SAN SALVADOR EL SECO, MEXICO — 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 would like to buy more land.
"I've never seen prices this high in my lifetime," said Amador, 79, his smile as wide as the crack in the dusty windshield of his Chevy pickup.
Corn futures for March delivery soared to the 20-cent exchange limit on the Chicago Board of Trade on Friday, hitting $3.965 a bushel after the U.S. Department of Agriculture announced a smaller-than-expected 2006 U.S. harvest of 10.5 billion bushels. Prices have surged 86% over the last year as plants that make corn-based ethanol fuel have sucked up a record 20% of U.S. production. U.S. agricultural officials said global inventories might fall to the lowest level in nearly 30 years, setting up a scramble among buyers to secure enough supply.
How long the bonanza will last is anyone's guess. What's clear is that America's thirst for 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 U.S. snapping up hundreds of millions of bushels and 63 more 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 domestic markets and perhaps score some export sales as well.
In addition, Mexico is gearing up to supply its own ethanol industry. Lawmakers are contemplating legislation that would require the state-owned oil company Pemex to oxygenate its gasoline with corn-based ethanol. Two plants are already under construction in the rural state of Sinaloa, where officials are looking to create employment and provide farmers with a reliable outlet for their harvests.
