Pepsi Buys Corn From Mexican Farmers

Very interesting article in the global business section of The New York Times (2/21/11), "For Pepsi, A Business Decision with Social Benefit".   PepsiCo is now buying corn directly from Mexican corn farmers, eliminating middlemen, and guaranteeing the price upfront.  According to the article,

"The deal enables the small farmers to secure credit to buy seeds and fertilizers, crop insurance and equipment.  "Before, I had to sell my cow to buy what I needed,” said José Guzmán Santana, another farmer selling to Pepsi. “Now I keep the cow and my family has milk while I grow my crop."  Pepsi

Co’s work with the corn farmers reflects a relatively new approach by corporations trying to maintain a business edge while helping out small communities and farmers." 

This appears to be a win-win business relationship for the farmers and PepsiCo.

"The corn project saved PepsiCo transportation costs because the farms were close to two of its factories, and the use of local farms assured it access to types of corn best suited to its products and processes. “That gives us great leverage because corn prices don’t fluctuate so much, but transportation costs do,” said Pedro Padierna, president of PepsiCo’s operations in Mexico, Central America and the Caribbean.  The social benefits of the corn program are obvious in higher incomes that have improved nutritional and educational standards among the participating farmers, not to mention its impact on illegal immigration and possibly even the reduction of marijuana production."

Students in my online course, Global Social Change, have examined and discusssed the interconnectedness of global trade, economics, poverty, illegal drugs and immigration.  This article provides us with an excellent example to illustrate how these variables interact and impact both the U.S. and Mexico.  To read the article, go to http://www.nytimes.com/2011/02/22/business/global/22pepsi.html

Good Food World raises some interesting questions about the PepsiCo-Mexico relationship.

• Who is determining which seeds they grow?
• Are the seeds patented hybrids or GMOs?
• Can the farmers save their own seed?
• Which pesticides are they instructed to use?
• Are the costs for seeds, fertilizers, and pesticides going up?
• Who actually negotiates and sets the price for the corn? Is it a “take it or leave it” pricing from PepsiCo or do the farmers have input?  (Good Food World)

These are fair questions.    As they say, the devil is in the details.