|Last year it was the High price of US corn, and this year the Low price of US corn, but on Friday between 50 to 100 thousand farmers on foot, herding cattle and driving tractors, stretched for four miles and jammed the historic center of Mexico City. One rowdy group even burned a tractor. In less than 12 months the Food for Fuel debate has transformed itself into a fight to keep corn prices (and tortilla prices) at their all time highs.
Thursday’s (31Jan08) farmer protest grew out of discontent with the lifting of imported corn tariffs under the North American Free Trade Agreement (NAFTA). Protestors assert Mexico will be flooded with “CHEAP” US corn imports, and put Mexican farmers out of business.
This is the same Mexico City that witnessed the “2007 Tortilla Protests” last year that escalated the debate on US Ethanol production. The 2007 protests were earmarked with accusations that rising tortilla prices were precipitated by the demand for corn in US ethanol production. The result; poor Mexican children were starving due to US using “Food for Fuel”.
Today, the 2008 Farmer Protests are predicting the opposite. Demonstrators forecast a devastated Mexican rural economy as cheap corn from the US will undercut the higher Mexican corn prices, and make farming unprofitable.
Now, rather than blaming the US Alternative Fuel industry for high tortilla prices; the farmers are acknowledging that increasing costs of fuel, fertilizer and electricity, an estimated 60% production costs, is what is driving the price of tortillas.
Inefficient and less organized, the small Mexican farmers are domestically less competitive than the highly organized US competition.
The facts are; US corn prices have NO impact on tortilla prices,
1. Tortilla prices have increased 100% in the last 18 months.
2. Mexico had been gradually dropping its tariffs on corn since 1994
3. Most of the corn imports in recent years had entered without tariffs under import quotas.
4. Corn from the US is yellow corn; a livestock feed. Mexicans produce tortillas for white corn.
5. US corn represents 14% of white corn consumed in Mexico.
6. Oil prices have risen 129% since 2005, which factor into the costs of transport, cultivating, harvesting, processing, and packaging costs.
7. Since 1993, the Mexican population has risen by 19%, and domestic corn production has grown 18%. However, Mexican corn consumption has risen 57%. Demand is simply outstripping supply.
8. The Mexican farming community lacks the cooperative marketing and bargaining regimes required to function in a modern economy, and small farmers are forced into subsistence rather than profit.
The point is; rather than the cost of food being driven by alternative fuel production, it is quite the opposite. food prices are being driven by the cost of Fossil Fuels. Rather than Food for Fuel, the reality is we pay a high price to turn Fossil Fuel into Food.