Mexico buys corn futures to ensure tortilla prices remain flat

Discussion in 'Economy' started by Sunni Man, Dec 26, 2010.

  1. Sunni Man
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    Sunni Man Diamond Member

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    Mexico City – In 2007, massive impromptu street protests threatened the popularity of Mexican President Felipe Calderón. But it was not drug violence or kidnappings that prompted the outcry. It was the price of corn tortillas.
    Now the Calderón administration faces a repeat scenario. High corn prices are threatening to put Mexico’s staple out of reach for those who depend on it most for the bulk of their daily caloric intake.
    Earlier this month, tortilla makers said that prices could rise by 50 percent. An increase of the same amount led to the so-called “tortilla riots” of 2007. At that time, the Monitor attended marches with protesters angrily gripping onto cobs of corn and chanting, “Without corn, we aren’t a country.”
    The government blasted the price-increase threats and set off on an inspection spree to make sure tortilla shops have not raised their prices. But most unusual – and perhaps a sign of how important the image of affordable tortillas are in a country that once worshipped corn gods – is the announcement it has purchased a form of corn insurance to safeguard prices into next year, reported the Financial Times.
    The futures, announced by Economy Minister Bruno Ferrari, should allay consumer concerns, he says. “The prices are guaranteed,” he said to the local media. “The supply necessary until the third quarter of next year is covered.”
    Concerns about tortilla prices sparked after the president of the National Tortilla Industry Union, Lorenzo Mejia, announced in a press release earlier this month that prices for a kilogram (2.2 pounds) of tortilla could rise to 12 pesos, or just under one dollar, and then continue to rise. The national average is currently at about 9.88 pesos. In Mexico City, it is 8.65 pesos.
    Mexico’s Economy Ministry immediately responded, saying that tortilla price hikes are not justified because production of white corn, used to make tortillas, has been sufficient for satisfying domestic demand. The ministry also announced it would work alongside Mexico’s consumer watchdog to protect against price gouging.
    David Mendoza, a tortilla seller in a downtown Mexico City food market, was selling tortillas for 8.5 pesos a kilo. He says the consumer watchdog came two weeks ago to inspect their prices and that he expects to have to raise his prices at some point next year.
    Corn futures rose earlier this week to a 29-month high, in part because of dry weather in Argentina, a major producer.
    Back in 2007, with Mexicans pulling out more pesos, the government threatened to sue hoarders, increased corn quotas for import, and capped prices. It even led to more talk about breaking up monopolies in Mexico that many blame for unfair prices.
    Brenda Mendoza, who works at a food stall in a Mexico City market, says "I was worried when I heard prices would go up, because everything is more expensive. But the government did not authorize it, thankfully."

    Mexico buys corn futures to ensure tortilla prices remain flat - Yahoo! News
     
  2. loosecannon
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    loosecannon Senior Member

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    China is hoarding food and getting set to distribute it cheap too, to curb public unrest over inflation that has driven the price of food for the Chinese poor to half their income.
     
  3. Mr. H.
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    Mr. H. Diamond Member

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    Thanks goodness they don't have a corn ethanol industry.

    Maybe we could send them our ethanol to power their farm equipment so they can grow more corn.
     
  4. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    This is the main reason that corn prices have risen. Let's burn our food for fuel! :uhoh3:
     
  5. Mr. H.
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    Mr. H. Diamond Member

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    Let them eat sopapillas.
     
  6. uscitizen
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    uscitizen Senior Member

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    Of course commodity traders have no impact on the price of corn..
     
  7. william the wie
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    william the wie Gold Member

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    With Argentina's farm policy (very long story), the real possibility of another drought in Russia next year, flooding in Pakistan and the Chinese labor shortage that is cutting into agricultural output famine next year is a real possibility. Ain't no blinking speculation needed to cause a price rise.
     
    Last edited: Dec 26, 2010
  8. loosecannon
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    loosecannon Senior Member

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    I agree famine looks somewhat likely. Or at least shortage driven by hoarding.

    Within a few years I think we will cross over the line wherein food is routinely hoarded and is not auctioned on the commodities exchanges in several nations that can afford to do otherwise. Russia, India, China and the US to name 4.
     
  9. uscitizen
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    uscitizen Senior Member

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    Perhaps we will get back to trading food for oil?
     
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  10. william the wie
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    william the wie Gold Member

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    China and Argentina are destroying their agricultural base with fiscal and industrial policy so I don't think Chinese hoarding is a long run possibility.
     

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