Mexico Battling Demand Dilemma, Rising Corn Prices

MEXICO CITY (AP)--Mexican legislators, producers, and consumers are battling with the government over how best to control the rising price of corn tortillas, a centuries-old staple of the Mexican diet.

Some lawmakers are calling on renewing price controls used in the past, while incoming economy secretary Eduardo Sojo says a better move would be to help farmers increase production.

Rising demand is a major factor pushing up corn prices, Sojo told a news conference Monday - in particular the fact that more U.S. corn is being diverted for the production of ethanol, instead of heading to Mexico’s consumer market.

Regarding the more structural changes impacting demand, Mexico’s government has “to design programs, together with producers and farmer organizations, to increase productivity and the production of corn,“ Sojo said.

The economy and agriculture ministries are devising plans to support Mexican corn farmers through the “correct incentives,“ he said, adding that he wasn’t sure if that would involve subsidies.

Sojo rejected the possibility of price controls, which have been called for by some farming groups and legislators, saying they would create disincentives for production and hurt market efficiency.

Corn prices in Mexico have climbed sharply over the past year following widespread speculation in markets for both locally produced and imported grains, due to uncertainty about how much U.S. corn would be available for Mexican importers.

Although local corn prices are typically volatile around harvest time, which mostly falls in the second half of the year, traders say the farm gate price for white corn saw an unprecedented rise of up to 45% in 2006 compared with the year-ago levels in the Mexican market.

Grains traders have forecast tortilla prices to rise between 20% and 25% during the last quarter of 2006 and the first quarter of 2007.

This isn't related to NAFTA, it's related to the price of corn being high in the U.S.

Yes, it is. Mexico, under NAFTA agreements, ended agricultural subsidies. The U.S. and Canada both continued them, often under different names (fuel subsidies for farmers, corporate tax breaks for agribiz, etc.) This is a HUGE issue in most of the world.

The reporting on drug laws was misleading. The Fox administration's iniatives would have ended the loophole under which people avoided prosecution by claiming very large amounts of controlled substances were for "personal use." Mexico -- and a lot of other countries -- allow what in the U.S. would be an "affirmative defense" in drug possession cases for "medical necessity." The proposed laws simply spelled out what was the largest amount of substances that could be considered under that defense. Somehow, the U.S. press got it bass-ackwards and reported it as "legalizing" those substances. NOT THAT IT HAS ANYTHING TO DO WITH THE PRICE OF CORN... though, narcotics are probably the only agricultural produce Mexican farmers can sell without running into barriers put up to protect agribiz.

This isn't related to NAFTA, it's related to the price of corn being high in the U.S.

"Obviously, it means that formerly productive farmers are otherwise employed in the drug trade, which is more lucrative, even after a corn price increase."

What? The unsuccessful attempts to decriminalize personal use of certain drugs in Mexico that were thwarted last spring have nothing to do with the price of corn. Their internal laws with regard to drug use don't have much to do with anything outside of Mexico. Laws with respect to possession and use of drugs appear to have little relation to demand for drugs and certainly little to do with production of drugs for export. Mexicans have grown marijuana for centuries, and probably for most of that time they've been selling at least some of it up here. Low corn prices or high corn prices haven't really had anything to do with that. The reason they sell so much drugs up here is because we have millions and millions of people up here who like to do drugs with billions and billions of dollars to spend on them. There is nothing new about Mexicans supplying drugs to Americans. They were doing it before the sixties. After drug use surged in the sixties their involvement grew, mainly because they just happen to be the only country on our southern border and that means most all drugs produced in Latin America will go through Mexico before reaching the country that consumes most of the illegal drugs consumed in the world, our country. This was going on long before NAFTA was ever even conceived, and realistically, it isn't going to change anytime in the foreseeable future. Fluctuations in corn prices have nothing to do with it. Corn can go up several dollars a bushel and it will still never be as profitable even as something like cheapo Mexican marijuana that sells in this country wholesale for hundreds of dollars a pound, and certainly nowhere near as profitable as drugs like heroin, cocaine, and meth, that sell in this country for thousands of dollars per pound wholesale. The profits to be made in the drug trade are huge and there will always be plenty of people willing to take the risks involved in that business to share in those huge profits. The wholesale price of corn would have to jump from the less than ten cents a pound it is now (56 lbs. in a bushel) on up maybe even into the hundreds of dollars a pound, or certainly at least many times higher than current prices before some crappy job in the cornfields is going to pull people away from the highly profitable drug trade. You're barking up the wrong tree.

Why don't these socialists just free up their economy so that enterprising Mexicans can take advantage of high prices to plant more corn. Duh!

Agriculture is a very specific branch of economy. Farmers need stability and predictability of prices. That is why subsidies/regulations/quotas may be needed.

When farmers abandon farms and go to city, they cannot return. Every nation needs some degree of food production secured.

I think one of the problems with that is that no one knows what corn prices will be like this year. They can only speculate. American farmers will likely plant several million more acres of corn than were planted last year and if the weather is good and they have a bumper crop the world markets could again be flooded by dirt cheap American corn. Mexican corn farmers are not subsidized like American corn farmers. If the bottom drops out on corn prices our government will pay out enough in subsidies to keep our corn growers in business. Mexican corn growers would do fine if prices remain as high as they are at present, but if prices drop back down as they may very well do, Mexican corn growers will lose their shirts. They're afraid to plant too much corn.

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