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Rising tortilla prices

Corn prices are shooting through the roof, giving sleepless nights to policy makers as rising food and feed prices result in higher inflation at a time when economic growth in slowing in most parts of the western world. Now, linkages between corn and crude oil through biofuel has meant that when oil prices rise, corn prices follow as efforts to find alternative sources of fuel (such as biofuel) gain momentum. And over the past few months, linkages between the energy and grains markets have only intensified. According to the United States Department of Agriculture (USDA), this year the country is going to use over 30% of its total corn crop for the production of ethanol, and this figure is only set to increase over the following years. Making maters worse in the recent weather concerns in the US, resulting in the recent surge in corn prices through $7/bushel.

Torrential rains across the US Midwest have delayed corn plantings and have also caused widespread destruction to the some of the already planted corn crops. Various forecasters are comparing the situation to the floods in 1993, when thunderstorms and tornadoes completely destroyed the key corn crop belt in the US. Corn and soybeans planted in wet, cool soils develop shallow roots, increasing the threat of damage from dry weather in July and August. Further, the yields of the crop are lower too. With more rains forecast for the coming few weeks, one can only sit back and pray and keep out of those mexican restaurants where tortilla prices are likely to skyrocket!

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This entry was posted on Sunday, June 15th, 2008 at 3:27 pm and is filed under Commodities, Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

38 Responses to “Rising tortilla prices”

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