MEXICAN CORN PRICES AND ETHANOL

http://www.csmonitor.com/2007/0521/p09s02-coop.html?page=1


In a recent Christian Science Monitor article, many good points were made about the effects of ethanol on corn prices. I’m not sure every point was on the mark however.

"..in Mexico, where corn is a staple food, the price of tortillas has skyrocketed because US corn has been diverted to ethanol production. "

It is my understanding that another major issue with tortilla prices (food grade white corn) is the lack of biotech varieties. There have not been enough biotech white corn varieties approved for human consumption, making these crops much more difficult and expensive to grow for our producers, so few are willing to grow it anyway. As a result, white corn accounts for less than 1% of US corn production, and already trades at a premium.

Further, even with NAFTA, there are trade barriers that prevent US corn producers from exporting white corn to Mexico. Even in the case of drought and severe shortage over- quota tariffs are quite steep.

Now I also understand that increased corn prices may be leading producers to destroy agave crops- used for tequila. Would the price of corn in Mexico be so high if they could relieve market pressure by importing ?

If ethanol has anything to do with the current plight of Mexican food prices, it is only adding to the misery created by previously existing anti-free trade policies.