Mexico City, Jan. 9 - Mexican tortilla prices could jump by as much as 5 percent by the end of January due to rising energy and labor costs, an industry official said on Tuesday, possibly adding to inflation.
Mexicans now pay close to 75 U.S. cents for a kilogram (2.2 pounds) of corn tortillas, a staple food in Mexico.
The forecast rise would be only just above annual inflation of around 4 percent, but any increase in basic food prices tends to make policy makers jittery.
"Tortilla producers are going to have to raise their prices to compensate for increased costs of gas, electricity and salaries that keep rising every year," Jose Cacho, the head of Mexico's corn flour producers association, told Reuters.
Rising prices for grains have stoked inflation in Mexico and across Latin America as fast-developing economies like India and China boost demand for food commodities and more grains are being diverted for biofuels.
Corn tortillas, flat bread patties eaten with almost every Mexican meal since Aztec times, account for 1.23 percent of Mexico's consumer price index, one of its largest components.
At the beginning of last year tortilla prices jumped 25 percent in Mexico as growing U.S. demand for corn-based ethanol pushed international corn prices to their highest in a decade.
Tens of thousands of disaffected consumers took to the streets in protest, forcing the government to agree a price cap with corn flour producers. The agreement expired in December.
The central bank has warned that higher food prices and a planned tax hike will likely keep inflation above the 4 percent rate it considers acceptable for this year.
Mexico's 12-month inflation was 3.68 percent in early December, but closely watched core inflation rose faster than expected to 3.98 percent.
NAFTA WON'T HELP
On Jan. 1, Mexico lifted 14 years of protection for corn, beans, milk and sugar under the North American Free Trade Agreement, which took effect in 1994 and includes the United States and Canada.
But increased imports of corn and other grains will not bring Mexican prices down because prices are high internationally, Cacho said.
U.S. corn futures soared to 11-year highs this week with some contracts closing at just above $5 a bushel on fund buying, active exports, and rallying crude oil.
Mexico's consumer watchdog agency Profeco will begin monitoring tortilla prices across the country this month. Prices tend to fluctuate in different regions depending on local tastes and markets.
The agency has not yet seen a significant jump in prices this year but if they do rise slightly in coming weeks the increase would still be within an "acceptable range," said Profeco official Gladis Lopez.
An expected surplus in the Mexican white corn harvest this year could also help cushion prices, Lopez said.