Corn prices peaked in April and began coming down in May, June, and July… but all that may be over. According to Bloomberg corn prices may be set to drive up inflation. Recently they’ve been running a series of articles on Corn Prices:
Their article US Crop Tour Stokes Fears of Looming Corn Shortage says, “Parched soils. Grasshopper infestations. Scorching heat. Hail damage. This year’s US corn crop has been put through the wringer… Things are so bad that scouts currently on a four-day tour through the Midwest are finding plants that are stunted and browning. Scores of fields have visible damage from pests. Cobs of grain are unusually small, and sometimes, stalks aren’t producing the ears at all.”
Lackluster Iowa Corn Crop Sets Stage for More Food Inflation Crop futures are up 2.2% on Friday… “Drought was the watchword of the week: dry soils plagued the tour participants throughout the western crop belt. Even in the east, where plants received more rain, yields were still looking a bit mediocre. Some evidence of crop disease and pest infestations also added to the woes.”
And foreign crops don’t seem to be able to take up the slack either. Drought Threatens China’s Harvest When World Can Least Afford It. Although the U.S. is the world’s #1 corn producer, China is experiencing a drought of its own, and Corn and rice production is suffering. But it’s not just drought… China’s northeastern provinces have gotten too much rain, which could reduce output by 4.5 million tons out of an expected 270 million tons or about a 1.67% reduction.
Why is Corn Such a Big Factor in Food Inflation?
Corn is used in many things. If you look at the ingredients at your grocery store, you will find a lot of corn derivatives. In addition to livestock feed, it is also used in high-fructose corn syrup, corn starch, alcoholic beverages, deodorant, cough drops, ethanol, and much more. One reason the “Core CPI” excludes food and energy is because rather than just monetary factors, the price of foods like corn is affected by the ethanol market, crude oil prices, and Chinese demand, among others.
We may think of Corn (Maize) as primarily an American thing, and it is America’s biggest crop according to the USDA, with roughly 80 million acres under cultivation, but it has become a worldwide commodity. Corn provides more than 20 percent of the world’s human nutrition.
In addition to trading on the Chicago Board of Trade (CBOT), corn is also traded on the Bolsa de Mercadorias & Futuros, the Marche a Terme International de France, the Budapest Commodity Exchange, the Kanmon Commodity Exchange, and the Tokyo Grain Exchange.
There are several different types of corn. Sweet corn is what you think of when you eat corn on the cob, but there is also popcorn, flour corn, dent corn, flint corn, and pod corn. Sweet corn is a naturally sweet variety that is harvested in the early stages before it gets too “starchy”. Most of the corn grown in the US is yellow dent corn, named for the dimple-like dents on the top of the corn kernels when ready for harvest. It is used for corn meal, tortilla chips, corn flakes, corn oil, and High-Fructose Corn Syrup (HFCS). It is also used as livestock feed.
Popcorn has a hard outer shell and minimal starch content. Flour corn is one of the oldest varieties of corn that has soft starch content. Flour corn can be ground more finely than dent and flint corn, creating more of a flour than a meal. This would be used for things like cornbread or muffins, giving them a more crumbly, softer texture. Flint corn is primarily found in Central and South America and has an extremely hard outer shell. It is easily recognizable because of its multi-colored kernels. Genetically modified corn varieties are found in the United States, Argentina, and Canada. Most of the corn produced in the United States is cultivated in the Midwest between the months of April and June and is harvested in October or November.
We’ve updated our Inflation-Adjusted Price of Corn page, where you can see the nominal price of corn since 1981, compared to the inflation-adjusted price. Although the nominal price has reached new highs, the inflation-adjusted has not yet exceeded the 2012 price, when ethanol was included in the gasoline mix (it took farmers a little while to catch up with demand). Surprisingly, in inflation-adjusted terms, corn prices were actually higher in 1983 than even in 2012. See our Inflation-Adjusted Price of Corn page for more info.
You might also like:
- Why doesn’t Core inflation include Food and Energy
- Inflation-Adjusted Price of Oil Chart
- Annual average Crude Oil Prices in Table form
- Price comparison of Oil vs. Gold
- Inflation Adjusted Gasoline Prices
- Inflation implications of Ethanol
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