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USGC, NCGA: Tortilla Prices Due to Supply, Not Ethanol

Grains groups say rising tortilla prices in Mexico are due to supply problems in that country rather than U.S. ethanol production or corn prices - but others disagree.

The rising price of tortillas in Mexico has drawn international media attention - and some speculation that the high price of white corn in Mexico is due to the high price of U.S. corn due to the demands of ethanol production. However, the U.S. Grains Council and the National Corn Growers Association say this is due to white corn supply issues in Mexico rather than to U.S. ethanol production's affect on corn prices.

"While there has been much in the media on this issue, no one in Mexico is pointing fingers at the United States," says Chris Corry, USGC senior director of international operations, in an NCGA release. "They recognize that this is a supply issue coupled with a political situation in Mexico."

Corry says industry representatives in Mexico told him last week that requests for import licenses were made to the Mexican government starting last summer, and licenses were issued for February imports in January. He believes the supply issue should make short-term improvements.

While corn and grain groups say there should be enough supply for both food and fuel, some groups, such as Washington nonprofit environmental group Earth Policy Institute, see demand for food and biofuels as a struggle.

A look at production and import numbers suggests that both the Mexican corn supply and U.S. corn prices are affecting the high tortilla prices. Mexican farmers produced 22.5 million tons of white and yellow corn in 2005, but that number dropped to 21.3 million tons in 2006. Mexico imported 10.5 million tons of U.S. corn in the 2006 calendar year, and is a regular U.S. corn buyer.

"While it is true that higher yellow corn prices in the United States have had an impact on domestic yellow corn prices in Mexico, it should also be noted the price of white corn in Mexico has increased," says NCGA President Ken McCauley. "What's important to realize, however, is that this is not an ethanol issue. Domestic and global demand for U.S. corn has driven the price up. In the end the markets will even everything out."

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