Record High Corn Prices Coming Back Down, With Mixed Effects

Oct 10, 2013
Originally published on October 10, 2013 7:33 pm
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When it comes to commodities, corn is king. About a third of U.S. cropland is planted with corn and prices have been high but that's changing. As Amy Mayer of Iowa Public radio reports, farmers have seen prices drop to their lowest point in three years.

AMY MAYER, BYLINE: On a clear fall day in central Iowa, Aaron Layman(ph) climbs into the cab of his green combine to do some maintenance. He's hoping his corn has a couple more weeks to grow before harvesting. He says he knew sky high corn prices were temporary.

AARON LAYMAN: We've done our best to try to prepare for this because farming is cyclical. We didn't anticipate that high prices would last forever.

MAYER: While bad for crop farmers, lower corn prices are good for farmers raising chickens, cows and pigs. About 15 miles northwest of Layman's farm, Jeff Longnecker(ph) grows much of the feed for his cattle. But in dry summers, like the past two, he's had to buy some. And last year, that hurt.

JEFF LONGNECKER: So I jumped in and bought, oh, I don't know, 10, 20,000 bushels of corn at the local elevator in August because we were afraid we weren't even going to have anything at that time. If I remember right, I paid 816 for it.

MAYER: But today, with corn around $5 a bushel, he's growing his herd.

LONGNECKER: Corn is getting cheaper. The farmers attitude about that is, well, we'll feed it and get rid of it that way, walk it off the farm, they call that. And I like doing that. That's a nice option to have.

MAYER: Animal feed is a major market for corn, as is ethanol production and food processing. Corn is also found in nearly everything. And Iowa State University economist Bruce Babcock says there's no risk of shortage.

BRUCE BABCOCK: The reason why so much land is planted to corn is because it's the most profitable crop that is out there.

MAYER: And as long as corn remains abundant and relatively cheap, the items we buy are not much affected by the price of a bushel of corn. That's because every stop between the farm and you adds a buffer. Stops like this one at (unintelligible) in Eddyville, Iowa, which makes the flavor enhancer, monosodium glutamate or MSG. General manager Jeff Payton(ph) says the company buys corn straight out of the field and contracts with a bigger processor across the street, where it's milled.

JEFF PAYTON: They process the corn, then by pipeline we receive the part of the corn, the dextrose, the glucose that we would need here at the plant for our fermentation operation.

MAYER: It takes about a week to convert the raw sugar with a few other ingredients into MSG.

PAYTON: About three percent of our product goes into retail, directly out to the customer. So that means 97 percent is mostly in bulk form.

MAYER: Like these 50-pound bags that a mechanical arm is stacking here on a pallet. Payton says they'll make at least one more stop on the way to a consumer, either in a restaurant kitchen or at another food processor. With every stop, the impact of corn's commodity price diminishes. Economists like Bruce Babcock say on the consumer side, prices tend to be sticky, meaning they creep up gradually, but they rarely come back down.

BABCOCK: Corn, as a share of the final retail food dollar, is so small that you can even double corn prices and it's going to have a fairly muted effect at the retail level.

MAYER: Back in the field, though, Jeff Longnecker says the commodity price will influence what gets planted next year. With corn paying less, he expects farmers to increase soybean acreage.

LONGNECKER: Don't misunderstand, they're going to continue to plant corn. There's no doubt. We're a corn nation.

MAYER: But if fewer acres are planted in corn, then the price will edge back up, benefiting those farmers who grow it and leaving the rest of us with our cheap snacks and soda, paper and soap, mostly unaware of the market forces. For NPR News, I'm Amy Mayer in Ames, Iowa.

BLOCK: That story came from Harvest Public Media, a public radio reporting project focused on agriculture and food production. Transcript provided by NPR, Copyright NPR.