U.S. ethanol not causing higher Mexican tortilla prices

Rising tortilla prices in Mexico are due to a supply issue in that country — not increased U.S. ethanol production or U.S. corn prices.

The U.S. Grains Council (USGC) and the National Corn Growers Association (NCGA) report that lower corn production in Mexico and the lack of import licenses have caused white corn shortages there.

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

White corn is the principal ingredient in tortillas.

Industry representatives in Mexico told Corry that requests for import licenses were made to the Mexican government starting in August 2006. Licenses were issued in January for February imports. In the near-term, the white corn supply should improve.

Additionally the country experienced a 1.2 million metric ton (47.2 million bushel) reduction in corn yields due to drought in 2006. Mexican farmers produced 22.5 million tons (885.8 million bushels) of both white and yellow corn in 2005, whereas production dropped 5 percent to 21.3 million tons (838.5 million bushels) in 2006.

“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,” said Ken McCauley, NCGA president. “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.”

Mexico is a substantial customer of U.S. corn — having imported 10.5 million tons (413.4 million bushels) in the 2006 calendar year. However, of that volume, only 253,000 tons (10 million bushels) was white corn. In addition, recent numbers released from the U.S. Department of Agriculture state world corn production will increase by about 5.2 million tons (204.7 million bushels) over January’s estimates.

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