This is a massive topic and will surely be an expanding post of the coming days. It's that topic of globalisation- that phenomenon that means someone in London can write about Guatemala and be read by people in Singapore, etc. When reports surfaced in January of a sharp rise in the price of maize in Guatemala, some were connecting this to the increase in ethanol production in the US.
El Siglo XXI wrote on (11-01-2007):
"El precio del maíz blanco se ha incrementado un 37.5% en un año, debido a la escasez mundial de este grano. En enero de 2006, el quintal tenía una cotización máxima de Q80 y una mínima de Q73, mientras que a la fecha alcanza hasta los Q110."
Inforpress also picked up on the story about, "the rising grain prices resulting from America's growing appetite for ethanol as an alternative to fossil fuel. Of course, this was a massive story across the border in Mexico where, exacerbated by a lack of a competitive domestic market in maize products, prices in corn rose steeply. The price of tortillas rose by nearly a third in three weeks".
The recent trend is for the price of maize to rise. And what does the FAO put this down to?
"Industrial use of coarse grains continued to expand rapidly in 2005/06. Apart from a strong demand for starches and sweeteners, the main driving factor has become the exponential growth in maize-based ethanol production, fuelled by rapid increases in world energy and petrol prices. In fact, much of the impact of accelerated investments in ethanol plants across several countries around the world is yet to be felt."
The FAO continues: "In the United States, the world's leading maize-based ethanol producer, the amount of maize used as the main feedstock for ethanol production is estimated to have touched a new record of over 40 million tonnes in 2005/06. This buoyant demand is driven by near quadruple expansion in ethanol production since the start of the decade. Put into perspective, the current usage of maize by the United States for ethanol comes close to its annual average exports or equals total maize used for animal feed in the EU 25. Based on official forecasts, ethanol manufacturing in the United States is projected to consume 20 percent of the 2006 crop. This would imply an additional 10 million tonnes of maize going to ethanol production in 2006/07."
This story of the rising price of Guatemala's most important foodstuff, kept coming back to oil. Oil before food, surely not?
The Famine Early Warning System Network (FEWS NET) summarised the situation as follows: "The price of white maize is increasing due to the international price increase of yellow maize caused by the increased demand for the grain for ethanol production in the U.S.A. It is expected that this increase will be for a limited time, and that prices for February and March national harvests will be lower." They conclude that generally the food security situation in the short term remains stable.
But what's the context here? According to a recent report on the maize problem in Guatemala, Propuesta para la Reactivación de la Cadena Agroalimentaria del Maíz Blanco y Amarillo by Mario Roberto Fuentes López, Jacob van Etten, José Luis Vivero Pol and Álvaro Ortega Aparicio, the situation is critical. Maize production in Guatemala is increasing but demand has steadily outstripped demand in the last decade and a half- a gap which has been bridged increasingly by importing maize from abroad (particularly from the US).
For some this policy of importation threatens Guatemala's ability to produce the food it requires so that none go hungry and go back to being self-sufficient as it was in the 1970s. Less reliance on imports would take the pressure off to devalue and cushion Guatemalans (remember we're talking about a vital foodstuff) from the vagaries of the global markets subject to speculation.
It's also impossible to ignore the fact that a huge amount of Guatemalans produce maize for their own consumption. So while maize production only comes in as 1% of Guatemala's GDP, economists tempted to belittle maize's economic importance should also consider the social significance of the statistic that two thirds of the agricultural land in Guatemala is used for maize production. As Susana Gauster of CONGECOOP, puts it we should be:
"calling for a return to the grain-production levels of the 1970s, when "Guatemala was the granary of Central America and Mexico and completely self-sufficient in corn because of a strong public production support aimed at guaranteeing food security.""
Gauster makes the point that this trend to use more and more maize in the production of ethanol is putting pressure on food prices in countries like Guatemala. But what has this got to do with chickens? Well, this brings us to the supporters of maize importation in Guatemala. Who are they? Amongst others they are pork and particularly chicken producers who depend on a ready supply of yellow maize (they can't use white maize as it lacks the necessary carotenoides). For these producers it's more convenient to import yellow maize- it's a stable supply so why bother in investing in boosting a comparitively riskier domestic supply?
When the U.S. Department of Agriculture announced that it would donate 18,000 metric tons of yellow corn to the Guatemalan Government in September 2006, this dumping undoubtedly favoured the chicken producers of Guatemala. According to Susana Gauster:
"los actores principales son contadas empresas, entres ellas las que comercializan su producto bajo las marcas "Pollo Rey", "Pío Lindo" etc., y quienes, bajo tres grupos de capital, concentran más de dos terceras partes de las importaciones del maíz amarillo, principal insumo de la industria avícola (que corresponde al 60-70% de sus costos de producción). A esto solo hay que agregar que quien controla las importaciones, también controla los precios domésticos (a productores pero también a consumidores), y esto nos revela el poder real de estas empresas."
Politically it's easy to see why a unified enormously powerful chicken producer has more influence over the Guatemalan Government than the unorganised small and numerous maize sector. This lack of sectoral organisation for maize producers is in no small way down to the bitter civil war fought in many of the high maize producing areas of Guatemala.
This is of course an incredibly complex situation- way beyond this short post. But the challenge for Guatemala is to start investing in its many domestic producers of maize. With CAFTA-DR gradually lowering the barrier to imports over the next nine years- this investment imperative will only become more and more vital.
