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Mexico feeling effects of ethanol boom
Marla Dickerson, LA Times
High corn prices are wreaking havoc on Mexico’s inflation rate and forcing shoppers to pay more for eggs, milk and tortillas. But they’re a godsend to farmers such as Victor Manuel Amador Luna.
With world corn prices riding high on strong demand from U.S. ethanol producers, Amador is looking to expand production on his farm about 125 miles east of Mexico City in the state of Puebla. He planted most of his 222 acres with corn this year and is looking to buy more land.
“I’ve never seen prices this high in my lifetime,” said Amador, 79, his smile wide, like the crack in the dusty windshield of his Chevy pickup.
How long the bonanza will last is anyone’s guess. What’s clear is that America’s thirst for corn-based ethanol is being felt around the globe, delivering fatter profits for grain farmers but higher costs for livestock producers, food processors and consumers.
The United States is the world’s No. 1 corn producer and exporter, shipping an estimated 2.2 billion bushels to international buyers last year. Most nations can’t compete with government-subsidized U.S. corn, which countries such as Mexico have come to rely on to fatten their hogs, chickens and cattle.
But with 110 ethanol plants in the United States snapping up hundreds of millions of bushels and an additional 63 refineries slated to come on-line in the next 18 months, some foreign farmers are betting that America will soon have less of the grain available to export. Agricultural economists say Argentina, Brazil, South Africa and Mexico are among the nations planting more corn to pick up the slack in their own domestic markets and perhaps score some export sales as well.
(20 Jan 2007)
Cost of Corn Soars, Forcing Mexico to Set Price Limits
James C. McKinley Jr., NY Times
Facing public outrage over the soaring price of tortillas, President Felipe Calderón abandoned his free-trade principles on Thursday and forced producers to sign an agreement fixing prices for corn products.
Skyrocketing prices for corn on the world market have pushed up the price of the humble tortilla, the mainstay of the Mexican diet, by nearly a third in the past three weeks, to 35 cents a pound in Mexico City and even higher in other parts of the country.
Half of the country’s 107 million people live on $4 a day or less, and many of them survive largely on tortillas and beans. The price increases have riled the public to such an extent that it has created a political storm that threatens to swamp Mr. Calderón’s fresh presidency.
This month, the president, who took office in December, was booed and heckled at events around the country over food prices. Mexican lawmakers called on him to impose price controls, while leftist opposition leaders suggested that he was protecting giant corn companies. One editorial cartoonist depicted him falling from a tower as tortillas flew upward like birds.
(19 Jan 2007)
Contributor Devlin Buckley writes: “This offers a brief glimpse of what rising food prices will do politically, not just in Mexico, but around the entire world.”
Commodities duo predicts ethanol to power higher grain prices for the foreseeable future
Glen Werling, Bluffton News-Banner
Ethanol is powering more than just vehicles nowadays. It’s also the explosive force behind the rising grain markets.
That’s the mutual analysis of David Kohli of Ford & Young Futures of Fort Wayne and Jon Cavanaugh of Central States Enterprises of New Haven.
…“The question it comes down to is this: food versus fuel. How necessary is ethanol? How necessary are chicken, pork and beef and eggs. You have a classic battle being set up between food and ethanol. It’s like the dotcom frenzy. Something’s got to break,” said Cavanaugh.
Of course as corn acres are added, soybean acres are subtracted. That vacuum might be filled in by South America, he added.
Cavanaugh observed that the demand for ethanol exceeds ability to produce it. The demand for ethanol might be rationed by either lower oil prices or higher corn prices-both of which affect the profitability of ethanol’s production.
Kohli predicted that the drop in crude oil wouldn’t last much longer and as summer demand comes on, it will start to rise again, driving the price of gas up to $2.60 to $2.75 a gallon again. That will increase the profitability of ethanol and increase its demand more.
…So what were Kohli and Cavanaugh’s predictions?
A short-term setback for corn prices because the market has become too bullish, according to Kohli. That’s short-term, he emphasized. Cavanaugh agreed that the market will experience a slight corrective pullback, but he did not see anything that will support long-term declines with prices still staying relatively high.
Kohli said he was crunching some numbers for corn futures earlier and kept coming up with $4.20. He foresaw a pullback to between possibly $3.35 to $3.80. Long-term he saw dramatic changes.
“Ethanol is just a totally different phenomenon. Corn is now not just a food commodity, it’s a fuel commodity,” agreed Cavanaugh, who added it’s very politically popular. Add weather problems and/or a below trend yield, the $5.54 long term might not be out of the question according to Cavanaugh. “It could possibly go even higher,” he added.
(17 Jan 2007)
Mexico caps tortilla price to aid poor, stem inflation
Patrick Harrington, Bloomberg News via Globe & Mail
Mexican President Felipe Calderon unveiled measures to stem a surge in prices for corn tortillas, the mainstay of the country’s diet, as eroding support among the poor threatens to undermine his 48-day-old presidency.
…”The tortilla is the principal component of the Mexican diet and a fundamental staple for those who have the least,” Mr. Calderon said in a message broadcast yesterday from the presidential residence. “The unjustified increase in this product threatens the economy of millions of families and their quality of life.”
Mr. Calderon, who warned in his campaign last summer that rival Andres Manuel Lopez Obrador would unleash inflation, now faces a rise in food prices that has pushed a kilogram of tortillas to about one-fifth the daily minimum wage.
…While global demand for feed corn for ethanol fuel production has pushed prices to a 10-year high, Mr. Calderon said world markets don’t explain the cost of white-corn tortillas in Mexico. “We will not tolerate speculators or hoarders,” Mr. Calderon said. “We are going to apply the law firmly and punish those who seek to take advantage of the needs of the people.”
(19 Jan 2007)
Sweet dreams (local ethanol)
Stuart Nimmo, Toronto Star
A Simcoe farmers co-op is literally letting the rot set in as it turns locally grown sweet potatoes into biogas, ethanol and electricity
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Sante DeCarolis’ sweet potato field just outside the small town of Simcoe has a distinct odour, not unlike the morning stench after an Annex frat party.
In the centre sits a massive pile of the starchy vegetable, the rotting rejects of an increasingly popular root crop where up to half the harvest never gets to market.
“You can really smell that alcohol,” says DeCarolis, pointing out that much of the crop never even makes it out of the ground. On average, this agricultural waste weighs in at about 4.5 tonnes per acre of land. “That’s a lot of wasted energy.”
It’s also, potentially, the future of this struggling farming community, which spreads across the northern shore of Lake Erie. DeCarolis is a founding member and director of CSEA Co-Operative Inc., which has a grand vision of producing ethanol, biogas and electricity out of locally grown sweet potatoes.
…The idea alone of producing ethanol out of sweet potatoes, sorghum and millet has legs when one considers the controversy around corn. Not just because of the poor energy equation when using corn, but also due to fears that dramatically expanding ethanol production will eat up food supplies and drive up prices.
…CSEA’s plan would provide stable, long-term pricing for farmers and put unused land back into use without much demand for irrigation. It would also find a market for the immense agricultural waste that would result from moving to sweet potatoes.
(18 Jan 2007)
