Economics of Volatile Corn Prices Essay Example | Topics and Well Written Essays - 750 words

Economics of Volatile Corn Prices - Essay Example The primary reason behind rise in the prices of corn was due to its global demand against its restricted supply. The excess demand could not be met with the restricted supply, which resulted in the rise in prices of corn all over the world. Mexico is the second largest importer of corn in the world. The rise in the corn prices all over the world has affected Mexico to a great extent. Decline in demand of corn due to rise in its price can be depicted by using the following graph:- (Source: Fep, 2004) In this graph it is shown that when the price of corn in Mexico was $3 per bushel, its demand was 2 billion bushels per year and the supply was 1.1 billion bushels per year. Thus there was an excess in demand which could not be met by the supply. As a result of the price rise to $5 per bushel, the demand decreased to 1.1 billion bushels per year and consequently excess supply is generated. The market should move towards equilibrium at a price of $4 per bushel where the demand equalises th e supply. Another reason for the rise in corn prices in Mexico was the production of corn based ethanol in the United States and the European Union. The producers of corn had to suffer due to this price rise. Another reason for the high corn prices was the draught in the United States. ... Thus the country has to find ways to deal with the uncertainties of the volatile markets. The country needs to focus on the market conditions properly. The main problem that the consumers in Mexico will face is when they will visit the grocery stores. Corn and food ingredients made from corn are used in ? of the total grocery products. Thus higher prices will be found throughout the grocery stores. The livestock feed rations contain a considerable amount of corns, a extended impact would be observed on poultry and meat prices due to higher feed costs than in any other food products. Volatility in corn prices brings in unpredictability in the market and may create risk of fundamental food security for consumers as well as governments. Financial risk generated due to the volatility of corn prices dampens investment in agricultural sector which in turn creates uncertainty among traders and producers. Thus the Mexican government must take steps to bring an alternate solution to the exist ing problem. There are several programs involving the cash transfer conducted by the Mexican Government in order to help the poor people there. The procedure of agriculture by means of contracts was another procedure advised by the Mexican Government (The World Bank Group, 2013). When there is an agreement made to buy a particular quantity of corn within a fixed period of time, neither the buyer nor the seller is sure that who is going to be benefitted by the agreement. This procedure supports the producers when there is a fall in the price. The price difference is subsidized between the time of signing the contract and the time of its fulfilment. However, corn prices have plunged from their previous position in June 2011. Ethanol is considered to be a viable source of

Discuss the Impact of the Recession on Consumer Behavior and on Essay

Discuss the Impact of the Recession on Consumer Behavior and on Marketers - Essay Example At the same time, marketers are resorting to new promotional campaigns in order to remain competitive and gain consumer attention in the face of this current economic downturn. Food and technology Statistics indicate that six in 10 consumers have reduced the volume of frequency as it pertains to eating-out in restaurant environments (Bainbridge 2010). As a result, especially noticeable in the pizza restaurant industry, marketers have changed their promotional activities to include vouchers with significant pricing discounts (Bainbridge). Where once major companies in this industry, such as Pizza Hut, used psychographic segmentation and targeting to gain attention and loyalty, they are finding it more difficult to compete especially when their products carry high price tags over competition. Companies like Pizza Hut once had well-established consumer segments that were devoted to the brand and were able to use rather low-cost marketing and higher price methodology to ensure positionin g in terms of quality. Today, however, the recession has created price wars that continue to erode profitability especially with more consumers eating within the home and avoiding the high costs of restaurant eating. This is also noticeable in the fast food industry with new promotions being added to traditional menus, such as McDonald’s with its dollar menu variety. However, this marketing effort is not bring the type of profit results marketers had once experienced early in the recession. Today, new freebie offers and Internet-based incentives coupons are becoming the norm for many consumer segments (Glazer 2009). This shows a shift in consumer behaviour toward active searching in the consumer search process to identify coupons before they will frequent even their favourite restaurants. There is clearly a value-driven methodology in consumer groups that change their buying behaviours and choices. This is even apparent in how grocery stores market their food products, with t he new value-based consumer searching for low-cost products. Statistics indicate that 53 percent of today’s recession-minded consumers are buying fewer organic products and 50 percent are even turning toward generic or private label brands (Frozen Food Age 2008). Organic products and well-known product brands used to be the driver for significant profitability in the grocery industry, however the recession is changing the supply chain to identify new value for consumers in order to sustain their business. Morrisons, one of the largest grocers in the UK, has control over much of its supply chain and is therefore able to ride out the recession successfully by using new promotional tactics. The store is able to provide fresh food options at a much cheaper price than competition and uses this fresh quality positioning to sustain higher profitability than other markets without control over their purchasing system (Mortimer 2009). However, it shows that the consumer propensity to c hange from their loyal and trusted brands to generic and private label brands and how it has affected total marketing and purchasing/distribution strategies. The grocery industry has identified that 44 percent of shoppers now consider private label products to be on par or even better than long-standing trusted brands (just-style.com 2009). This is a danger to