Skip to content

Corn-y rationales for tortilla prices don’t sell

19 January 2007

Although the Calderón administration has slapped price controls on tortillas ($8.50 per kilo) the price is still very, very high. 

The NEW “salario minimo” — which is based on a broad market basket of goods and services in Zona “A” (the most expensive parts of the country) is only $50.57 a day.  In theory this is enough for a family of four to get by… but just barely.  The difference between 6 or 7 pesos and 8.50 pesos per day is a huge chunk of an already inadequate income. 

The salario raise was set before the tortilla jump, and the explanations for the jump don’t quite make sense. 

The USDA was reporting back in June 2004 that U.S. corn exports to Mexico had been rising since 1994 (when NAFTA went into effect). 

It’s important to understand the types of corn being exported:

Most of the increased trade has been in yellow corn, used primarily to feed livestock. But over the past 3 years, about 10 percent of this trade has consisted of white corn, which is used to produce tortillas and other traditional Mexican foods.

There are two fairly distinct markets for corn in Mexico: yellow corn for livestock feed and other industrial uses, such as the production of starch and high-fructose corn syrup, and white corn for direct human consumption. Over the next decade, the growth of yellow corn exports is largely assured by the anticipated expansion of Mexican livestock production. Prospects for white corn exports are more difficult to predict, given the changing structure of Mexico’s corn, milling, and tortilla industries.

It’s WHITE CORN — for human consumption — that suddenly jumped.  The standard explanation — that more yellow corn (used also for ethanol production) was planted at the expense of white corn doesn’t make sense. 

Neal Dikeman, a partner in something called a “boutique merchant bank advising strategic investors and startups in cleantech” finds it “funny” that ethanol demand in the United States and WalMart business practices are also sending tortilla prices through the roof. 

I assume he means “that’s weird” as opposed to “ha-ha!  That’s a laugh!” but it’s hard to tell.  They call Economics the “dismal science” for a reason… the practicioners are cold-blooded SOBs to whom humor is a foreign language anyway. 

From what I can decypher of Dikema’s ivory-towered economic gobbledy-gook, increased demand for yellow corn is driving white corn off the market, causing white corn (the kind people eat.  Yellow corn is used for animal feed or ethanol or sweeteners) prices to jump.  That’s a given.  But to Dikeman:

… this price rise is just a perfect example of how globalization can even out the impact of something like ethanol demand on corn prices by spreading the effect across multiple markets and multiple commodities .

In other words… “Oh well, it all works out in the end.” 

He’s just looking at this from an academic viewpoint, and one can safely assume, a few pesos difference (or double the price in some places) won’t hurt him.  He probably doesn’t eat tortillas anyway.  But if they are your “daily bread” this is a matter of life and death. 

And, Dikeman’s theory would only make sense if Mexican farmers — white corn producers — are also planting yellow corn.  They’re not.  They’re being driven off the land by a number of other factors.  Breaking up the ejitals (the collectively owned farms) was probably not done as well as it could have been.  The small individual farms can’t compete against corporate entities in the United States and Canada.  And those countries subsidize both the growers (through fuel rebates among other things) and exports. 

 I’ve recommened Jennifer Rodgers’ website since she’s an expert on the effects of genetically modified corn on indigenous communities.  I’m dubious of the sustainability of corn strains that require chemical fertilizer and special harvesting techniques (i.e., fuel intensive agriculture) in a country where farms are small, independent units, and not huge corporate enterprises.  I think in general, GM corn is going to destroy Mexican agriculture (and… given that Mexico — the motherland of corn — still grows varieties that would be needed if any plant disease was to wipe out a monoculture corn variety, it is very bad disaster planning). 

I’m starting to think GM corn will do nothing but make Mexico more dependent on outside resources (fertilizer and fuel) and do nothing but force more farmers off their own land. I’m surprised the Mexican poster didn’t notice some other possible effects of the tortilla jump.  Wal Mart has been undercutting the mom-n-pop tortilla vendors.  With tortilla sales pretty much limited to two major distributors (Maseca and Cargill — the lattter being a U.S. owned company), Ethanol speculation MAY be a factor, but Dikeman also mentions that Wal-Mart has taken advantage of the situation and is starting to undersell neighborhood tortilla distributors.

Stories that Mexicans are crossing the border to buy tortillas at U.S. Wal Marts seem to fall in the category of “urban legends” (besides higher U.S. prices for basic commodities, there are the tolls and transit costs that wouldn’t make tortillas cheaper in U.S. stores, even with the sudden doubling in price… what people who’ve reported this are probably seeing is Mexican and Mexican-Americans who’ve always shopped at Wal Mart buying their weekly tortillas, and just never noticed before… and jumped to conclusions). 

Tortillas always had a set price when I lived in Mexico City no matter where you bought them. But if you bought from the mom-n-pops, it was mom and pop and their daughter and their nephew and his buddy who were making a living and investing in your neighborhood (and sometimes feeding the neighbors who had late paychecks or hungry kids). Walmart has… employees, not owners (not owners in my neighborhood, anyway — and not owners who swept the sidewalk and gave handouts to the neighborhood dogs).

Dikeman also noticed the glut in yellow corn used for corn sweeteners. He also mentioned NAFTA… and OUR desire to sell genetically modified corn to the nation where corn production began (and where there are still a lot of varieties that aren’t found anywhere else).

Given that there has been a concerted effort to keep corn sweetners (which compete with Mexican grown sugar) on the market (and to avoid a soft-drink tax which would have hurt the foreign sweetner market more than the sugar growers) AND to go ahead with dropping protections for Mexican corn growers (and, probably allowing genetically modified corn to enter the country), both pushed by PAN, I think this post I saw (of all places on Lonely Planet’s Thorn Tree Mexico Message Board — which sometimes has good political/cultural discussions not normally found on tourist message boards) — written by a Mexican national, not a tourist — is on a lot of Mexican’s minds and should be taken seriously:

ISN’T IT IRONIC that the first to suffer under the new PAN president are the poor with the price hikes for tortillas. Kind of gives a new meaning to the phrase “nuestro PAN de cada dia” for much of the population. My understanding is that there is no shortage of white corn here which is what is destined for human consumption. The shortage lies in yellow corn, used mainly for animal feed. So how are the price hikes justified? And is this just a ploy by some to lobby for lifting the ban on GM corn seed?

No comments yet

Leave a reply, but please stick to the topic

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: