World price, exchange rate and inventory impacts on the mexican corn sector: a case study of market volatility and vulnerability

Résumé 0

"Two decades of trade liberalization and economic reform have led to a reduction in food self-sufficiency of corn, primary component of the Mexican food and feed supply. Due to the country’s dependence on global markets, Mexican corn prices are sensitive to changes in international prices and inventory holding for speculative purposes. The impact of corn price volatility on Mexican social stability has prompted evaluation of the effects of changes in international prices, exchange rates and inventories on the corn price through the use of a spatial and intertemporal equilibrium model. Results indicate that if the world price increases by 20%, then the price increases by 15.6%, production increases by 4.0%, while corn imports decrease by 19.2%. Assuming that corn imports do not change, a three million metric tons inventory will increase corn price by 32.5%, and increase production by 8.7%. Higher corn prices are undesirable for society due to the negative effects on the low-income population. Thus it is recommended that the Mexican government apply policies that promote food self-sufficiency and reduce incentives for speculation"