[FLPERMACULTURE] The first casualty of ethanol, higher tortilla prices

[Joseph Wetmore]

Hi

When you try to replace farm land for growing food
with farm land used to grow fuel for automobiles, food
prices go up.  It does not matter whether you are
producing ethanol, bio-diesel or corn-oil.  Supply and
demand work that way.

Ethanol is a *very* minor part of our energy package
and the poor in Mexico are already starting to feel
it.  Imagine what problems will develop if a
significant percentage of Americans switch to
alternative fuels.

Americans have to give up their love affair with the
car.

Joe

Nothing flat about tortilla prices
Some in Mexico cost 60 percent more, leading to a
serious struggle for low-income people

Carolyn Said, Chronicle Staff Writer

Saturday, January 13, 2007
 

Who jacked up the tortilla?

Prices for corn tortillas, a staple of Mexican diet
and culture, are soaring south of the border.

Some tortilla prices in Mexico have risen as much as
60 percent, hurting the low-income people who depend
on it as their basic food.

Elizabeth Rosas, a 20-year-old office cleaner in
Mexico City, was discouraged to find that her usual
tortilla shop this week raised the price of its corn
tortillas from 8 pesos (73 cents) to 10 pesos (91
cents) a kilogram.

"My family doesn't have the budget to pay more for
tortillas," said Rosas, who makes $40 a week and
shares a two-bedroom apartment with her husband, five
relatives and her newborn son.

"If prices continue to rise, we'll have to switch to
bolillos," said Rosas, referring to manufactured
sandwich rolls with less flavor and nutritional value
than tortillas.

Just why tortillas cost so much remains murky.

Corn prices are spiking in the United States, with
crop yields low and demand high. The production of the
gasoline additive ethanol has taken off in the past
year, consuming millions of bushels of corn.

But Mexico grows most of its own corn for consumption.
And the yellow corn used for ethanol and livestock
feed is different from the sweet white corn that's
ground into masa for handmade tortillas, although some
mass-produced tortillas are made from yellow corn.

Mutters about monopolies and price gouging have been
rising, leading Mexico's antitrust agency to say on
Thursday that it will investigate hoarding and price
manipulation.

Mexico also said it will import 650,000 tons of white
corn, mainly from the United States, to help lower
tortilla prices.

El Universal, a daily Mexico City newspaper, called
the rising tortilla prices "criminal" and demanded
that the government help control the price of a basic
good consumed by 97 percent of Mexicans, especially
the poor.

Some economists say the culprit could be
globalization, as products around the world
increasingly are linked in a complex supply chain.

"The price of oil is driving up the price of corn
(because of increased ethanol production), which is
driving up the price of tortillas," said Peter
Navarro, a business professor at UC Irvine. "You push
on one thing and another thing moves," added Navarro,
the author of "If It's Raining in Brazil, Buy
Starbucks."

He said the U.S. ethanol stampede could be thought of
"as a regressive tax on Mexico, because it raises the
price of a basic commodity. In economics, we call
these general equilibrium effects. Something happens
in one market and it ripples through other markets."

There's no question corn prices are high.

"Usually at this time of year, corn (futures are)
about $2 a bushel and here we are at almost $4 a
bushel," said Chris Kraft, president of Chicago's RCI
Advisory Services, a trader in commodity futures. The
supply of corn from the growing season that ended in
September "is the lowest amount we've had on hand in
the past 20 years," he added.

Even all that doesn't explain why Mexican tortillas
cost so much.

"It's hard to imagine that corn prices would cause a
bigger spike in tortilla prices than the original"
price increase, said Richard Norgaard, an economist in
the UC Berkeley Latin American Studies Group. "The
price of tortillas includes a fair amount of labor and
processing."

In the United States, more-expensive corn could have a
domino effect on everything from Coca-Cola (sweetened
with corn syrup) to Big Macs (from corn-fed cattle).

"The most important products (likely) to be affected
are meats," said Daniel Sumner, an agricultural
economist at UC Davis. Corn price increases could
"show up in pork chops as a few cents per pound.
Consumers may not notice it, but I can tell you the
hog farmer does."

Some Mexican tortilla shops are refusing to raise
prices in hopes of keeping customers loyal.

Abraham Dominguez, a 23-year-old who manages a
tortilla shop in Mexico City, was doing brisk business
this week selling his product for about 63 cents a
kilogram.

"They say the price of corn is up," said Dominguez,
wiping sweat from his forehead and brushing corn flour
from his apron. "But we still haven't felt the pinch,
so there's no reason to punish our customers."

Meanwhile, large supermarkets are keeping their
tortilla prices low, at about 55 cents a kilogram. Yet
Dominguez added what most Mexicans know -- there's no
comparison between mass-produced tortillas and those
freshly made at the corner shop.

Chronicle foreign service correspondent Monica
Campbell contributed to this report from Mexico City.
E-mail Carolyn Said at csaid at sfchronicle.com.


http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/01/13/BUGVLNHTMK1.DTL


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