(Adds second tortilla group, tortilla shop quote)
By Jason Lange and Luis Rojas Mena
MEXICO CITY, May 14 (Reuters) - The price of tortillas, a political hot button in Mexico where the corn pancakes are eaten more readily than bread, is expected to jump about 18 percent by June on rising costs for fuel and corn, a major industry group said on Wednesday.
Average tortilla prices should rise to 10 pesos ($0.95) per kilo in June from 8.5 pesos per kilo now, Rafael Ortega, who heads the National Chamber for the Tortilla and Dough Industry, told Reuters. Ortega's organization groups together about 40 percent of the country's tortilla producers.
The chamber's forecast, together with other projections of even sharper increases that have been published in Mexican newspapers, contradicted recent statements from major retailers that tortilla prices will not rise sharply this year.
Food costs are a serious concern for the poor in Mexico, where the minimum wage is around $5 a day. In the past, the government has made deals with retailers and producers to control tortilla costs.
Investors seized on the forecasts as more evidence that the price increases will fuel higher inflation and might lead the central bank to raise interest rates this year.
Yields on Mexican interest rate futures <0#TII:> surged on Wednesday, showing investors had significantly increased bets of a rate hike sometime this year.
The yield on Mexico's benchmark 10-year peso bond <MX10YT=RR> rose 7 basis points to bid 8.10 percent.
Ortega said the average price for a tonne of milled corn has jumped to 3,650 pesos from 3,000 pesos in January.
"It is just supply and demand," Ortega said.
"NO OPTION"
Another industry group said on Wednesday tortilla prices would rise gradually from this week, increasing to 9 pesos ($0.85) from Thursday, and also blaming higher costs for corn.
"Our members have no option, or they raise prices for tortillas or close their businesses," Lorenzo Mejia, the leader of the National Association of Industrial Millers and Tortilla Outlets, told local radio.
In Mexico City, tortilla store staff said they had also heard prices for the staple would be on the rise from June to 9 pesos per kilo, up from 8.5 pesos currently.
"The increase is because everything is on the way up," said Juan Manuel Aguilar, who helps run a tortilla store in a working class neighborhood of the capital, blaming higher dough, fuel and electricity costs.
Global grain prices have surged on higher demand from countries like China, scant harvests in many countries and growing demand for grain from the biofuel industry.
In some parts of the world, soaring prices for basic food staples such as rice have sparked street protests and riots.
($1 = 10.487 pesos) (Additional reporting by Michael O'Boyle; editing by Jim Marshall) ((jason.lange@reuters.com ; 52 55 5282 7153; Reuters Messaging: jason.lange.reuters.com@reuters.net)) Keywords: MEXICO TORTILLA/
* Canadian dollar eases against stronger greenback
* Oil prices slide, reversing currency's early gains
* Bonds mixed with no key data
By John McCrank
TORONTO, May 14 (Reuters) - The Canadian dollar fell
against a stronger U.S. dollar on Wednesday, as oil prices
dropped from their record highs, thwarting the currency's bid
above parity with the greenback.
Domestic bond prices, with no domestic data to influence
direction, ended mixed.
The Canadian dollar closed at US$1.0043, valuing a U.S.
dollar at 99.57 Canadian cents, down from C$1.0028 to the U.S.
dollar, or 99.72 U.S. cents, at Tuesday's close.
"It's still very much in this range, and not a lot has
changed, even though we did try to break through parity," said
Camilla Sutton, currency strategist at Scotia Capital.
The currency muscled its way above parity early in the
session, hitting a high of US$1.0036, valuing a U.S. dollar at
99.64 Canadian cents.
Much of the recent strength in the Canadian dollar has been
attributed to higher oil prices, as Canada is a major exporter.
But with the price of U.S. crude <CLc1> off its recent record
high of nearly $127 a barrel, the currency lost momentum.
Adding to the Canadian dollar's weakness was renewed
strength in the U.S. dollar, as softer than expected U.S.
inflation data was not seen altering the U.S. Federal Reserve's
interest rate outlook. See [ID:nN14521634]
The Canadian dollar was markedly higher against most other
major currencies, however, as the market is taking the view
that what is good for the United States is good for Canada,
said Sutton.
"When we have the strong U.S. dollar day, we tend to have
very strong Canada days as well in terms of how Canada performs
on the crosses."
The United States buys over 75 percent of Canadian
exports.
BONDS MIXED
Canadian bond prices ended mixed as there was no key data
to influence direction.
"The markets are looking ahead to manufacturing sales
tomorrow, but I think the real important releases start to come
next week," said Max Clarke, economist at IDEAglobal in New
York.
Inflation data for April will be released next Wednesday,
with retail sales data for March the due following day.
The two-year bond fell 5 Canadian cents to C$101.83 to
yield 2.824 percent. The 10-year rose 5 Canadian cents to
C$103.08 to yield 3.596 percent.
The yield spread between the two- and 10-year bonds was
77.7 basis points, down from 80.1 at the previous close.
The 30-year bond climbed 34 Canadian cents to C$116.06 for
a yield of 4.054 percent. In the United States, the 30-year
treasury yielded 4.614 percent.
The three-month when-issued T-bill yielded 2.68 percent,
down from 2.69 percent at the previous close.
((john.mccrank@thomsonreuters.com; +1 416 941 8083; Reuters
Messaging: john.mccrank.reuters.com@reuters.net))
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Keywords: MARKETS CANADA DOLLAR BONDS
By Jason Lange
MEXICO CITY, May 14 (Reuters) - The price of tortillas, a political hot button in Mexico where the corn pancakes are an everyday staple, is expected to jump about 18 percent by June on rising costs for fuel and corn, a major industry group said on Wednesday.
Average tortilla prices should rise to 10 pesos per kilo in June from 8.5 pesos per kilo now, Rafael Ortega, who heads the National Chamber for the Tortilla and Dough Industry, told Reuters. Ortega's organization groups together about 40 percent of the country's tortilla producers.
The chamber's forecast, together with other projections of even sharper increases that have been published in Mexican newspapers, contradicted recent statements from major retailers that tortilla prices will not rise sharply this year.
Food costs are a serious concern for the poor in Mexico, where the minimum wage is around 5 dollars a day. In the past, the government has made deals with retailers and producers to control tortilla costs.
Investors seized on the forecasts as more evidence that the price increases will fuel higher inflation and might lead the central bank to raise interest rates this year.
Yields on Mexican interest rate futures <0#TII:> surged on Wednesday, showing investors had significantly increased bets of a rate hike sometime this year.
The yield on Mexico's benchmark 10-year peso bond <MX10YT=RR> rose 7 basis points to bid 8.10 percent.
Ortega said the average price for a tonne of milled corn has jumped to 3,650 pesos from 3,000 pesos in January.
"It is just supply and demand," Ortega said.
Global grain prices have surged on higher demand from countries like China, scanty harvests in many countries and growing demand for grain from the biofuel industry.
In some parts of the world, soaring prices for basic food staples such as rice have sparked street protests and riots.
(Additional reporting by Luis Rojas Mena and Michael O'Boyle; Editing by David Gregorio)
((jason.lange@reuters.com ; 52 55 5282 7153; Reuters Messaging: jason.lange.reuters.com@reuters.net)) Keywords: MEXICO TORTILLA/
* What: Brazil's benchmark Selic interest rate
* When: June 4, after 6 p.m. (2100 GMT)
* Brazil's central bank is expected to raise the Selic to 12.25 percent from 11.75, according to 12 of 15 economists surveyed by Reuters, with three expecting it at 12.5 percent
By Vanessa Stelzer
SAO PAULO, May 14 (Reuters) - Brazil's central bank is expected to raise its benchmark lending rate by 50 basis points in June, but some analysts in a Reuters survey on Wednesday expect a steeper increase as inflation accelerates.
Out of 15 analysts polled by Reuters, 12 saw the benchmark Selic rate rising to 12.25 percent from 11.75 percent at the next monetary policy meeting on June 3-4 while three forecast the Selic at 12.50 percent.
A survey on April 17, the day after the bank raised rates for the first time in three years to keep inflation at bay, showed 13 analysts calling for a 50 basis points rate increase, while two saw the Selic rising by 25 basis points.
Recent inflation indicators in Brazil have shown a broad-base increase in prices, from wholesale agriculture goods and raw materials to manufactured products.
The surge in prices has prompted central bank officials to warn there is a greater risk that short-term inflation pressures could spread as Brazil's economy speeds up.
"We think they will increase the speed and the intensity of rate hikes," said Luciano Costa, an economist at Unibanco Asset Management, who expects the Selic to rise by 75 basis points. "Our forecast is that they will speed up rate hikes so that the rate increases won't go beyond 2008."
The benchmark IPCA consumer price index rose 5.04 percent in the 12 months to April, higher than the central bank's target of 4.5 percent for 2008 and 2009.
Industrial production recovered in March from a drop in February and retail sales data should show a similar trend. Automobile sales reached a record in April, signaling red-hot consumer demand may pressure inflation data in coming months.
"Inflation expectations have taken a turn for the worse, given the current data and oil at a record, and this tends to make the central bank more conservative about 2009," said Luiz Suzigan, an economist at research firm LCA Consultores who also sees a 75 basis-point increase in June.
Economists in the survey expected further rate increases this year, with the majority forecasting the Selic to end 2008 at 13.25 percent. Estimates ranged from 12.25 to 14.5 percent. (Writing by Elzio Barreto; Editing by James Dalgleish) ((elzio.barreto@thomsonreuters.com; +55 11 5644-7725; Reuters Messaging: elzio.barreto.reuters.com@reuters.net)) Keywords: BRAZIL ECONOMY/RATES
(Adds details, time report is to be issued))
WASHINGTON, May 14 (Reuters) - The U.S. Treasury Department will issue its semiannual report on currency practices of key trade partners including China on Thursday, the department said on Wednesday.
The report will be issued at 4 p.m. (2000 GMT).
As in the past, Treasury is expected to conclude that China is not deliberately manipulating its currency's value to gain an unfair trade advantage.
In the last report, issued on Dec. 19, Treasury complained there was "substantial undervaluation" of China's yuan currency but stopped short of labeling Beijing a manipulator, a decision that angered U.S. lawmakers.
Treasury Secretary Henry Paulson is scheduled to meet top Chinese officials in Washington during the week of June 16-20 for the next round of discussions under a "strategic economic dialogue" initiated in 2006.
Paulson has urged Beijing to let its currency appreciate more rapidly to get world trade into better balance, which includes reducing record U.S. trade deficits with China. (Reporting by Glenn Somerville; Editing by Neil Stempleman) ((glenn.somerville@thomsonreuters.com; +1-202-898-8377; Reuters Messaging: glenn.somerville.reuters.com@reuters.net)) Keywords: USA CHINA/REPORT
Next: DIARY-U.S. Treasuries, Thursday, May 15