Sunday, May 15, 2011


Corn is no longer just a summer veggie to be enjoyed off the cob. Nowdays, corn has laced its way into nearly every component of our economy. And it's true, corn really is in almost everythign. It's used in soap, plasitcs, artificial sweeteners, paint, hair dyes, baby food, and even packing peanuts! However, the largest uses for corn are as livestock feed, for ethanol production, and as an export. Corn is used to feed most of the animals sold in your grocery store, especially cattle. You have probably heard of E85 and other ethanol fuels, the growing production of ethanols has created a new consumer of corn. Many countries rely on corn as well, but do not have the ability to grow enough themselves, so the US exports corn, which fuels our economy.
Check out this chart which shows the distribution of how corn is used in the United States. --->
Corn affects our nations' energy production, livestock, and exports, creating a significant impact on the economy as a whole.



Ethanol currently is the third largest consumer of corn produced in the United States and that is because of its great success and growth. Government subsidies given to ethanol and biofuel producton are four times greater than those given to domestic oil drilling, in the United States. The reason the government supports ethanol production so greatly is because it costs significantly less to produce than oil. In fact its predicted that by 2015 it will cost only 60 cents to produce a gallon of ethanol as compared to the current $3 it costs to create one gallon of oil today. This chart from the Natural Resource Report 2010 shows how much ethanol use has increased since 1995.
However, In order to feed this growth, more corn must be produced as well. If you're more interested in ethanol production and its success check out this report by the Department of Energy --->


Corn Fed Fuel

In order to meet ethanol producers' demands for corn more and more corn must be grown each year. This year a record amount of corn will be delivered to biofuel plants. According to the USDA's monthly feed stock report for May 2011, corn used to make ethanol is set to increase by 50 million bushels this year. This would make the number of bushels used to create ethanol at 5,000 million for 2011. Just in the last year the amount of corn used for ethanol has increased by 14%. This graph shows the distribution of corn use in just the industrial sector, you can see how in the present ethanol dominates consumption.
The USDA explains that if corn production did not grow in stride with ethanol production the industry would fail. Check out the USDA's complete report on ethanol --->


The Results

Lester R. Brown president of the Earth Policy Institute stated back in 2007,
"This unprecedented diversion of corn to fuel production will affect food prices everywhere,"
and he was quite right. The cost of a bushel of corn is currently hovering around $7.00, and experts link this price increase directly to the growth of the ethanol industry. This chart illustrates the sudden spike in corn prices after the ethanol industry took off.
These high prices affect more than just the stock market, they affect the average consumer at the grocery store every day. The World Future Society, a nonprofit research group focused on solving poverty issues, cites ethanol driven corn prices in driving up the price of almost all items on supermarket shelves. When ethanol doubled the national corn consumption in the US, every person felt the effects and as a result food prices have never been higher. Follow this link to see the US Census' 2011 report on food prices --->


Corn Fed Cattle

The largest industry consuming corn is livestock and the livestock consuming the most corn is cows. Since corn and cattle are so dependent upon one another, the price of corn greatly affects the price of beef. The USDA and Economic Research Service estimate that it takes 7 pounds of corn to raise one pound of beef. That graph expresses in kilograms how much grain it takes to raise one pound of other meats.
The USDA explains that when corn prices raise as high as they have for an extended period of time, meat prices are greatly affected in a negative way. To see how inflated grain prices have effected meats and other food prices read this ERS report on food expenditures --->


Tripled Threat

In the last month corn feed prices have risen from $5.20 to $5.60, according to the USDA. According to the Cost Control for Food Distribution and Processing Group, since ethanol production took off, corn prices have TRIPLED. Cattle prices have responded with a paralleling raise in price. These two graphs paint a picture of the linked increases.

Obviously an increase in corn prices here made a large impact on the Unites States economy and its consumers. In order to combat inflated food prices we must first tame inflated corn prices. Check out this Reuters article which explains the global impact of food price inflation --->


Corn- The Global Grain

This year, there will be a national increase in the amount of corn planted. Almost 40% of the corn crop was already planted by May 8th last week. In addition, nation and global consumption of corn are expected to increase this year. The USDA predicts that this month, May 2011, global consumption of corn will be 1,125.4 million tons. That is already a 5.4 million ton increase from April. This pie chart shows the global distribution of corn use.
Unsurprisingly, China and the US are the largest consumers. The reality is that the United States is not only the largest consumer of corn, it is also the largest producer. Read one farmer's personal commentary on the increase in corn use here --->


Corn Fed Economy

This chart shows that the US clearly leads in globe in exporting corn to other nations.
The USDA explained in their monthly report that United States exports of corn were 3.5 million metric tons last month. Corn makes the largest net contribution to the U.S. agricultural trade balance of all the agricultural commodities. In lay-mans terms, corn is the most important crop to our nation's economy. Follow this link to see a graph of which nations are on the receiving end of US corn exports. --->


Lets Slow it Down

The need for corn is rapidly growing not only in the United States but all over the world. With increased planting the US will be able to meet that need in the future and continue growth in alternative energy methods such as ethanol. In fact, in the coming year corn yields will increase by over 1 billion bushels. The graph shows yields as well as future projections. However, as long as the demand for corn is split between exports, ethanol production, and livestock feed, food costs will remain inflated. To see the complete USDA monthly report and yearly projections follow this link. --->



The for corn for ethanol production, livestock feed, and international use is rapidly growing, making corn key to the economy of the United States. Corn's role is so major that its price effects all US consumers and global consumers as well. While the increase in use and production of corn is a good thing, the inflation caused by split demand is not. Ethanol production is the main factor in corn price inflation, with its recent rise to power in the economy and shocking consumption. This rise in consumption affects the livestock industry, making meat production costs higher, especially in cattle. These high production costs reach deep into the US economy, all the way to grocery store shelves. But corn as a commodity is key to the United States' international trade, and is our largest agricultural export. Follow this link for some quick fun facts on corn, to lighten the mood. --->