WORLD PRICE, EXCHANGE RATE AND INVENTORY IMPACTS ON THE MEXICAN CORN SECTOR: A CASE STUDY OF MARKET VOLATILITY AND VULNERABILITY
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WORLD PRICE, EXCHANGE RATE
AND INVENTORY IMPACTS ON THE MEXICAN
CORN SECTOR: A CASE STUDY OF MARKET
VOLATILITY AND VULNERABILITY
José Alberto García-Salazar, Rhonda K. Skaggs
and Terry L. Crawford
SUMMARY
Two decades of trade liberalization and economic reform that if the world price increases by 20%, then the price in-
have led to a reduction in food self-sufficiency of corn, prima- creases by 15.6%, production increases by 4.0%, while corn
ry component of the Mexican food and feed supply. Due to the imports decrease by 19.2%. Assuming that corn imports do
country’s dependence on global markets, Mexican corn prices not change, a three million metric tons inventory will increase
are sensitive to changes in international prices and inventory corn price by 32.5%, and increase production by 8.7%. High-
holding for speculative purposes. The impact of corn price er corn prices are undesirable for society due to the negative
volatility on Mexican social stability has prompted evalua- effects on the low-income population. Thus it is recommended
tion of the effects of changes in international prices, exchange that the Mexican government apply policies that promote food
rates and inventories on the corn price through the use of a self-sufficiency and reduce incentives for speculation.
spatial and intertemporal equilibrium model. Results indicate
xtreme price volatility government intervention in the grain sumers and the elimination of inefficient
throughout the year cur- market through the Compañía Nacional and dishonest intermediaries, and b) pro-
rently characterizes nu- de Subsistencias Populares (CONASU- tecting low-income consumers by grant-
merous food product markets in Mexico. PO). On the consumption side of the mar- ing them access to basic foods and pro-
Because the Mexican government has ket CONASUPO sold corn at lower than tecting low-income producers by allowing
been gradually withdrawing from agricul- competitive prices and was responsible them to obtain a livelihood from their
tural market interventions, price volatility for moving grain from surplus to scarcity production activities. CONASUPO sought
in the local grain sector, particularly regions. On the production side, the gov- to increase both the purchasing power of
corn, has become more extreme. For ex- ernment supported farmers with guaran- low-income consumers and the incomes
ample, in early 2007 the price of corn teed output prices and subsidized input of small, staple-producing farmers while
produced in Sinaloa and sold in the Cen- prices. CONASUPO was designed to pro- simultaneously promoting domestic and
tral Wholesale Market of Ecatepec, Esta- mote Mexico’s economic and social de- external trade in these commodities
do de México, increased 30% in less than velopment by a) regulating the markets (Yunez-Naude, 2003). CONASUPO was
a month (SNIIM, 2009). for staple or subsistence crops through liquidated in 1999 as part of Mexico’s
From 1965 to 1999 corn the creation of more efficient and rational domestic economic reforms, general trade
price volatility was moderated by federal relationships between producers and con- liberalization, and commitments made
Keywords / Exchange Rate / International Price / Inventories / NAFTA / Spatial and Intertemporal Equilibrium Model /
White and Yellow Corn /
Received: 05/11/2011. Modified: 06/04/2012. Accepted: 06/05/2012.
José Alberto García-Salazar. Agronomical Engineer, Universidad Autónoma de Chapingo,
Mexico. M.Sc. and Doctor in Economy, Colegio de Posgraduados (COLPOS), Mexico. Professor-Researcher, COLPOS, Mexico. Ad-
dress: Instituto de Socioeconomía, Estadística e Informática, COLPOS. Km. 36,5 Carretera México-Texcoco. CP 56230, Montecillo,
Estado de México, México. e-mail: jsalazar@colpos.mx
Rhonda K. Skaggs. B.S. and M.S. in Agricultural and Natural Resource Economics, Colorado
State University, USA. Ph.D. in Economics, Utah State University, USA. Professor, New Mexico State University (NMSU), USA.
e-mail: rskaggs@nmsu.edu
Terry L. Crawford. B.S. in Agricultural Economics, NMSU, USA. M.s. and Ph.D. in Agricul-
tural Economics, Cornell University, USA. Professor, NMSU, USA. e-mail: crawford@nmsu.edu
498 0378-1844/12/07/498-08 $ 3.00/0 JUL 2012, VOL. 37 Nº 7under the North American Free Trade discontent, and exacerbate Mexican eco- crease from 13,387 million gallons in
Agreement (NAFTA) and the World nomic crises. 2010/2011 to 15,994 million gallons by
Trade Organization (WTO). Numerous factors can 2020/2021 (FAPRI 2011). To reach this
Rising grain prices in positively influence corn prices in Mexi- level of ethanol production, FAPRI pro-
2007 led to ‘tortilla riots’ involving thou- co. The most important are changes in jected use of corn for fuel alcohol would
sands of people throughout Mexico and the world price of corn, increases in the increase from 4,902 million bushels in
resulted in attempts by the Mexican gov- exchange rate, inventory accumulation, year 2010/2011 to 5,563 million bushels
ernment to cap the price of corn flour and supply curve shifts due to adverse by 2020/2021.
(which rose by over 400% in a three- climatic conditions. Because part of Mex- Increased biomass de-
month period). As a result of global mar- ican corn consumption is supplied by im- mand by the ethanol industry is project-
ket forces, the millions of poor Mexicans ports, an increase in the world price has ed to considerably alter the USA corn
who rely on corn as their primary source a direct impact on price and on other market. FAPRI projects farm-level corn
of calories found themselves competing market variables in Mexico. Clearly, prices will increase from $3.89/bushel in
for industrial corn demand and responded abrupt changes in the USA market will 2008/2009 to $4.11/bushel in 2018/2019.
by taking to the streets. Mexico’s corn- cause sharp variations in Mexican domes- Greater changes in corn prices will oc-
feeding livestock industries were also tic prices. Mexican domestic corn produc- cur if projected production is not
negatively impacted by recent corn mar- tion has been insufficient to meet national achieved. FAPRI projects corn produc-
ket events, as were consumers of animal consumption needs throughout the post- tion will increase from 13,740 million
products, further compromising the nutri- NAFTA period and Mexico has turned to bushels in 2008/2009 to 16,215 million
tional status of the Mexican population. the USA market to guarantee needed sup- bushels in 2018/2019; these increases in
Critics of the NAFTA plies. At the time NAFTA was imple- corn production will come from an in-
blame policy reforms implemented as a mented the annual average (1993-1995) crease in harvested area (from 78.6 to
result of agreement for reduced competi- Mexican imports of corn were 1,881,000 83.3 million acres) and a yield increase
tiveness of Mexican corn producers, ex- metric tons and represented 9.4% of na- from 153.9 to 174.3 bushels per harvest-
posure of the Mexican food and agricul- tional consumption. These numbers are ed acre.
tural sector to greater price volatility, de- contrasted with data for the post-NAFTA Devaluation of the Mex-
creased food security, and increased risks period 2005-2007 when 7,216,000 metric ican peso relative to the USA dollar
of political and social instability. Mexi- tons were imported and supplied 25.2% would have effects on the Mexican corn
co’s official vision has been that free total consumption. Dependence on im- market similar to changes in the world
trade and economic reforms would trans- ports has resulted in decreased food self- price. Inventory accumulation is another
form the agricultural sector and increase sufficiency in Mexico. factor that could impact the Mexican
national income. NAFTA opponents claim Reduced self-sufficiency corn market by increasing corn prices.
that the agreement has resulted in food of a key staple crop has made the Mexi- Corn scarcity resulting from speculative
dependence, led to massive rural-to-urban can domestic market more vulnerable to storage activities produces a temporal
migration, and increased poverty; empiri- changes in the global market, primarily demand surplus that can cause prices to
cal findings suggest that the much-ex- changes in supply and demand emanating rise, and it is probable that early 2007
pected transformation of the Mexican ag- from the USA Mexican vulnerability to increases in observed corn prices were
ricultural sector did not occur in the first USA corn market events has been exacer- caused by inventory accumulation. Data
ten years of NAFTA (Yunez-Naude and bated by recent trends and regulations re- obtained from the Sistema de Infor-
Barceinas-Paredes, 2004). Due to the re- lated to corn ethanol production and al- mación Agroalimentaria y Pesquera de
sulting negative distributional effects, ternative fuel mandates. Rising oil prices la Secretaría de Agricultura, Ganadería,
some researchers, farmer groups, and and uncertainty in the world petroleum Desarrollo Rural, Pesca y Alimentación
members of opposition parties contend market underlie the rapid expansion of (SIAP-SAGARPA, 2009b) support this
that the inclusion of corn into the NAF- the ethanol industry in the USA. hypothesis. Harvested production in De-
TA should be renegotiated. The Energy Policy Act cember 2006 of 5,807,000 tons, plus in-
Dramatic short-term of 2005 established strong political sup- ventories of 2,614,000 tons in this same
corn price increases are problematic in port for the development of alternative month meant that by January 2007 avail-
Mexico for the following reasons: a) fuel sources, and the Energy Indepen- able supply surpassed 8 million tons.
corn is the most important staple Mexi- dence and Security Act of 2007 estab- Because exports were low in these
can foodstuff, and is used as an input in lished to move the United States toward months, it is very likely that the early
many final products consumed by the greater energy independence and securi- 2007 rise in prices was a consequence
population of 105 million people; cur- ty, to increase the production of clean of market speculation.
rently more that 14 million metric tons renewable fuels, to protect consumers, to Given the importance of
are consumed by livestock, more than 10 increase the efficiency of products, corn as a subsistence and market crop
million metric tons are used in tortillas buildings, and vehicles, to promote re- for producers and as a major ingredient
and other food products, and more than search on and deploy greenhouse gas in the diets of Mexican consumers,
three million metric tons are consumed capture and storage options, and to im- quantification of the impacts of key fac-
by the industrial sector in the form of prove the energy performance of the tors on the Mexican corn market and
starch and other products (SAGARPA, Federal Government, and for other pur- corn prices is needed. This paper exam-
2007); b) higher corn prices dispropor- poses. Ethanol, principally derived from ines world price, exchange rate and in-
tionately decrease corn consumption in corn, currently is the dominant biofuel ventory effects on the Mexican corn sec-
the low-income population due to their used in the USA. tor. The objective of the research report-
greater dependence on corn as a basic The Food and Agricul- ed here is to provide policy recommen-
foodstuff; and c) increasing corn prices tural Policy Research Institute projected dations for dealing with inter-temporal
decrease disposable income across the in its March 2011 baseline that USA corn price variability and for increasing
socio-economic spectrum, cause social corn-derived ethanol production will in- social welfare in Mexico.
JUL 2012, VOL. 37 Nº 7 499The Model the ‘net social payoff’ (NSP) according where, for month t, pt‑1= (1/1+it) t‑1 : dis-
to Eq. 1: count factor with it equal to the rate of
A spatial and in- inf lation; ljt , ldt and lft : in-
ter-temporal equilibrium model tercepts of corn demand
of the Mexican corn market functions in j, d and f; y jt ,
was used to quantify world ydt and y ft : quantities of
price, exchange rate and inven- corn consumed (feed, food,
tory effects on the Mexican and industrial consumption)
corn sector. The model includes in j, d and f; ω jt , ω dt and ωft
the spatial dimension because : slopes of demand functions
Mexico’s tradable corn surplus in j, d and f; ν it and ν st : in-
is concentrated in the north- tercepts of corn supply
western and southern regions of functions in i and s; x it and
the country, while the majority x st : quantities of white and
of corn is consumed in the yellow corn produced in i
Mexico City metropolitan area. and s; ηit and η st : slopes of
Large distances between the supply functions in i and s;
main producer-supplier regions p mt and p nt : prices prevail-
and the main internal points of ing at ports-of-entry m and
consumption emphasize the im- n; x mt and x nt : quantities of
portance of transportation costs. white and yellow corn im-
The model includes a temporal ported through ports-of-en-
dimension because almost 60% try m and n; p cijt and p r ijt :
of Mexican-grown corn is har- costs of transporting white
vested in November, December, corn by truck and train
and January; thus, storage costs from i to j; xcijt and x r ijt :
are an important element in quantities of white corn
market dynamics. shipped by truck and train
The model sepa- from i to j; p cidt and p r idt are
rately considers production and subject to the following restrictions: the costs of transporting
consumption of white and yel- white corn by truck and train from i to
low corn because each type re- d; xcidt and x r idt : quantities of white
sponds differently to market corn shipped by truck and train from i
stimuli. Corn consumption was to d; p c sjt and p r sjt : costs of transport-
broken into feed, food, and in- ing yellow corn by truck and train
dustrial uses. Because almost from s to j; xc sjt and x r sjt : quantities of
100% of Mexican corn imports yellow corn shipped by truck and train
come from the USA, the model from s to j; p c sft and p r sft : costs of
focuses on the connections be- transporting yellow corn by truck and
tween internal points of con- train from s to f; xc sft and x r sft : quanti-
sumption, domestic supply re- ties of yellow corn shipped from s to
gions, USA-Mexico border f; p c mjt and p r mjt : costs of transporting
ports-of-entry and maritime white corn by truck and
ports-of-entry. Furthermore, train from m to j; xc mjt and
the model includes the spatial x r mjt : quantities of white
and temporal allocation of both corn shipped by truck and
white and yellow corn imports. train from m to j; p c mdt and p r mdt : costs
Based on Takaya- of transporting white corn by truck
ma and Judge (1971), Bivings and train from m to d; xc mdt and x r mdt :e
(1997) and García and Wil- quantities of yellow corn shipped by
liams (2004), and assuming truck and train from m to d; p c njt and
i(i=1,2…I=10) white corn pro- p r njt : costs of transporting yellow corn
duction regions, s(s=1,2...S=10) by truck and train from n to j; xc njt and
yellow corn production re- x r njt : quantities of yellow corn shipped
gions, j( j=1,2…J=10) feed con- by truck and train from n to j; p c nft
sumption regions, d(d=1,2,3… and p r nft : costs of transporting yellow
D=10) food consumption re- corn by truck and train from n to f; xc-
gions, f(f=1,2,3…F=10) indus- nft and x nft : quantities of yellow corn
r
trial consumption regions, shipped by truck and
m(m=1,2…M=11) border and train from n to f; pit,t+1
maritime ports-of-entry for and p st,t+1 : costs of stor-
white corn imports; n(n=1,2… age per unit of white and
N=11) border and maritime yellow corn in i and s
ports-of-entry for yellow corn from t to t+1; x it,t+1, x st,t+1 :
imports and t(t=1,2...T=12) quantities of white and
months, the model maximizes yellow corn stored in i
500 JUL 2012, VOL. 37 Nº 7and s from t to t+1; p mt,t+1, p nt,t+1 : stor- Manzanillo. The model was optimized and yellow) minus exports per year,
age costs per unit of white and yellow over a 12 month period, beginning in and was separated into food, feed, in-
corn stored in m and n from t to t+1; October of one year through Septem- dustrial, seed, and shrinkage. b) Seed
and x mt,t+1, x nt,t+1 : quantities of white ber of the following year. corn usage by region and month was
and yellow corn stored in m and n The model includes obtained by multiplying surface by
from t to t+1. production, consumption, and prices by planting density (kg·ha ‑1). c) It was as-
The target function in region and month, monthly imports by sumed that 4.14% of corn production is
Eq. 1 maximizes the ‘net social pay- port-of-entry, trade f lows by month, lost in storage and marketing processes
off’ (NSP) which is equal to the areas and quantities of storage by region and to estimate post-harvest shrinkage. d)
under the demand curves minus the ar- month. To determine factors affecting Annual national feed consumption was
eas under the supply curves, less the corn prices the model was first esti- proportionally weighted using data on
value of the imports less transportation mated and validated for the average grain consumption by region to obtain
and storage costs. Restriction (2) es- year for the period 2005-2007. The animal consumption by region. e) An-
tablishes how white corn production in model was validated by comparing the nual national food (industrial) con-
i is distributed to j and d, and restric- observed values of production (white sumption was proportionally weighted
tion (3) defines how yellow corn pro- and yellow corn), consumption (feed, using data on industrial production of
duction in s is distributed to j and f. food, and industrial) and average con- hominy paste and milled starch to ob-
Restriction (4) establishes how white sumer prices in the average year 2005- tain food and industrial consumption
corn imports through m are distributed 2007, with the values obtained using by region. f ) It was assumed that feed,
to regions j and d, and restriction (5) the base period model. The following food, and industrial consumption were
indicates how yellow corn imports scenarios were then examined and equally distributed across 12 months of
through n are distributed to j and f. compared with the results of the base the year. Data and information used to
Restriction (6) establishes how feed model: a) increases in the international calculate total consumption were ob-
consumption in j is supplied with corn price of yellow corn by 10% and 20%, tained from INEGI (1995), SAGARPA
originating in i, s, m and n. Restric- b) increases in the exchange rate by (2007), SIAP-SAGARPA (2009c) and
tion (7) indicates that food consump- 15% and 30%, and c) increases in end- USITC (2009).
tion in d is supplied with grain coming ing inventories by three million and The regional price paid
from i and m; in similar form, restric- five million tons. by consumers and received by produc-
tion (8) establishes that industrial con- ers was calculated using the interna-
sumption in f is supplied with grain Data tional price of corn at Mexican ports-
coming from s and n. of-entry. Transportation costs from
Restrictions (9) and For each region, aver- each port-of-entry to internal points of
(10) indicate that ending inventories in ages of the three yearly corn consump- consumption were added to the inter-
i and s are equal to initial inventories. tion cycles were used, beginning in national price to obtain consumer pric-
Shortages of white corn in the USA October 2004 and ending in September es. Producer prices in each region
market were incorporated into the 2007; thus, the data used in the model were assumed to be equal to consumer
model by restriction (11), which indi- refer to an average of three years. All prices less a marketing margin for
cates that imports entering through values for October to December are transportation of the grain from the
different ports in a given month must averages of the corresponding data in farm to the points of consumption.
be equal to the data observed in the 2004, 2005, and 2006. From January to Marketing margins for each region
average year over the period 2005- September, all values are annual aver- were calculated using the difference
2007. Actual Gulf of Mexico region ages for the years 2005, 2006, and between corn price in the wholesale
port storage and transportation infra- 2007. The year that runs from October markets and the average price received
structure capacity was established by of the first year to September of the by producers. Data for the average
restriction (12), which indicates that following year is referred to as average producer price were obtained from the
white and yellow corn imports through year 2005-2007. SIAP-SAGARPA (2009a); corn price
the USA-Mexico border ports-of-entry Supply and demand data for the wholesale market are from
of Nuevo Laredo, Piedras Negras and functions were estimated using domes- SNIIM (2009).
Ciudad Juárez must represent 60.1% tically-produced and consumed quanti- International prices of
(δ) of total imports, or the average an- ties, grower and consumer prices, and yellow corn at the Mexican border
nual amount for the period 2005-2007. supply and demand price elasticities. were calculated using the Des Moines,
Finally, restriction (13) establishes the The price elasticities of food and feed Iowa price plus transportation costs to
non-negativity conditions. demand were from FAPRI (2009). The Laredo, Texas and Eagle Pass, Texas.
The model included ten industrial demand price elasticity was International prices of corn at Mexican
white corn production regions: Chi- assumed to be the same as the food Gulf and Pacific ports were calculated
apas, Jalisco, Central, Guanajuato-Mi- demand price elasticity. The domestic using New Orleans prices plus ship-
choacán, Sinaloa, Gulf, Guerrero-Oax- corn supply price elasticity also came ping costs to Mexican ports. The inter-
aca, North, Northeast and Peninsula. from FAPRI (2009). Corn production national price of corn was calculated
The same regions also were defined by region and month was obtained by taking into account the exchange
for yellow corn production and feed, from SIAP-SAGARPA (2009c). rate, insurance, ocean freight, costs of
food, and industrial corn consumption. Mexican corn con- international financing, and entry
Eleven ports-of-entry were included for sumption by region and month was costs. Based on data from SAGARPA
white and yellow corn: Mexicali, No- calculated as follows: a) Annual na- (2007) it was assumed that the white
gales, Cd. Juárez, Piedras Negras, tional consumption was calculated as corn international price was equal to
Nuevo Laredo, Tampico, Veracruz, the sum of domestic production (white the yellow corn international price plus
Progreso, Guaymas, Mazatlán, and and yellow corn) plus imports (white a 13% premium. Data for Des Moines
JUL 2012, VOL. 37 Nº 7 501and New Orleans corn prices and Table I
transportation costs from Des Moines Validation of the corn model, 2005-2007
to Laredo and Eagle Pass, and insur-
Observed Base Dif. Dif. Observed Base Dif. Dif.
ance and freight costs were obtained
Region data model data model
from AMS-USDA (2009). Mexican
Thousand metric tons % Thousand metric tons %
port-of-entry costs were obtained from
Apoyos y Servicios a la Comercial- Feed consumption (white and yellow corn) Food consumption (white corn)
ización Agropecuaria (ASERCA). The Chiapas 453 466 13 2.8 344 354 10 2.9
peso/dollar exchange rate was obtained Jalisco 2,692 2,765 73 2.7 1,153 1,184 32 2.8
from INEGI (2008a); the London inter- Central 2,350 2,372 23 1.0 4,137 4,175 38 0.9
bank offer rate (LIBOR) used to calcu- Gto. - Mich. 1,442 1,487 45 3.1 976 1,005 29 2.9
late the costs of international financing Sinaloa 1,384 1,418 34 2.5 1,121 1,151 31 2.7
was obtained from INEGI (2008c). Gulf 1,803 1,807 3 0.2 797 801 4 0.5
Rail transportation Oax. - Gro. 592 611 19 3.2 647 668 20 3.1
costs from Mexican production regions North 2,076 2,113 37 1.8 982 995 13 1.3
and ports-of-entry to internal points of Northeast 770 784 13 1.7 701 698 -2 -0.3
consumption were estimated using a Peninsula 746 750 3 0.5 387 386 -1 -0.3
distance matrix and an average tariff Total 14,309 14,572 263 1.8 11,244 11,417 173 1.5
which includes both fixed and variable Industrial consumption (yellow corn) White corn production
cost factors. Data for the average tariff Chiapas 5 5 0 1.8 1,266 1,270 3 0.3
were obtained from SCT (2009). The Jalisco 834 834 1 0.1 2,746 2,742 -4 -0.2
cities used as reference points for cal- Central 1,382 1,380 -2 -0.2 3,515 3,680 164 4.7
culating the transportation matrix costs Gto. - Mich. 25 26 0 1.2 2,595 2,581 -14 -0.5
were Tapachula, Guadalajara, Ciudad Sinaloa 321 321 0 0.0 4,913 4,891 -23 -0.5
de México, Morelia, Culiacán, Jalapa, Gulf 3 3 0 -1.1 1,134 1,223 89 7.9
Oaxaca, Chihuahua, Monterrey and Oax. - Gro. 2 2 0 -0.2 1,845 1,830 -15 -0.8
Mérida. Mexican trucking costs from North 282 284 2 0.8 1,066 1,120 54 5.1
production regions and ports-of-entry Northeast 186 187 1 0.8 372 411 39 10.6
to internal consumption points were Peninsula 13 13 0 -0.4 493 535 42 8.5
similarly estimated using a distance Total 3,052 3,054 2 0.1 19,946 20,281 335 1.7
matrix and data from DGTTFM Yellow corn production Corn average prices
(2000). The 2000 data were used to (Pesos/metric ton)
calculate that for 2005-2007 using the Chiapas 168 177 8 4.8 1,669 1,371 -298 -17.8
national consumer price index for the Jalisco 325 356 30 9.3 2,033 1,748 -285 -14.0
transport sector obtained from INEGI Central 21 23 2 9.7 1,894 1,812 -81 -4.3
(2008b). The cities taken as reference Gto. - Mich. 23 24 1 4.7 2,055 1,678 -378 -18.4
points were Tapachula, Guadalajara, Sinaloa 43 48 5 10.5 2,033 1,780 -253 -12.4
Ciudad de México, Morelia, Culiacán, Gulf 18 21 2 13.0 1,724 1,736 12 0.7
Jalapa, Oaxaca, Chihuahua, Monterrey, Oax.-Gro. 0 0 0 - 1,933 1,594 -339 -17.5
and Mérida. Finally, storage costs for North 493 530 37 7.5 1,819 1,641 -178 -9.8
imports (including handling at entry Northeast 345 375 29 8.5 1,731 1,649 -83 -4.8
and exit points) and Mexican-produced Peninsula 6 7 1 12.1 1,755 1,770 14 0.8
corn were obtained from SAGARPA Total 1,444 1,559 115 8.0 1,865 1,678 -187 -10.0
(2002) and INEGI (2008b).
White corn imports Yellow corn imports
Results and Discussion Total 124 124 0 0.0 7,092 7,079 -12 -0.2
The model was validat-
ed for consumption (feed, food, and in-
dustrial), production (white and yellow corn production by 10.6%; however, 11,244,000 and 3,052,000 metric tons,
corn), and prices. Table I presents re- the effect on total white corn produc- respectively; 61.7% of feed consump-
sults obtained from the model com- tion is small. Likewise, the model un- tion was supplied with white corn and
pared to actual values for the average derestimated consumer price in the re- 30.3% was supplied with yellow corn,
of years 2005-2007. The model solu- gions of Chiapas, Guanajuato-Micho- 100% of food consumption was white
tion was very close to the actual levels acán and Oaxaca-Guerrero by 17.8, corn, and 100% of industrial consump-
for the corresponding variables in the 18.4 and 17.5%. This is a consequence tion was yellow corn. White and yel-
year of analysis except in a few cases. of the fact that corn consumption in low corn production was 19,946,000
At the national level the model overes- these regions is lower than in other and 1,444,000 metric tons, and white
timated feed, food and industrial con- parts of Mexico because the livestock and yellow imports were 124,000 and
sumption, and white and yellow corn population and consumer industries are 7,092,000 metric tons. In the average
production by 1.8, 1.5 and 0.1%, and smaller, and corn grown there is con- year 2005-2007, 25.2% of the Mexican
by 1.7 and 8.0%, respectively. The sumed primarily by the households corn demand was supplied with im-
base model underestimated yellow corn that produce it. ports from the USA (Table I).
imports by 0.2% and consumer prices In the average year The factors affecting corn price
by 10.0%. At the regional level, the 2005-2007, feed, food and industrial are shown in Table II. If the interna-
model overestimated Northeast white corn consumption were 14,309,000; tional price of yellow corn increases
502 JUL 2012, VOL. 37 Nº 7by 20%, then total Mexican Table II
production increases by 4.0% Impacts of international corn price, exchange rate and inventory
and total consumption de- holding on the Mexican corn sector
creases by 1.8% relative to
the observed base model val- Variable Base Scenario Dif. Dif. Scenario Dif. Dif.
ues. Because Mexican pro- model
Tons % Tons %
duction is higher and con-
sumption is lower, total corn 10% increase in international 20% increase in international
corn price corn price
imports decrease by 19.2%.
As a result of a higher inter- Consumption 29,044 28,800 -244 -0.8 28,524 -520 -1.8
national price, the Mexican Feed 14,572 14,431 -141 -1.0 14,273 -299 -2.0
corn price is 15.6% higher Food 11,417 11,344 -74 -0.6 11,253 -164 -1.4
with respect to the base mod- Industrial 3,054 3,026 -29 -0.9 2,997 -57 -1.9
el, which indicates a strong Production 21,840 22,228 388 1.8 22,704 864 4.0
White 20,281 20,634 353 1.7 21,071 790 3.9
relationship (1 to 0.78) be-
Yellow 1,559 1,594 35 2.2 1,633 74 4.7
tween domestic and foreign
Imports 7,204 6,572 -632 -8.8 5,819 -1,384 -19.2
markets. Similar impacts, al- White 124 124 0 0.0 124 0 0.0
though of lower magnitude, Yellow 7,079 6,448 -632 -8.9 5,695 -1,384 -19.6
would occur if international Consumer price1 1,678 1,803 125 7.4 1,940 262 15.6
white and yellow corn prices
were to increase by 10% (Ta- Exchange rate (Mexican pesos/ Exchange rate (Mexican pesos/
USD) increases by 15% USD) increases by 30%
ble II).
All factors af- Consumption 29,044 28,660 -384 -1.3 28,308 -736 -2.5
fecting the international corn Feed 14,572 14,351 -221 -1.5 14,148 -424 -2.9
price do impact the Mexican Food 11,417 11,298 -120 -1.0 11,190 -228 -2.0
corn price, and for this rea- Industrial 3,054 3,011 -43 -1.4 2,970 -84 -2.8
Production 21,840 22,468 628 2.9 23,050 1,210 5.5
son an increase in the ex-
White 20,281 20,856 574 2.8 21,377 1,096 5.4
change rate has similar ef- Yellow 1,559 1,613 53 3.4 1,673 114 7.3
fects on the Mexican corn Imports 7,204 6,192 -1,012 -14.0 5,257 -1,946 -27.0
market. If the peso/dollar ex- White 124 124 0 0.0 124 0 0.0
change rate increases by Yellow 7,079 6,068 -1,012 -14.3 5,133 -1,946 -27.5
30%, then Mexican corn pro- Consumer pricea 1,678 1,872 194 11.6 2,053 375 22.3
duction increases 5.5% and
Ending inventories increase Ending inventories increase
total consumption decreases by 3 million metric tonsb by 5 million metric tonsb
2.5% relative to the observed
base model values. Likewise, Consumption 29,044 27,950 -1,094 -3.8 27,220 -1,824 -6.3
because production is higher Feed 14,572 13,951 -621 -4.3 13,538 -1,034 -7.1
and consumption is lower, to- Food 11,417 11,054 -363 -3.2 10,812 -606 -5.3
Industrial 3,054 2,945 -110 -3.6 2,870 -184 -6.0
tal corn imports decrease by
Production 21,840 23,746 1,906 8.7 25,016 3,176 14.5
27%. In this case, corn price White 20,281 22,038 1,757 8.7 23,206 2,925 14.4
would increase by 22.3% as a Yellow 1,559 1,708 149 9.6 1,810 251 16.1
result of the peso devalua- Imports 7,204 7,204 0 0.0 7,204 0 0.0
tion. If a duty is imposed on White 124 124 0 0.0 124 0 0.0
corn imports from the USA, Yellow 7,079 7,079 0 0.0 7,079 0 0.0
similar effects would be ob- Consumer pricea 1,678 2,223 545 32.5 2,592 914 54.5
served in the Mexican mar- Beginning inventories 2,042 2,042 0 0.0 2,042 0 0.0
ket. White 1,305 1,305 0 0.0 1,305 0 0.0
How can in- Yellow 737 737 0 0.0 737 0 0.0
ternational and domestic corn Ending inventories 2,042 5,042 3,000 146.9 7,042 5,000 244.9
prices be de-linked in the White 1,305 3,222 1,917 146.9 4,500 3,195 244.9
Mexican market? The strong Yellow 737 1,820 1,083 146.9 2,542 1,805 244.9
relationship between the pric- a
Average consumer price.
es is a consequence of the b These scenarios assume that total imports of yellow corn are equal to the level observed in the base model.
high import levels required to
meet domestic consumption
needs. With domestic con-
sumption dependent on imports, Mexi- dramatic absolute and relative increas- vides insight into possible policy re-
co loses food self-sufficiency and the es in Mexican corn imports in a short sponses.
international price has a large effect period of time have led many Mexi- While the range of op-
on domestic prices. Imports supplied cans to question what policy responses tions is limited, policy instruments de-
9.7% of Mexican annual corn con- are needed and feasible in order to im- signed to encourage domestic corn
sumption needs at the time when NAF- prove domestic food security and re- production could help reverse recent
TA was implemented, with the share of duce price volatility. Trade liberaliza- increases in Mexican corn imports.
imports in total national consumption tion and broad economic reforms limit The competitiveness and viability of
increasing to an annual average of the federal government’s policy op- Mexican corn production could be im-
25.2% for the period 2005-2007. The tions, although the present study pro- proved through input subsidies to de-
JUL 2012, VOL. 37 Nº 7 503crease farm-level production costs, farm marketing enterprises could be unrest driven largely by food market
subsidies to reduce post-harvest trans- successful if they included inventory factors.
portation and storage costs, as well as programs, which can be an effective
publicly-funded investments designed way to prevent a seasonal fall in pric- References
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14.5% increase in corn production and lumbia, MI, USA. www.fapri.missouri.
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IMPACTOS DEL PRECIO INTERNACIONAL, TASA DE CAMBIO E INVENTARIOS SOBRE EL SECTOR MAICERO
MEXICANO: UN ESTUDIO DE CASO SOBRE VOLATIVIDAD Y VULNERABILIDAD DEL MERCADO
José Alberto García-Salazar, Rhonda K. Skaggs y Terry L.Crawford
RESUMEN
Dos décadas de liberalización comercial y reformas económi- Los resultados indican que si el precio mundial aumentara en
cas han llevado a la pérdida de autosuficiencia alimentaria en 20%, entonces el precio se incrementaría en 15,6%, la produc-
maíz, componente principal de la oferta de alimentos y forrajes ción aumentaría en 4,0%, mientras que las importaciones dis-
en México. Debido a la dependencia del país de los mercados minuirían en 19,2%. Asumiendo que las importaciones de maíz
globales, el precio del maíz mexicano es sensible a los cam- no cambian, un inventario de tres millones de toneladas métri-
bios en el precio internacional y a los inventarios con propó- cas incrementaría el precio del maíz en 32,5%, y aumentaría la
sitos especulativos. El impacto de la volatilidad del precio del producción en 8,7%. Altos precios al maíz son indeseables para
maíz mexicano sobre la estabilidad social de México motivó la la sociedad debido a los efectos negativos sobre la población
evaluación de los efectos de cambios en el precio internacional, de bajos ingresos. Por lo tanto, es recomendable que el gobier-
tasa de cambio e inventarios sobre el precio de maíz a través no de México aplique políticas que promuevan la autosuficien-
del uso de un modelo de equilibrio espacial e inter-temporal. cia alimentaria y reduzcan los incentivos para la especulación.
IMPACTOS DO PREÇO INTERNACIONAL, TAXA DE CÂMBIO E INVENTÁRIOS SOBRE O SETOR DOS
PRODUTORES DE MILHO MEXICANO: UM ESTUDO DE CASO SOBRE VOLATILIDADE E VULNERABILIDADE
DO MERCADO
José Alberto García-Salazar, Rhonda K. Skaggs e Terry L.Crawford
RESUMO
Duas décadas de liberalização comercial e reformas econô- resultados indicam que se o preço mundial aumentara em 20%,
micas têm levado à perda de autosuficiência alimentária em então o preço se incrementaria em 15,6%, a produção aumen-
milho branco e amarelo, componentes principais da oferta de taria em 4,0%, enquanto que as importações diminuiriam em
alimentos e forragens no México. Devido à dependência do 19,2%. Assumindo que as importações de milho não mudam,
país dos mercados globais, o preço do milho mexicano é sen- um inventário de três milhões de toneladas métricas incremen-
sível a mudanças no preço internacional e aos inventários com taria o preço do milho em 32,5%, e aumentaria a produção em
propósitos especulativos. O impacto da volatilidade do preço do 8,7%. Altos preços do milho são indesejáveis para a socieda-
milho mexicano sobre a estabilidade social do México motivou de devido aos efeitos negativos sobre a população de baixos
a avaliação dos efeitos de mudanças no preço internacional, ingressos. Portanto, é recomendável que o governo do México
taxa de câmbio e inventários sobre o preço do milho através aplique políticas que promovam a autossuficiência alimentária
do uso de um modelo de equilíbrio espacial e intertemporal. Os e reduza os incentivos para a especulação.
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