Repercussions on Raising Prices for Commodities.


 

O son of man! If thine eyes be turned towards mercy, forsake the things that profit thee, and cleave unto that which will profit mankind. And if thine eyes be turned towards justice, choose thou for thy neighbor that which thou choosest for thyself.

 

Bahá’u’lláh

We have been learning how the power of the market affects supply and demand. We have also see how Fair Trade may be utilized to raise the price of a commodity, like coffee or chocolate. But what happen when the price of a commodity rises naturally because demand raises? Since the price of oil has been in all times high, the ethanol is now being using as an alternative to produce fuel. Ethanol happens to come from yellow corn, which also may be used for human consumption. The pressure over the demand of ethanol has made the price of corn raise:

Supply and Demand IV

This should be good news. The ecologists should be happy because a renewable, less pollutant material is being used to fuel cars. Fair traders advocates should be happy because corn farmers have now increased their income.

But that is an incomplete point of view from the westerns.

In Mexico, Corn is used to made tortillas. Tortillas are not a simple food sold in fast food restaurants; it’s a basic food and part of that country’s culture. According to the National Institute of Nutrition, 40% of the poorest families get 50% of their calories from tortillas. Tortillas are basically mashed corn, no other ingredient but water is used. Last year, the price of a kilogram of tortillas was 60 cents (USD), then it was raised to 80 cents, but in January the Mexican Government announced that no further subsidies could be given to the tortilla, and the price for a kilogram was set at $1.60. In a country where the minimum wage lays between $6.00 and $8.00 a day this is nothing more that a national tragedy.

Thousands of families are being affected by the raise of the price of corn and tortillas. Then, chickens eat corn, so the price has been raised for eggs and poultry. Now the food in Mexico is more expensive than in last November.

Economic law dictates that the higher price of corn will be an incentive to corn production, but the Mexican capacity of cultivate more corn is limited and close to its edge, so they need to import more corn from the United States, where corn farms are hardly owned by small farmers but huge multinationals using pesticides and genetically modified corn, which is forbidben in Mexico.

Some producers thus have been beneficiated by the high price of corn, but the vast majority of Mexicans now will have to work more to have food in their table.

An unthought consequence of higher prices on commodities!

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One Response to Repercussions on Raising Prices for Commodities.

  1. […] wrote some time ago about how the increasing use of ethanol was damaging the economy of the poor in Latin America, […]

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