corn-producing sector in mexico and sustainability alejandro nadal centre for economic studies el...
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Corn-Producing Sector in Mexico and Sustainability
Alejandro NadalCentre for Economic Studies
El Colegio de México
OSISA – CCS-UKZNWinter School on Rethinking Sustainability,
Development and Economic JusticeSouth Africa, Durban, July 2013
OVERVIEW - Main Features
• Importance of small scale producers, both small commercial farmers or subsistence producers
• 3 million direct producers• 15 million persons depend directly on corn• Approximately 8 more million depend indirectly
(commerce, transportation) on corn production• Large employment generator• Crucial staple
– Nixtamal process: only used in Mexico & Guatemala– Converts bound niacin into free niacin
Zea mays: Mexico is centre of origin of corn
• Vavilov in Mexico (1930, 1932): Mexico is the centre of origin of corn (Zea mays)
• Mexico is the centre of domestication of corn from “teosinte” (Zea mays parviglumis) around 7,000 years BPT
• Mexico is the centre of greatest genetic variability of corn• Mexican corn germplasm: 51 racial complexes and more
than 9,000 varieties (38% of accessions at CIMMYT) plus 388 varieties of wild relatives (teosinte and tripsacum)
• Today: high risk of genetic erosion– Degradation of milpa systems– Migration induced by economic warfare– Large scale agri-business model (including for ethanol)– GMOs: moratorium, contamination (Oaxaca), authorization
Corn small scale producers and genetic variability
• Mexican producers using traditional methods on rain-fed land rely heavily on genetic diversity as a strategy for survival
• Genetic variability of corn = most important technological asset of small scale corn producers in Mexico
• Sowing different varieties, with different abilities to withstand a range of environmental conditions, offers insurance for an adequate harvest: this requires sophisticated handling of a complex set of inter-relations between seed characteristics, soil quality, surrounding topographic features, weather and climate, etc.
• Milpa: complex intercropping system (it’s core is made of three crops: corn (Zea mays), beans (Phaseolus vulgaris) and squash (Cucurbitacea spp.)
Genetic variability of corn in Mexico
• Global importance: Mexican germplasm has been used to improve more than 45 varieties of corn used worldwide
• Critical in context of climate change• In situ conservation performed by three million
small scale producers in Mexico: curators of germplasm
• Ex situ in germplasm banks not enough in the long haul– Static conservation (in situ is dynamic)– Lack of adequate information in accessions’ passports
In situ Conservation of Genetic Resources
Maize in Mexico: well adapted to complex tapestry of agro-ecosystems. Due to strong genetic X environment interaction, maize is well adapted to the harsh and varied conditions of Mexico’s lanscapes
Mexican corn germplasm is the single most important technological asset of poor (small-scale) producers
HYV’s unable to compete with landraces. GMO’s may be in the same situation (Berthaud, Goodman, García Barrios, etc.),
Justifying Corn in NAFTA
• Government’s justification for including corn in NAFTA: it would be cheaper to import than to produce domestically
• These three million producers were defined by GOM as “inefficient” and too costly (subsidies and price floor support mechanisms)
• In addition, the GOM argued that these subsidies were distorting prices of corn and affected consumers of final maize products (tortillas)
Corn in NAFTA
• Tariff rate quota system over 15 year period• Tariff-free quota to expand at 3% p.a.• Initial tariff at 206% ad valorem (phase out)• Price floor support and import quotas to be
eliminated immediately and…• Replaced by income deficiency systems (à la
Dunkel)• Support for producers during this period
would be maintained constant in real terms
The NAFTA Project: expected results
1. Increments in corn imports
2. Reductions in domestic prices
3. Diminished output
Reallocation of productive resources: land, capital and labor
Corn in NAFTA: TRQ and Imports (1989-2004)
0
1000
2000
3000
4000
5000
6000
700019
89
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Th
ou
san
d m
etri
c to
ns
The Implementation of Corn in NAFTA
• Tariff for over quota not implemented: de facto total liberalization took place on January 1, 1994
• Transition period truncated to 36 months (domestic and international prices alligned)
• Producers’ prices dropped 50% first years of NAFTA• PROCAMPO’s real value dropped 45%• Investments in hydro infrastructure collapsed• Credit for agriculture at all-time low• TODAY: international prices have increased (food crisis) due
to biofuel production in the USA and to a lesser extent financial speculation in futures markets
International Corn Prices
International Corn Prices2000 - 2012
Evolution of international prices of corn
• World demand (China)?• What about market power concentration?
– Archer Daniels Midland, Cargill, Bunge, Louis Dreyfus (ABCD) control more than 40% of world trade in grains
• Ethanol and biofuel production, especially in the US• Financial speculation in Chicago Mercantile Exchange
– US CTC continues to deregulate commodities’ futures markets– Big players in energy trading entering commodities trade: Vitol
(largest independent oil trader) has hired team from Viterra (Toronto). Viterra was bought by Glencore, largest global commodity speculator
Financial speculation and commodity markets
Source: UNCTAD’s Policy Brief No. 25 Calculated with data from Bloomberg
Financial speculation and commodity markets
Source: UNCTAD’s Policy Brief No. 25 Calculated with data from Bloomberg
PROCAMPO: Real Value and Beneficiaries
200.00
220.00
240.00
260.00
280.00
300.00
320.00
340.00
360.00
380.00
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
1994
Pes
os/h
a
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,100
3,200
3,300
3,400
Tho
usan
d be
nefic
iarie
s
Pesos/Ha Beneficiaries
Mexico: Investment in Hydro-agricultural Infrastructure (1991-2003)
0
200
400
600
800
1,000
1,200
1,400
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Milli
on P
esos
199
4
0
5
10
15
20
25
30
35
40
45
Tho
usan
d he
ctar
es
Federal budget appropriations Surface converted to irrigation
Trends in Mexican Agriculture
Banrural: Credit for Agriculture
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
1994 1996 1998 2000
Mill
ions
of
peso
s fo
r to
tal c
redi
tCommercial Bank
Loans for Agriculture
0
10000
20000
30000
40000
50000
1994 1997 2000
Mill
ion
1994
pes
os
Total Agriculture Livestock
Declining government credit
Declining commercial credit
New Irrigated Surface, 1991-2001
0.0
10.0
20.0
30.0
40.0
50.0
1991 1993 1995 1997 1999 2001
Tho
usan
d h
ecta
res
Trends in Mexican Agriculture:Declining Investment
Declining Subsidies for Maize (Amber Box)
Real Maize Subsidies 1994-2002
1,500
1,750
2,000
2,250
2,500
2,750
3,000
3,250
3,500
1994 1995 1996 1997 1998 1999 2000 2001 2002
mill
ion
s 19
93 p
eso
s
Source: OECD, Agricultural Policies in OECD Countries: Monitoring and Evaluation, 2003; author's calculations.