Spatial Integration of Mexico-U.S. Grain Markets: The Case of Maize, Wheat and Sorghum

Resumen

The Mexican government embarked on agricultural trade liberalization in the 1990s, and agricultural trade flows in North America increased. Based on data on Mexico and United States of America (U.S.) prices of maize, sorghum and wheat from 1981 to 2010 we show that trade liberalization between Mexico and the U.S. under the North American Free Trade Agreement (NAFTA) resulted in a structural change in prices received by Mexican producers of these crops. We found that this change coincides with convergence with U.S. prices of maize, sorghum and wheat in Mexico food consumption. Hence, the study provides evidence that trade liberalization led to greater integration of Mexico-U.S. agricultural markets. We also shown that for the three studied crops, there is a long-term relationship between their price series and an increase in the speed of adjustment of domestic prices in response to changes in international/U.S. prices.