I can hear it now... "Let them eat wheat tortillas!"
Archer Daniuels Midland, ConAgra et la just want you to know that their
profits are more important than your food.
Mexicans Cope With Rising Tortilla Price
By PETER ORSI, Associated Press Writer
Saturday, January 13, 2007
MEXICO CITY, Mexico (AP) --
Soaring international demand for corn has caused a spike in prices
for Mexico's humble tortilla, hitting the poor and forcing President
Felipe Calderon's business-friendly government into an uncomfortable
confrontation with powerful monopolies.
Tortilla prices jumped nearly 14 percent over the past year, a move
Mexico's Central Bank Gov. Guillermo Ortiz called "unjustifiable" in a
country where inflation ran about 4 percent. Ortiz pinned the blame on
companies monopolizing the market and blocking competition.
"We clearly have a problem of speculation," he said.
The government and economists also blame increased U.S. production
of ethanol from corn as an alternative to oil.
The battle over the tortilla, the most basic staple of the Mexican
diet especially among the poor, demonstrates how increasing economic
integration is felt on the street level.
"This is direct evidence of the way globalization is affecting all
walks of life in Mexico and all over the world," said David Barkin, an
economics professor at the Xochimilco campus of the Autonomous
Metropolitan University in Mexico City.
On Friday, Economy Minister Eduardo Sojo said the government had
authorized duty-free imports of 650,000 metric tons of corn to drive
down tortilla prices. But he warned that any price relief would not be
immediate, with the corn imports hitting the Mexican market in February.
Sojo said the quotas include 450,000 metric tons of white corn from
the United States under the North American Free Trade Agreement, and
200,000 metric tons of white or yellow corn from anywhere else in the world.
White corn is favored in Mexico for tortillas, while yellow corn is
reserved for livestock and industrial uses.
Efrain Garcia, president of the National Confederation of
Agricultural Corn Producers, said growers would not oppose the increased
imports, saying "it's very clear to us, the producers, that (Mexico)
needs a cheap tortilla."
The federal government's antitrust watchdog announced this week it
was investigating allegations companies were manipulating corn prices,
and making deals to limit the supply of corn to boost prices of tortillas.
The Federal Competition Commission's director, Eduardo Perez Motta,
said Friday the investigation would extend to "the whole chain of
production, all the way to the consumer." Violators could face fines up
to $6.4 million.
Since 2004, the agency has applied sanctions in six cases against
anticompetitive practices in the corn and tortilla markets. Last year,
it blocked Gruma's takeover of Mexican corn processor Agroinsa, saying
it would have given it too much control over the market.
Officials from the world's largest tortilla maker, Monterrey,
Mexico-based Gruma SA, were not immediately available for comment. The
company, which has 89 tortilla plants worldwide and sells in the U.S.
under the Mission brand, holds an estimated 70 percent share of the
Mexican market for tortillas and cornmeal.
Big retailers, mostly supermarkets, have kept tortilla prices steady
around $0.55 a kilogram, but in Mexico City, some shops are selling them
for $0.90 a kilogram, up from $0.73.
For low-income Mexicans, who earn about $18 a day on average, the
increasing prices have hit hard. According to the government, about half
of the country's 107 million citizens live in poverty.
"When there isn't enough money to buy meat, you do without," said
Bonifacia Ysidro as she wrapped an embroidered towel around a foot-high
stack of tortillas to cart home.
Tortillas, she added, "you can't do without."
Ysidro said she paid $2.27 — about a sixth of her household's
combined daily income — for enough tortillas to feed her family of six.
"If I don't have that much, I'll have to buy less," she said.
The U.S. Agriculture Department said Friday that ethanol plants and
foreign buyers are gobbling U.S. corn supplies, pushing prices as high
as $3.40 a bushel, the highest in more than a decade.
Nationwide in the United States, supplies of corn are expected to
drop to 752 million bushels, a drop from last month's forecast of 935
million bushels and a steep decline from last year's supply of 1.967
billion bushels.
Mexican lawmakers are demanding the government impose price
controls, but the federal consumer protection agency instead has
launched an inspection campaign to ensure tortilla sellers post their
prices and do not gouge customers.
Juan Camacho Gomez, president of national tortilla industry group,
said if the price continues to rise and people buy fewer tortillas, it
could mean "death for the small" sellers.
The country's tortilla sellers have proposed creating joint import
companies to bypass intermediaries and cut costs.
The government eliminated its decades-old subsidy for tortillas in
1999 just as cheap corn imports were rising from the United States under
NAFTA.
The tortilla increase outpaced inflation and minimum wage hikes of
about 4 percent for the past year.
Grains traders forecast tortilla prices will rise by 20 to 25
percent during the first quarter of 2007.
That prospect worries Ysidro, who said: "If it goes higher, what am
I going to give my children?"
URL:
http://sfgate.com/cgi-bin/article.cgi?file=/n/a/2007/01/13/financial/f185223S78.DTL
