What is in this article?:
- Mexico under strain of severe drought
- Demand trending upward
- A cold and dry winter in northern Mexico has exacerbated poor conditions with reports of widespread famine, escalating food prices and extreme dry conditions that have forced the government to truck drinking water to nearly a half million residents in remote villages across six northern states where lakes and ground wells have run dry.
Demand trending upward
Welch says even if drought conditions improve in Northern Mexico over the summer months, the trend for white corn imports are expected to trend upward.
“The demand for grain corn may be directly associated with the drought in Northern Mexico. Once conditions improve there we will see Mexican grain corn imports leveling off. But white corn imports have been trending up for several years, and it could be that a growing population base is driving demand—and I expect that to continue,” he says.
As far as the potential for U.S. corn growers to switch from grain corn to white corn, Welch says it is possible. But he warns that production costs are greater for food corn.
“But the gap between production costs for grain corn versus white corn is closing as technology helps to keep costs down. Whether grain producers would make that jump or not, I can’t say. But the market is usually the driving factor in decisions like that, and the market for white corn in Mexico looks strong,” he said.
Meanwhile, Mexico continues to struggle with more than just grain shortages as a result of dry conditions. The 2011 price of beans has doubled in just over a year, and consumers are feeling the pinch in other food staples. On a whole, prices for basic foods—including beans, tortillas, vegetable oil, meat and dairy—rose 45 percent in 2011, and since October last year prices have exploded another 35 percent.
While the situation is most dire in the impoverished areas of the north, metropolitan areas including highly industrialized Monterrey are also feeling the squeeze. Recently the Mexican Red Cross estimated that some two million people are chronically hungry in the state of Nuevo Leon.
The crisis is becoming a political thorn in the side of Mexican PresidentFelipe Calderon. While Mexico grows substantial food crops for export to the U.S.—some $21 billion last year—it is struggling to grow enough for its resident population, a problem some argue is being driven by greed from Mexico’s upper class.
Agriculture Minister Fransisco Mayorga has come under fire by humanitarian groups who argue that if Mexico has the resources to grow food for sale to U.S. buyers who are willing to pay more than Mexican consumers, then why hasn’t the government limited exports in favor of feeding the poor?
Economists say Mexico will continue to struggle with becoming more sustainable and self-sufficient, but drought conditions will continue to complicate those efforts until substantial rains fall. But even with rain, the U.S. Grains Council recently reported that the lasting effect of the drought indicates Mexico’s demand for feed grains is likely to last for two to three more years.