Unintended Consequences -- the price of corn

Government subsidies for using corn to produce Ethanol for fuel. Sounds good; right? Mexico does not grow enough corn for their own use, they need to import it. Guess what... From CBS News:

Mexico Signs Deal to Hem Tortilla Costs
Mexican president signs accord to contain soaring tortilla prices, protect dietary staple

President Felipe Calderon signed an accord with businesses on Thursday to curb soaring tortilla prices and protect Mexico's poor from speculative sellers and a surge in the cost of corn driven by the U.S. ethanol industry. The corn tortilla is the basic staple of the Mexican diet and is especially crucial for the poor. The accord limits tortilla prices to 8.50 pesos ($0.78) per kilogram and threatens to use existing laws to achieve prison sentences of up to 10 years for company officials found hoarding corn. Some stores have been selling tortillas for as much as 10 pesos ($0.91) per kilogram.

It also raises quotas for duty-free corn imports to 750,000 metric tons (826,733 U.S. tons), most of which will come from the United States.

The measure is to be reviewed for possible modifications on April 30.

"The unjustifiable price rise of this product threatens the economy of millions of families," Calderon said. "We won't tolerate speculators or monopolists. We will apply the law with firmness and punish those who take advantage of people's need."

The rise in tortilla prices has been one of the first major challenges for the conservative who took office in December, putting him in an uncomfortable position between the interests of business and those of the poor.

Tortilla prices rose by 14 percent in 2006, more than three times the inflation rate, and they have continued to surge in the first weeks of 2007.

The rise is partly due to U.S. ethanol plants gobbling corn supplies and pushing prices as high as $3.40 a bushel, the highest in more than a decade.

The production of Ethanol from biomass is about breakeven. You need to put a lot of energy into this through growth, harvesting and distillation and the overall recovery of energy is about par. The US Government is subsidizing Ethanol development so corn growers are selling a lot of corn to Ethanol plants who are driving the price up. The unfortunate thing is that this overall increase in food corn (cereals, tortilla's, corn syrup, etc...) is not just borne by the US, it also affects all the nations that the US exports to. Some of these nations cannot well afford this price jump.