May 10, 2007

Mexico's increased corn output may influence corn prices

An assurance by Mexico of an increase in its corn output is likely to have a small impact on near-record prices, a senior US official said on Tuesday.

US Undersecretary of Commerce for International Trade Frank Lavin said a slight increase in production can move prices more significantly given that corn demand is "inelastic". 

In March, the Mexican agriculture ministry has promised an increase in corn production of at least 10 percent this year due to an additional cultivation of more than 1 million acres.

Mexico has faced a drastic increase in the price of the grain as it reached ten-year highs and sparked protests demanding a price cap on thin corn patties which is used for corn-based tortilla, the country's staple food.

But US producers who export to Mexico are unlikely to be hurt by an increase in Mexican production or any lower prices as strong demand for corn-based ethanol will eat up US corn exports, the US Department of Agriculture reports.

Lavin said increased competition from US corn would have a positive impact on ordinary Mexicans.