Mexico buys corn futures to ensure tortilla prices remain flat

Mexico is taking action to halt a rise in corn prices and prevent a repeat of the so-called 'tortilla riots' of 2007, when tortillas became difficult to afford for many Mexicans.

In 2007, massive impromptu street protests threatened the popularity of Mexican President Felipe Calderón. But it was not drug violence or kidnappings that prompted the outcry. It was the price of corn tortillas.

Now the Calderón administration faces a repeat scenario. High corn prices are threatening to put Mexico’s staple out of reach for those who depend on it most for the bulk of their daily caloric intake.

Earlier this month, tortilla makers said that prices could rise by 50 percent. An increase of the same amount led to the so-called “tortilla riots” of 2007. At that time, the Monitor attended marches with protesters angrily gripping onto cobs of corn and chanting, “Without corn, we aren’t a country.”

The government blasted the price-increase threats and set off on an inspection spree to make sure tortilla shops have not raised their prices. But most unusual – and perhaps a sign of how important the image of affordable tortillas are in a country that once worshipped corn gods – is the announcement it has purchased a form of corn insurance to safeguard prices into next year, reported the Financial Times.

The futures, announced by Economy Minister Bruno Ferrari, should allay consumer concerns, he says. “The prices are guaranteed,” he said to the local media. “The supply necessary until the third quarter of next year is covered.”

Concerns about tortilla prices sparked after the president of the National Tortilla Industry Union, Lorenzo Mejia, announced in a press release earlier this month that prices for a kilogram (2.2 pounds) of tortilla could rise to 12 pesos, or just under one dollar, and then continue to rise. The national average is currently at about 9.88 pesos. In Mexico City, it is 8.65 pesos.

Mexico’s Economy Ministry immediately responded, saying that tortilla price hikes are not justified because production of white corn, used to make tortillas, has been sufficient for satisfying domestic demand. The ministry also announced it would work alongside Mexico’s consumer watchdog to protect against price gouging.

David Mendoza, a tortilla seller in a downtown Mexico City food market, was selling tortillas for 8.5 pesos a kilo. He says the consumer watchdog came two weeks ago to inspect their prices and that he expects to have to raise his prices at some point next year.

Corn futures rose earlier this week to a 29-month high, in part because of dry weather in Argentina, a major producer.

Back in 2007, with Mexicans pulling out more pesos, the government threatened to sue hoarders, increased corn quotas for import, and capped prices. It even led to more talk about breaking up monopolies in Mexico that many blame for unfair prices.

Brenda Mendoza, who works at a food stall in a Mexico City market, says "I was worried when I heard prices would go up, because everything is more expensive. But the government did not authorize it, thankfully."

As far as the new announcement about these futures contracts go, this is apparently not the first time such protection has been purchased to control prices. It's just the first time, according to Reuters, that it has been made public.