Corn vs. Tequila
This article focuses on resource scarcity and cost benefit analysis. Mexican farmers are setting fields of blue agave on fire. As many know, blue agave makes tequila. They are not leaving the land barren. They are now planting corn. This is in reaction to the booming ethanol industry in the United States.
"Those growers are going after what pays best now," said Ismael Vicente Ramirez, head of agriculture at Mexico's Tequila Regulatory Council.
There has been an over supply of the plant, and the prices are dropping. It is also suggested this new corn craze will now leave a 35% gap in agave production. It takes many years for an agave to grow to a size worth exploiting.
Land is scarce. This is a trade off the Mexicans are hoping brings greater wealth. They can either plant agave, or they can plant corn. One or the other. They are trying to cash in on a profitable market in the United States. This also relates to trade between nations and a possible comparative advantage. We may have more land, but the value of their time might be less.
4 comments:
Is this a good trade-off for Mexico? I believe they would benefit best by farmers with the healthiest of plants continuing to grow agave and only those with sickly agave plants moving to corn. This specialty trade would reduce agave supply which should push the price back up for tequila and would also allow others to benefit from growing the highly priced corn.
The rising demand for corn is due to the alternative energy push by the US government. The US is trying to find cleaner alternatives to carbon-based fuels such as oil and coal. Corn-based ethanol is one such alternative, though it is not the cheapest version. Brazil is one of the largest producers of ethanol in the world, though they harvest sugar cane rather than corn. Brazil seems to have a comparative advantage over the US in producing ethanol. Thus, I wonder why we don't simply buy Brazilian cane ethanol rather than using taxpayer dollars to subsidize American corn farmers.
Over the course of the long term, this switch from corn to agave may help the farmers that continue to grow the agave. Even though I don't know much about agave or how it is grown, a shortage of agave with a continued demand for tequila would drive the price of agave up. Of course, the US will still need to get corn from SOMEWHERE for a cheaper price for ethanol production(or else we'll be facing increases in feed/food prices), and Mexico might just be the place to get it, for now.
Honestly I think that farmers in mexico shouild stick to growing Agave. I say this because I am from the state of Washington and I know many farmers that are suffering greatly because they are unable to trade and sell their corn because the united states is wanting to use sources outside of the U.S.. This is the same thing for wheat farmers. If the united states really wants to get a jump on finding a cleaner more reliable and cheaper way of producing fuel they should look at their own country instead of going outside. The farmers in Mexico would be better off growing Agave because that is one of their specialties, and they could use that source as a trade for money and corn for their people.
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