Monday, February 14, 2011

Corn Prices Showing Pending Problems

The article focused on how the demand for corn is now at an all time high and how as a result the price of corn is reaching record highs. The article stated that “Corn futures have nearly doubled from $3.60 per bushel in June 2010 to $7.00.” The trend does not seem to be slowing down either, since the demand for corn and corn products seems to be increasing. In the United States the corn stocks have declined by 1.8 million metric tons, and it’s estimated that world ending supplies would decrease by 4 million metric tons. This means that the demand for corn is so high that expert analysis could not account for the usage.
The demand for corn comes from all over the world but can be attributed to numerous reasons. The fact that corn or its derivatives are part of so many products is the main reason. The versatility of corn causes its demand to rise and causes competition for many industries all vying for the limited supply. The shortage of available acreage is another major reason; since crops other than corn must be grown, this constantly stresses available land. Estimates put the amount of additional land that would have to be devoted exclusively to corn cultivation at about 90 million acres. Another reason is the huge demand for ethanol which is an important component of gasoline. In the United States alone we consume more gasoline than any other nation, thus our demand for ethanol is huge. There is a constant fight for the use of corn as food versus fuel. Another factor leading to the corn shortage and rising price are emerging nations of the world and their growing markets. China in particular is a country that has seen both its corn usage and demand rise sharply. China also has almost half of the world’s corn reserve and maintains their food reserves as a national policy.
These issues over corn have led to food shortages and sky high inflation on food prices for much of the world. The article listed Algeria and Tunisia as countries that have seen public outcry in addition to violent protest over the soaring prices of food commodities. The increase in food prices also can be attributed to crop damages all over the world. This directly affects the supply of corn thus creating higher demand. Experts think that corn prices will rise thus causing food prices to continue to rise until a tipping point is reached.
I feel as though the demand for corn is unlikely to decrease until the United States finds some serious alternatives to gasoline. By reducing our consumption this would allow some of the corn to be used for food instead of going towards fuel production. Another method that could be implemented could be research on alternate methods of growing corn. High-rise gardens that would resemble parking garages have been proposed in other areas and allow the best utilization of land to grow as much corn as possible. Since land is a limited resource using all of it to grow corn is unreasonable and will only lead us further into problems food wise.
Discussion Question- How can we accommodate the demand for corn? Should we impose taxes, come up with alternative growing methods, or curb our ethanol use in fuel?

--Jermaine Hawkins

3 comments:

  1. Personally i would have to go with curb our ethanol use in fuel as i think this is just one of many reasons that we should try and move towards a new energy source for transportation. But what i found really interesting about this is that it went from 3.60 to 7 dollars. Thats huge! I mean if the price of a barrel of oil goes up 10 cents we usually cant hear enough about it. But then stuff like that happens and this is the first i read about it

    Russell Hayman
    Econ 376

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  2. The article posted by Jermaine is very interesting and provides fascinating facts. Rather than worrying about oil prices, there are other important stuff we really have to worry about. High corn prices would not only affect food prices but also fuel production. I think this is one of the most important issues we have to worry about.
    --SYED

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  3. Corn prices are showing pending problems, and the trend does not seem to be slowing down either, since the demand for corn and corn products seems to be increasing. To make a smart investment tactic regarding this commodity you need to know your options. I never realized corn products
    are such a complicated commodity. If you are thinking of getting more information on this topic, I would recommend looking at Agriculture.com directory. They offer a truly comprehensive directory of expert marketing commentaries available, including strategies from farmers and marketing firms, crop technology, daily weather forecasts, and other useful info. While I now work for them, I can honestly say that I have never seen a more complete directory or one that has more useful data on this topic. Check it out.

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