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The only problem

4 January 2011

Outside this country, and even from commentators inside, you’d think the Calderón Administration’s attempts to control the narcotics export market was the only problem worth writing about.  I said aboth here and in other places that narcotics are a commodity, the production here being overwhelmingly for export.  But, if you think it is the only commodity of any importance, or even overwheming importance, think again.  We’ll have national elections coming up in 2012, and there is a vital commodity  issue that affects a lot more of the voters in this country than marijuana and opium poppies.

María del Carmen Martínez (The [Mexico City] News):

While tortillas, natural gas and gasoline registered price hikes in 2010, authorities said Thursday that the cost of these basic goods is expected to increase again in 2011, negatively affecting the economy of poorer Mexican families.

Throughout 2010, the price on tortillas rose by as much 2 pesos per kilo, depending on the area. In some regions, the Federal Consumer Protection Agency (Profeco) said, the price of tortillas increased from 8 pesos to 12 pesos per kilo, while in other states, tortillas cost between 13 and 15 pesos a kilo.

Nonetheless, Profeco officials said that there is no justification for the rise since many other basic products, including corn, experienced a price drop in the international marketplace. The price of a tortilla, Profeco said, is established by the cost of corn.

Well, the price of corn, the price of natural gas to cook the corn, the price of gasoline to transport the corn,..

The price of gasoline went up 10 times this year. Authorities said that regardless of Profeco’s official dispositions, tortillas will most likely go up again in 2011. Profeco also predicted that gasoline will undergo several increases next year, although these rises will be gradual.

Last November, the Treasury and Public Finance Secreariat (SHCP) said that the rise in gasoline prices in 2011 would be similar to that of 2010, meaning magna, premium and diesel gasoline will rise 8 cents per liter every month. The government agency said that this gradual rise does not mean that Mexico’s rates are above international standards. Natural gas prices are expected to rise by 5 cents a cubic liter every month.

Not to mention that, given the NAFTA agricultural rules that came into effect on 1 January 2010,  Mexican farmers can’t compete against corporate U.S. farmers, and Mexico is more than ever dependent on U.S. corn production.  And as to U.S. corn futures for 2011 …

Stephen Koff, Cleveland Plain-Dealer:

WASHINGTON, D.C. – The United States has long embraced its corn farmers, and just this month Congress extended tax breaks for ethanol refiners so they’ll keep making their corn-based alternative fuel. With China, too, relying on a lot of U.S.-grown corn for ethanol, 2011 could be a bumper year.

Yet if high demand brings tight supplies and higher costs, the coming year could also bring higher grocery prices for American families, according to analysts in the agriculture, commodities and grocery industries.

If corn prices rise as high as some extreme estimates, “you’re going to have more expensive lots of things,” said Tom Jackson, president and CEO of the Ohio Grocers Association.

The question neither he nor anyone else can answer is whether this will actually happen.

It depends on factors that include the weather, the kinds of crops that farmers choose to grow, the world’s supply of corn and its demand, the price of gasoline and other fuels, and even the world’s import and export practices. If none of these change, it follows that as more corn winds up in fuel tanks in the form of ethanol, there will be less corn for corn flakes, high-fructose corn syrup and feed corn for cows and chicken. A tight supply would drive up consumer prices for all these end products.

Prices for corn futures, at $6.23 a bushel this week on the Chicago Mercantile Exchange, are already higher than they’ve been in two and a half years. A brokerage in Singapore, Phillip Futures, this week predicted they would explode by another 36 percent in 2011, to $8.50 a bushel, driven at least partly by demand from China and by renewed tax incentives given to this country’s ethanol producers.

Mexico has already moved to control the price of corn tortillas, whose high costs in early 2007 touched off food riots. Mexico’s government bought futures contracts that guarantee a fixed price for corn until the third quarter of next year, according to the Financial Times last week.

Which means, about September of this year, the political situation may change radically, if it hasn’t by then as people lose even more patience with the lame duck government.  If I have a prediction, it is that foreign press reports will continue, though, to write on any political or social unrest as somehow related to narcotics,  which, it seems, is our only problem.

One Comment leave one →
  1. ... permalink
    4 January 2011 8:07 pm

    Mr. Grabman, you totally have to write an article about the Maynez/Vivaldi Motecuhzoma.

    About the premiere:
    http://www.proceso.com.mx/rv/modHome/detalleExclusiva/85620

    Story and samples:
    http://www.proceso.com.mx/rv/modHome/detalleExclusiva/81902

    Please?

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