In February 2011, Cornerstone’s Research Associate, Josh Tucker, went on his first research trip to Iowa to study opportunities in corn. While the U.S. leads the world in corn production, Iowa leads the US. Among the 36 million acres in Iowa, 31 million acres are farmed, and 23 million acres farm either corn or soybeans. Cornerstone chose Iowa to perform the research because of its 66,000 corn farmers and Iowa State University, nationally known for its agricultural expertise.
With higher incomes and a growing middle class, China became a net importer of corn in 2010 for the first time in a decade. Since China is second in global production, this shows the incredible demand they have for corn. If this trend continues, and it is estimated that it will, it will only put more pressure on tight global supplies.
The key driver for corn prices, beyond weather, “money printing,” and other factors driving up all agricultural commodities, is ethanol use. Corn for ethanol use has soared from less than 500 million bushels in 1999 to 5000 million bushels in 2011.
There is a great debate over Food vs. Fuel with valid arguments on both sides. Food, in this case, is not necessarily talking about the corn we eat at the dinner table. Corn is a key input to many items throughout the grocery store, whether it be feed for livestock or the high fructose corn syrup (HFCS) that our sodas are packed with. In the U.S., we have enjoyed falling food prices for years due to processed food made with corn, among other things, that has been cheap. (Corn was below $4 last year and now it’s above $7.50.) Therefore, we see the rapid change now as extraordinary even though it is not. The expensive corn we feed our cattle and chicken has not yet really hit the meat case at your local supermarket, but in time, it will. Since we are the global leader in corn production, we have produced enough in the past to feed the livestock that feeds our people cheaply and feed those in less developed countries. Now, we have to feed our cars, too.
To learn more about Josh’s research and findings, or if you would like us to present this information to your local Rotary Club, Lion’s Club, or other professional organization, please contact us. We would love to come talk about any of our research.