Attempts By Governments To Hedge & Stockpile Likely To Drive Food Prices Even Higher
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The Mexican government, keen to avoid a repeat of the tortilla riots when corn prices jumped, has tried to secure lower corn prices by purchasing in bulk, buying a massive 1.516 million tonnes last week. In 2007 tortillas cost on average 5.73 pesos per kilo and today they're 9.76 pesos per kilo, according to data from the economy ministry.
"I don't see social problems because the government is very focused on controlling the price of something that is an integral piece of the Mexican diet. They'll keep protecting the people," said Alvaro Ley, head of AMEG, the Mexican meat fatteners association.
However, dealers say the Mexican tactic could touch off a frenzy of buying by other countries wrongfooted by the U.S. drought. Iran, Algeria and Jordan are all shopping for grain this week.
One notable absentee so far is leading wheat buyer Egypt, which snaps up more than 10 million tonnes a year. Pham noted that Egypt, which is still experiencing social and political tensions following last year's revolution, gets a quarter of what it consumes from the United States. "Any upward movement in U.S. wheat prices will have significant impact on the lives of ordinary Egyptians, nearly half of whom subsist on less than two dollars a day," he added.
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http://www.cnbc.com/id/48590056