Mexican retailers see no steep tortilla price hike

MEXICO CITY, April 22 (Reuters) - Prices of Mexico's tortillas, a staple food which caused an inflation scare last year, are not likely to rise steeply in 2008 thanks to increased supply of corn, a retail official said on Tuesday.

Vicente Yanez, president of Mexican retailers association ANTAD, said in a radio interview members of his group have been selling a kilogram of tortilla for less than 6 pesos ($0.57).

Tortilla "prices will be set accordingly to supply and demand but we do not foresee significant increases due to the high volume of corn expected for this year," he said.

Mexico's agriculture ministry said in January the country would produce 25.2 million tonnes of corn in 2008, a 6 percent increase from the previous year.

Inflation across Latin America has quickened in the past few months as rapidly developing economies like India and China boost global demand for food commodities, while increasing amounts of grain are being diverted to make biofuels.

In January, Mexico ended 14 years of protection of corn, beans, milk and sugar under the North American Free Trade Agreement, or NAFTA, which took effect in 1994. It groups Mexico, The United States and Canada.

Small Mexican farmers fear the trade opening will overwhelm Mexico with a flood of corn from the United States, the world's biggest producer.

But record international corn prices mean Mexico wants to increase internal output as well.

"The corn harvest for this year enjoys high prices, which is good news for producers, who for many years suffered from lagging prices," Yanez added.

"There will be wider supply of white corn, which is the raw material for tortillas. We do not foresee an increase in raw material costs, hence it will not affect the price."

Mexico's 12-month inflation rose to 4.25 percent in March, above the limit the central bank consider acceptable.

ANTAD has 91 members, including supermarket chains, and department and specialty stores. ($1 = 1.516 pesos) (Reporting by Cyntia Barrera Diaz; Editing by Diane Craft)