The Story You Didn't Read: Mexico's tortilla riots

Posted Feb 2nd 2007 1:15PM by Ben Berkowitz
Filed under: International Markets, Wal-Mart (WMT), Columns, Archer-Daniels-Midland (ADM), Chipotle Mexican Grill'A' (CMG), Mexico, Economic Data

Ben Berkowitz is the business news editor at AOL. This is a new column that will run weekly, highlighting business stories with significant implications that were overlooked at first glance.

This week's story that no one read and everyone should have is about tortilla riots in Mexico. Yes, tortilla riots. In Mexico. Some 75,000 people protesting the rising price of tortillas.

Not to be overly blunt, but who cares, right? It's just a single grocery item in some other country. But the reason the people are up in arms is more important than anyone realizes.

Poor Mexicans rely on tortillas for their diet. And a lot of other poor people in a lot of other places rely on other foodstuffs made from corn.

The problem is ethanol. Ethanol, that fuel additive that reduces pollution and helps us wean our dependency on foreign oil and makes farmers rich and politicians look silly when they stump in Iowa. As the U.S. adds more ethanol to its gasoline, the price of corn is surging dramatically, leading to extreme market volatility.

President Bush wants to use a variety of sources to make ethanol as the government pushes increased use of the additive, but for now most U.S. producers seem to be eschewing sugar and other products in favor of corn. If that remains the case, corn prices will only go higher and the poor of Mexico and elsewhere will be further pinched.

Of course, publicly-traded corn companies like Archer-Daniels-Midland (NYSE: ADM), Bunge Ltd. (NYSE: BG) and Corn Products International Inc. (NYSE: CPO) can't and don't mind that much - their profits are soaring. Big multinationals like Wal-Mart Stores (NYSE: WMT) must be happy too -- higher prices on big-selling staples are always a happy thing.

So the question remains: why should Americans care? Well, corn prices are up here, too. As are citrus prices. And lettuce and avocados and strawberries and all the other stuff that got wiped out in the California freeze last month. Operating a Mexican restaurant can't be pretty right now. Neither can living in a poor home in East Los Angeles (when was the last time English-language TV news led a broadcast with soaring milk prices, as the Spanish-language stations in L.A. did a couple of years ago?)

People need to eat. They need to be able to afford food. The underclass of America is used to being hungry already, but if people can't afford crucial staples then there's a real problem. You think the border issue is bad now? Tack a few more pesos on a kilo of tortillas and you're going to see a lot more people trying to find a better life in America - and who can (or would) blame them?

If you read science fiction books in the 1980s and 1990s, any of them with any sort of dystopian view of the early 21st Century usually included some sort of food shortage/food riots element. It seemed reasonable to assume 20 years ago that there could be problems feeding America. Hopefully, they weren't so right.

Tags: corn prices, CornPrices, ethanol, Mexico, tortillas

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Reader Comments (Page 1 of 1)

2-02-2007 @ 1:29PM

Gary E. Sattler said...

Cellulosic Ethanol is the answer. No one is eating wood waste or switchgrass...that I know of.

Do your research and pick your companies. Seriously consider getting in RIGHT NOW!

2-02-2007 @ 3:12PM

toytruckman said...

Since ethanol can be made from any plant life, lets help out Georgia and have them harvest the Kudzu that is destroying the landscape. Prison crews to do the picking comes to mind for cheap labor.

2-03-2007 @ 12:43PM

Tim said...

Corn is a food-stuff, and a major input all kinds of food stuffs (beef, chicken, eggs) -- etc. Those go up.

Rising corn, wheat producers shift over, wheat goes up.

Everyone has to eat, so they will pay more for foods across the board.

What do you think the revenue spread for Walmart is: 5% food/ 95% produced goods?

What happens when people are paying increased prices for food, they buy less produced goods.

This is bad for Walmart to see people have their food prices inflate because of government ethanol pressures.

2-02-2007 @ 7:14PM

Josh said...

Corn Ethanol technology has been around for a very long time. It is flourishing right now only because the government has mandated Ethanol in Fuels, Massively subsidized it's production, and protected the corn ethanol producers from the more efficient Sugar cane ethanol produced in central and South America.

Corn ethanol is too inefficient to be a viable alternative energy. You burn nearly as much fossil fuels creating it as the energy that is created. The only reason it is being made is because our government is shelling out big bucks to make sure that it is made.. Switchgrass and other fuels are even less efficient.

So when you boil it down, Mexicans can't afford to eat because the US government decided it would be a good idea to burn up their food supply in our SUV's. It is special interest politics at it's worst.

2-05-2007 @ 1:45PM

Barry said...

Cellulosic Ethanol is NOT the answer. There is NO such thing as agricultural waste. As much of the plant as possible needs to go back into the ground as the cost of fertilizers (natural gas) and pesticides (oil) skyrocket. Make the decision - do you want to eat or drive?

2-11-2007 @ 11:15PM

Kevin said...

"Underclass of America is used to being hungry"? That a joke? The underclass of America has a very high rate of obesity. The underclass of America is used to stuffing themselves. Why ruin an interesting article with this brainless sophomoric J-school throwaway line?

3-28-2007 @ 12:17PM

scott said...

Trip reduction is the answer. All these solutions remind me of an addict trying for the next fix. Hate to be the hippie in the wood pile, but habits need to change, not the source of the fuel.

3-31-2007 @ 10:17PM

Joyful said...

If the Department of Agriculture doesn't get on the stick real soon and figure out what's wrong with the bees, food prices really will skyrocket. Right now, the future of every U.S. crop that depends on bee pollenation is at dire risk, and according to my newspaper yesterday, we're depending on a loose network of unpaid volunteers for research.

4-15-2007 @ 3:50PM

hepcatjac said...

Ethanol ultimately is worse than oil in terms of alleviating climate change. It may burn cleaner from your exhaust pipe but it costs more in terms of energy to produce and also requires the burning down of more forests in SE Asia and Brazil if we're gonna use it as a serious alternative to oil.

Ultimately, its great for farmers and great geopolitics, but its crap for the environment.