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How can Mexican corn be left to rot?
Larry White quotes the NYT and asks:
"Every year, nearly three million tons of harvested Mexican corn is left to rot because it is too expensive to sell."
How on earth could this be true? Does it mean that the mere cost of transporting the corn from farm to market exceeds the market value of the corn? (Seems impossible, given that Mexico pays prices that cover the cost of importing corn from the US.) If so, why did anyone bother to harvest the corn, and before that to grow it in the first place?
I would not vouch for Mexican government statistics. But I do know that large amounts of corn rot in rural Mexico. The corn is grown for immediate consumption. The rainfall is highly uncertain so farmers plant far more than they need to eat in a typical year. (Where is micro-insurance? But note the shadow value of family labor is often low, so why not plant more? Plus it keeps disputed claims to land active.) In most years there is a great deal of corn "waste," but the precautionary growing has some efficiency properties. The remaining corn is fed to the pigs or dogs or simply left to rot. There are relatively high fixed costs to entering more formal corn markets, most of all transporting the product (i.e., the police will demand bribes), plus the extra corn would not yield very much.
Few of these rural growers import corn from the United States. And it is not hard to believe that mass-shipped corn from the USA is cheaper in Chihuahua than corn shipped up from rural Guerrero.
Note also that many of the very poorest Mexicans grow corn for their own consumption and thus tariff-free corn importation from the US will expand their opportunity set; it will not "put them out of business."
Posted by Tyler Cowen on July 18, 2006 at 01:19 AM in Economics | Permalink
Comments
I find it hard to believe that rural Mexican peasants haven't learned the art of whisky-making. In early European America, distilling whisky was the best way to turn corn into a valuable, distributable product. Does the Mexican heat kill the whisky-making process, or is it a skill which has simply never been developed?
- Josh
Posted by: Wild Pegasus at Jul 18, 2006 3:32:49 AM
It still seems strange that it should be left to rot, given that it's not *that* expensive to shelter it in a silo and then use it as animal feed for chickens, goats or the like. But maybe we are thinking too much like capitalists and looking for angles to make money; if the extra corn is grown simply as a precaution against starvation, and the grower lacks initiative required to bring it to market or otherwise use it productively, then the rot would be easy enough to explain.
Posted by: bbartlog at Jul 18, 2006 10:19:37 AM
When I lived in Cameroon food went to rot all the time. It was fascinating really. For example as oranges came into season the price would drop from 1 for 20 cents to 2 for 20, 4 for 10 and then finally you couldn't buy them at the market because there were so many oranges on the ground that no one would bother buying one. During that time fruit would just rot because there was more than people could eat and it was too difficult to ship it to a foreign market (even down the road).
Then the cycle would move in the opposite direction with prices gradually increasing. The same happened with mangos and avacados.
Posted by: vc at Jul 18, 2006 11:38:36 AM
Isn't anyone aware that this kind of thing was the inspiration for the first modern Intertemporal Equalibrium construction (Hayek, 1928).
Posted by: PrestoPundit at Jul 18, 2006 12:18:09 PM
If this is true and gas prices continue to soar, then Mexico may have a
new market for that corn, Ethanol.
Posted by: Scott at Jul 18, 2006 8:46:08 PM
[Where is micro-insurance?]
Out there rotting in the field. Self-insurance is often the cheapest kind.
Posted by: dsquared at Jul 19, 2006 9:54:55 AM
Here is a puzzle that I do not understand. From:
http://www.newscientist.com/channel/health/mg19125601.600-time-to-turn-the-tables-on-big-food.html;jsessionid=HGGJKABINLKJ
"
"In The Omnivore's Dilemma, the ecology of the food
system comes into focus. Michael Pollan highlights the
"fundamental tension between the logic of nature and
the logic of industry", using the overproduction of
corn as an illustration. The US pumps out 10 billion
bushels of industrial corn each year, with each bushel
requiring about a litre of oil to grow it.
"Ecologically this is a fabulously expensive way to
produce food," writes Pollan, adding that ecological
considerations don't enter into the equation. This
corn has to go somewhere. "Sooner or later clever
marketers will figure out a way to induce the human
omnivore to consume the surfeit of cheap calories," he
writes. In fact they already have, and we are eating
it directly or indirectly, to the tune of about a
tonne a year each, though most of it is hidden from
view. Fast food, for example, is basically corn in
disguise. Soda is little else but high-fructose corn
syrup and water. Most meat is really just the corn
consumed by feedlot livestock. US citizens are not
only eating this overproduction and paying for it at
the till, but are also subsidising it through taxes.
"Very simply, we subsidise high-fructose corn syrup in
this country, but not carrots," writes Pollan."
Posted by: gaddeswarup at Jul 20, 2006 1:41:24 PM
Didn't you have the article (last year, I think) about the boom in sales of "Corn Stoves" which heated homes by burning corn?
Here is one that showed up on a google search:
http://www.thecornburner.com/
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Posted by: levan at Sep 11, 2006 3:34:55 AM
