Truth and Tortillas
Truth About Trade & Technology has posted a Wall Street Journal commentary on the tortilla crisis in Mexico. The op-ed piece contends that the “cause of the corn price spike is too much government intervention.”
The sharp increase in Mexican corn prices, which fueled the tortilla price spike, followed big price increases for corn on international markets over the past year. The main cause, according to most commodity analysts, was the U.S. decision to subsidize ethanol made from corn. Growers who previously marketed their harvests to food and livestock companies suddenly have new demand from ethanol producers, who are also armed with a subsidy to make their bids more attractive. The increase in demand from government-subsidized ethanol producers pushed up prices.
Yet the U.S. isn’t the only government that is distorting markets. Mexico’s quota system for corn imports has exacerbated the problem.
Read the whole commentary.