to gauge the political feasibility and economic implications of policy proposals.

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[1] Url: https://link.springer.com/article/10.1007/s12571-024-01483-8#Fig1

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