WASHINGTON, D.C. - Mexico's soft drink industry is continuing its shift from sugar to high fructose corn syrup (HFCS), a development expected to boost U.S. HFCS exports to Mexico this year, according to a USDA Foreign Agricultural Service report.

The annual assessment of Mexican sugar production and sweetener use indicates Mexico's in-country HFCS production will be similar to last year's despite the increase in corn prices. Industry sources report it's easier and financially beneficial to import additional HFCS supplies from the United States than to build new capacity.

Meanwhile, demand for HFCS is increasing, especially as a replacement for sugar in soft drinks.

Kyd Brenner, a U.S. Grains Council consultant who has worked with the corn sweetener industry, notes these trends are expected.

"When the North American Free Trade Agreement (NAFTA) was first negotiated, the corn industry believed there would be a gradual transition to use of corn sweeteners by the Mexican beverage industry. We did not believe it would occur as fast as it did in the United States, but that it would be a more gradual switch, and that prediction has proven correct."

Trade disputes from 1996 to 2008 interrupted this economic process, according to Brenner, but the full implementation of NAFTA in 2008 opened the doors for free trade in sweeteners with Mexico.

"This has created an additional demand for just over 100 million bushels of U.S. corn, either in the form of sweetener exports or as grain exports to Mexican HFCS facilities," Brenner said. "If we are able to complete the three pending free trade agreements with Korea, Panama and especially Colombia, we could see additional growth in domestic processing demand and export demand for local production."

Mexico's HFCS industry uses about 2 million metric tons (79 million bushels) of corn annually, of which 80-90 percent is imported, according to the industry's association.

SOURCE: U.S. Grains Council