Category: Corn

Introduction

Robust trade is the lifeline for any nation’s economy. In this era of globalization, aspects of national trade and economy are intricately connected with the trade practices of other countries in the world. To ensure that all signatory nations have equal opportunities to prosper economically and trade their goods and produce fairly, the World Trade Organization has through its statutory body, promulgated trade dispute mechanisms. Despite a promulgated arbitration timeline, resolution of cases may extend anything from 15 months to years. The US-Canada Corn dispute is one such case for which the Canadian government has approached the WTO to adjudicate. This case is fairly recent, initiated by Canada on 8 January 2007 and has been accepted by the WTO as Dispute Settlement Case 357 (DS 357). While the case has still not reached the adjudicator’s panel, it has great geostrategic importance in addition to the bilateral aspects. This essay aims to explain the dispute, reactions of the involved parties including outside agencies, its possible ramifications and the possible end results.

The Genesis

In 2005, The Canadian Corn Producers(CCP) association had complained to the Canadian government on the unfair trade practices being followed by the American government in providing huge subsidies to their farmers. They wanted the Canadian government to invoke anti-dumping laws and in their opening remarks of a presentation to the Canadian House of Commons Standing Committee on Agriculture and Agri-food stated that:

“ Trade injury caused by US subsidies has meant that Canadian corn producers now face the difficult choice of continuing to produce corn at less than the cost of production for years on end, or not producing corn at all. Canadian corn producers cannot continue under the current situation. This will be the last year for many of our producers if no relief from the harmful effects of US subsidies and dumping is obtained”(CCP, 3).

Subsequent to that complaint, a case of Antidumping (AD) and Countervailing (CV) duty was filed by the CCP in Canada’s International Trade Tribunal (CITT) whose preliminary findings indicated possibilities of dumping by the US. Using this ‘preliminary’ assessment, The Canadian Border Services Agency (CBSA) ordered a levy of $1.65 per bushel as tariff on US imported corn. This arbitrary action resulted in a US request for WTO dispute settlement on 17 March 2006. Faced with a legally difficult situation, the CITT chose to give a final verdict on April 18, 2006, in favour of the United States. “However, Canadian corn producers continued to press their concerns with the Canadian government about perceived unfair subsidization of US Corn” (Schnepf, 2). Whether the perceptions were real or not, the reality of the uncompetitive nature of the Canadian corn produce was evident. Canada’s average annual production of 8.7 million metric tons (MMT) since 2000, is minuscule in comparison to the U.S. figures of nearly 262 MMT. Canadian import of US corn had risen to 2.8 MMT per year and was significantly cheaper. “Corn farmers argued that American subsidies depressed Canadian corn prices by about 14 percent” (New York Times, 2007) leading to serious financial losses and closure of some corn producers. The issue soon became a domestic political battleground with political parties, media and NGOs raising the spectre of ‘economic imperialism’ by the United States’.

The WTO Update on the Dispute

Careful study of the US-Canada corn dispute case from the WTO official website reveals some interesting developments. The actual title of the dispute is “Subsidies and Other Domestic Support for Corn and Other Agricultural Products”. Thus it challenges a whole range of products not just corn. After Canada requested for consultations on 8 January 2007, Australia put in its request on 18 January 2007 to join the consultations. This was followed by Argentina, Brazil, the European Communities, Guatemala, Nicaragua and Thailand requests. On 22 January 2007, Uruguay requested to join the consultations. Thereafter, the US informed the Dispute Settlement Body (DSB) that “they had accepted the requests of Argentina, Australia, Brazil, the European Communities, Guatemala, Nicaragua, Thailand and Uruguay to join the consultations” (WTO, 2008). With domestic support for the issue growing and the presence of other countries who felt similarly disadvantaged by American ‘protectionist measures’, Canada on 7 June 2007 requested for the establishment of a panel vide WTO document WT/DS357/11 dated 8 June 2007, (WTO, 2008), which was deferred by the DSB. Brazil too joined in on 11 July 2007 requesting for consultations with the United States on “two distinct categories of US agricultural measures:

• domestic support for agricultural products,
• export credit guarantees for agricultural products” (WTO, 2008).

This led to yet another request for establishment of the panel by both Canada and Brazil resulting in a DSB panel being set up in 2007. Sensing that this particular case had wider geopolitical ramifications, Argentina, Australia, Chile, China, the European Communities, India, Japan, Mexico, New Zealand, Nicaragua, South Africa, Chinese Taipei, Turkey, Uruguay and Thailand reserved their third-party rights to join the consultations. As in 2008, the WTO update on the case shows that though the panel has been established, the DSB report has not yet been circulated.

This delay requires examination because as per the WTO dispute settlement guidelines after a panel is formed, the final panel report is supposed to be tabled to the concerned parties within six months, thereafter three weeks for the panel to be deliberated by the WTO members and then one month for the DSB to adopt the report. If either party goes in for an appeal, a period of 60 to 90 days is allowed after which the DSB can take a maximum of one month to consider the appeal and then deliver the final decision. In other words, going by the DSB timeline, this dispute should be resolved by November 2008. However, since the first step after establishment of the panel, i.e. tabling the report has not yet been done; this case like other WTO cases is heading for a long drawn out settlement process. The credibility of the WTO dispute settlement process is also in question as Sanford reports that “Between 2002 and 2005, the level of dispute settlement activity dropped from around 35 cases a year to around 10” (3). Therefore, there are considerable stakes in seeing this case through its logical end. The ‘foot dragging’ on this issue maybe because the US-Canada corn dispute has many domestic and global geopolitical implications.

Implications for Canada

The early processing and a decision in favour of Canada are vital for Canadian agricultural sector. While corn has been an emotive issue, the dispute covers the entire range of agri- products and hence the whole sector is affected by non-resolution. The Canadian corn producers association is an influential lobby in Canada and their cause is finding resonance with NGOs, peace activists and social interest groups. A table of NGO participation prepared by Wolfe on the US-Canada corn dispute shows the presence of 9 NGO from the Agri-group and 5 from the non-Agri group (20). Canadian corn producers association even used the services of professional lobbyist, McMillan Binch Mendelsohn to influence their case with the Canadian government (Wolfe, 23). Thus, disputes such as these serve to increase the power of lobbies, NGOs and special interest groups in Canada, a trend mirroring the situation in Washington D.C. On the bilateral side, the US may decide that this dispute to be a ‘hostile act’ warranting retaliatory measures on other aspects of US-Canada trade.

Implications for the US

For the United States, the implications of a negative verdict in this dispute bring in far greater domestic ramifications and unravelling of many domestic policies. Schnepf very accurately puts it that “If successfully litigated, this case could affect all U.S. agricultural policy since the charges against the U.S. export credit guarantee and direct payment programs extend beyond corn to all major program crops”(2). The US government would be forced to take the issue with the congress and the entire farm bill would then have to be reviewed. Such a precipitous action would surely affect thousands of US citizens involved in the agricultural sector. It would involve realignment and rationalization of agricultural subsidies, a key demand by developing nations who have a great stake in seeing this particular dispute end favourably to Canada’s advantage. Any major rationalization of US farm subsidies would be deeply unpopular across the political spectrum with lobbies, special interest groups and NGOs pitching in to make the situation difficult. Thus from the US point of view, the best way forward on the ‘Corn’ dispute is a bilateral resolution outside the ambit of WTO.

Global Implications

The global implications of the US – Canada corn dispute are indeed dramatic. The entry of China into the WTO prompted the US to undertake a congressional hearing to study the impact, which is encapsulated by the following statement that “China’s rapid growth and dramatic technologic trajectory pose challenges to the United States. Like any economic relationship mediated through the market, the relationship has elements of competition and rivalry, as well as cooperation” (Naughton, 22). As far back as 2005, the G-20 developing countries have been striving to ensure that developed countries play fairly in the global economic markets. The various failures of the Doha round of talks have been attributed to this mismatch in policies. At the Cancun summit, “ the G-20 even managed to demand successfully that the EU and the United States go back to the drawing board and come back with improved offers on agricultural subsidies and trade barriers” (Bhagwati, 2005). Thus, any dispute between developed countries is earnestly sought out by the developing countries to leverage their case for better deal for their products and produce. Castle and Landler (2008) commenting on the latest development of the Doha round accurately summed up the sentiment, “World trade talks collapsed here on Tuesday after seven years of on-again, off-again negotiations, in the latest sign of India’s and China’s growing might on the world stage and the decreasing ability of the United States to impose its will globally” (1). Thus the US-Canada corn dispute has the potential of further unravelling the complex dynamics of the global geopolitical structure. The dispute may provide China the leverage to use its trade surplus with the US for strategic purposes as also ensure a precedence for lowering subsidies by the developed world thus firmly shifting the balance of trade power firmly from the West to the East.

Works Cited

Bhagwati, Jagdish. December 2005. “From Seattle to Hong Kong”. Foreign Affairs online – WTO Special Edition. 2008. Web.

Canadian Corn Producers. 2005. “Corn Trade with US”. Web.

Castle, Stephen & Landler Mark. 2008. “Protecting Livelihoods”. BBC news online website. Web.

Naughton, Barry. 2004. “China’s Economic Growth and Technology Development: International Linkages and Implications for the U.S.” Statement recorded in the Hearing before the US- China Economic and Security Review Commission of the One Hundred Eighth Congress, Second session 12-13. 2008. Web.

New York Times online website. 2007. “Canada Seeks W.T.O. Panel to Settle Dispute”. Web.

Sanford, Lain. 2007. “ The Importance of Transparency in WTO Dispute Settlement”. Web.

Schnepf, Randy. 2007. “U.S.-Canada WTO Corn Trade Dispute”. Web.

Wolfe, Robert. 2007. “ Harvesting Public Policy? Private Influences on Agricultural Trade Policy in Canada”. Web.

WTO official Website. 2008. “Dispute Settlement: Dispute DS 357; United States — Subsidies and Other Domestic Support for Corn and Other Agricultural Products”. Web.

Industrial corn

Michael Pollan’s book The Omnivore’s Dilemma has been in the limelight for a long time now. The omnivore’s dilemma arises from the fact that when human beings are capable of eating anything that is found in nature, it will then be hard to identify what you should eat, what is healthy for you and what is not. Herbivores like bears do not have to worry over what they will eat every day, they just have to find the leaves of a eucalyptus tree and their mean is complete. However, human beings and other omnivores like rats and pigs will eat unhealthily just because the dilemma of having to choose what to eat proves to be too hard for them, or because they have no idea on the contents of the foods that they are eating. In the first chapter of his book, Pollan argues that corn has been the order of today’s meals. Almost a quarter of all the foods there are in the supermarket contain corn.

In this essay, my main focus is on the first chapter of his book, “Industrial Corn”, to explain what it is that we eat from all those products that use corn as one of its ingredients. Looking at the supermarket today, almost every product is linked to either a plant or an animal. From the vegetables and the fruit section where we find the carrots, broccoli, eggplant, cabbage, potato, onion, and cucumbers. The apples, pineapples, oranges, grapes and the bananas, some of which are even sometimes sprinkled with water, creating a sense of the fresh morning dew on fresh fruits, and attracting us to them (Pollan, 2007).

Moving on to the meats section, you will find meat from lambs, cows, chicken, turkey, and from the different types of fish there are in the sea. In short, almost every food there is in the supermarket will have a link to the food chain, something that we the consumers think is none of our concern. Who cares what food the chicken, the cows, the lambs or the fish ate, or worse still, where it came from? We forget the wise words of Anthelme Brillat-Savarin, a famous French gastronomist who said,” show me what you eat, and I will tell you what you are.”

Pollan continues to say that in his research and attempts to follow the food chains for the industrial foods, which have become the order of the day for the common American, he traveled widely to some places and states. During his travels, he always ended up at one commonplace, the American Corn Belt. It turned out that most of the products in the supermarket are a product of Zea mays, commonly known to the Americans as corn. Corn is the food for the cows, the pigs, lambs, the chicken, turkey, and fishes like the tilapia, catfish, and the salmon, which despite being a carnivore is nowadays being fed on corn to prevent it from eating the other fish species. This means that the eggs we eat today are made of corn. So are all the products from dairy cows that feed on the corn like milk, yogurt and cheese.

Moving on to the processed foods, corn continues to be a common ingredient. An example is the chicken nugget, which is made of meat from corn feeding chicken, not to mention other ingredients like the starch from corn, which holds the nugget together. There is also the batter to coat it, which contains the cornflour and finally the frying oil, a corn product, where it is fried. More corn products in the chicken nugget are citric acid, leavenings and golden colorants. In America, it is a common practice to take a meal with a soft drink, especially at the fast foods. However, what people don’t know is that this is adding more corn to your body. Why? Because almost all the fruit drinks and sodas that are in the market have been using high fructose corn syrup as a sweetener since the 1980s. This situation does not change when it comes to taking beer. The beverage is made from glucose, which is got from corn, and then fermented into alcohol.

Pollan advises people to read the ingredients of what they buy at the supermarket, and they will find that corn is an ingredient, only that it is written in chemical terms. Chemical names such as ascorbic acid, lactic acid, maltose, and caramel color to mention but a few all stand for corn. Corn is in the canned fruits, soups, syrups, ketchup, coffee whitener, hot dogs, mayonnaise, cake mixes, candies snacks and starches. Pollan says that a quarter of all the food and the non-food products sold in today’s supermarkets, approximated to be about forty-five thousand, all contain corn. He continues to say that cleansers, toothpaste, wall varnish, papers and cosmetics are all among the non food products that contain corn. There are very many ways in which corn manifests its self, but the question is what percentage of you does corn manifest? (Corn facts, 2009).

The Maya people of Mexico are at times called the corn people, not because they look like corn, but because they are so dependent on corn. It has been their staple food for the longest time possible, approximated to be about nine thousand years. Some have gone to an extent of calling it the miraculous grass. Research has shown that only 60 percent of the food calories that these Mexicans eat are not from corn. Thus, a Mexican does not lie when he says “I am corn.” Americans, who can not say they are corn people, and yet 25 percent of the products they buy in the market contain corn, display a lack of imagination. This is a fact, because only a few, if not none of the Americans can realize that coke contains corn. Scientists in the food industry continue to warn us that only seventeen thousand of the total products in the market contain a genuine display of their ingredients. The rest have a clever molecular rearrangement, a fact that we can not be able to tell, so we continue to buy the in genuinely displayed products as we do not have a choice.

How corn became so popular

Corn originated from Central America in 1492, and was first discovered by Christopher Columbus. He described it as a tall grass which had an ear as big as a human hand, on which grains were attached. There are several advantages that made, corn to thrive in the land of the Native Americans, one of them being that it does not require a lot of minerals to grow, and the favorable climate that it enjoyed. A man called Squanto taught the pilgrims how to plant corn in 1921 during spring. They were excited about it because it grew very fast and produced a lot of grains even when planted on a small patch. It had adapted well to the North American soils and climate, and became a lot better than the grains that were introduced by the Europeans.

At the beginning of the twentieth century, it was discovered that a cross breed between corn of different kinds produced much better corn, in that the product of the cross breed produced more yields than the parents. Due to the huge benefits that the corn had, it made it to the industrial age. More and more uses of the corn were identified, and that was how it managed to become a part of so many products in the American market. Today, corn has become one of the major crops grown in America. In 2005, 42 percent of the total corn produced in the world was from America. 17 percent was set apart for industrial use, 25 percent used as food and for export, while the rest was used as feed for livestock (Pollan, 2007).

In conclusion, I would say that the saying,” you are what you eat,” will remain to be a painful truth. Americans may live as far as they can from the corn fields, but they will continue to feed on corn for a long time, knowingly or unknowingly. They may be striving to eat natural foods, but what they do not know is that these foods contain corn as a major ingredient, so that they keep on eating the same nutrients over and over. It is clear that in Americans are fed by corn, from the dairy products, poultry products, fish products, soft and fruit drinks, the vitamin pills we take, to the junk foods we all eat. A bushel of the corn grown uses approximately 33 percent of a gallon of oil. A considerable amount of the oils from corn evaporate and form acidic rainfall, poisoning drinking water from all ecosystems. The pesticides that keep pests from spoiling the crops in the fields, and the fuels used by the trains, are all users of corn.

More and more corn is grown as years pass by, because as the prices of corn decrease, then the farmers resolve to grow more corn the following season. This results to an overproduction of corn in America, hence the discovery of more ways to use it, while farmers earn little money. We can make clear decisions on what we should eat, and make efforts to have a say on how the foods that we eat are produced. But as long as we keep quiet and let the manufacturers determine the products that will use in food production, we will remain to be (Crumpacker Bunny, 2006)

Works cited

1. Corn facts, 2009, Sotatech.
2. Crumpacker Bunny, Washington post, you are what you eat, 2006.
3. Pollan Michael, The omnivore’s dilemma: a natural history of four meals, New York, Penguin Press, 2007

Historical Trends in Corn Prices and Supply And Demand of Previous Years

Prices have largely been influenced by the supply and demands rates. Regarding the supply factors for corn prices, specific attention should be paid to the analysis of stocks, production, and imports. The presented numerical data was premised on the situation with carryover and beginning stocks that influence supply rates of corn.

In particular, larger stocks ensured extra supplies in case the production level was low whereas small stocks did not provided safety grounds and could negatively influence supply. All these reforms contributed supply rates was significantly diminished causing increase in corn prices. However, it did not influence the corn price because the demand rates remain the same.

Regarding the supply and demand rates, corn prices in 2002/2003 period equaled to $ 0.34 per bushel whereas the period from 2003 to 2003 reveals a significant price rise by $ 1.66 per bushel. The next year, the price was almost doubled and reached $ 3.4 per bushel (Leibtag 2).

The period of increase, from 2005 to 2005 is explained by an increased demand for corn-based ethanol production. Higher demand of corn use in food production has also contribute to the increase in supply, which followed by the increase in prices. The increase in price observed is associated with higher demand for ethanol. As a result, demand for corn increased due to the increased demand for ethanol, which later influenced positively the price of corn.

Judging from the above, the farmers are likely to increase prices on corn because of the demand on the products made from corn – ethanol and corn flakes. Corn was also used for feeding cattle (Leibtag 4).

The fluctuations in price were explained by higher demand for corn involved into the production of food, including ethanol, corn flakes, and corn syrup for beverages (Hoffman 2). The 2007-2008 marketing years also provides a significant increase in prices from $ 3.28 per bushel in 2007 to $ 5.26 per bushel in 2008 (National Agricultural Statistics Service 1).

Annual report statistics on farm income for the period from 2008 to 2012 has proved that revenues for producing corns have witnessed $ 1.4 (0.7 %) rise. The increase is relatively lower that it was in period between 2007 and 2008 years (about $ 2). However, the corn prices follow a steady tendency of price augmentation.

A significant rise in prices observed in years 2007 and 2008 can be explained by variations in supply and demand on the product. In this respect, increased supply influences positively the price, but if supply increase along with demand, corn price rates will be unchanged. At the same time, if demand increases, the price rates will also increase.

Projection of Supply And Demand Numbers for the Next Year

With regard to the above corn price rates due to the increased demand of corn, the future perspective promise to be positive. Increase in supply can also negatively influence the corn prices unless the demand rates fluctuate. Regarding the time series graphs (Sea “U.S. Corn Supply”), the supply of corn promises to augment steadily.

The explanation for this can be presented with reference to corn price rates for the previous years. Hence, as it has been presented earlier, corn prices gradually augmented and experienced a significant rise in period between 2005 and 2007. Regarding the table, the supply of corn also been significantly increased. Therefore, it can be suggested that increase in supply can be connected to the increase in corn prices.

Supply rates should be closely intertwined with demand levels because it will significantly influence the corn price fluctuations. Looking at the diagram (sea graph “U.S. corn utilization”) allows us to understand what factors does demand variations involve, including ending stock, export needs, corn-based ethanol production, and feed and residual needs.

In addition, one can track a slight growth of corn utilization in the sphere of fuel alcohol production, that has grown by 7 million gallons from 2003 to 2009 (USDA n. p.). While synthesizing the demand and supply rates with the corn prices projections, it should be stressed that corn price will encounter a relative fall (See graph “U.S. corn price and stocks-to-use ratio”).

Despite the fact that corn prices have extremely increased by 2009, a slight decline in corn prices will be expected in future years. So, the price for bushel will be below $ 4 (Hoffman 3). Despite the fact that corn prices will be lower, the demand for this product will be higher than in 2006 and as a result, the prices will be much higher in 2012.

Overall, the presented analysis proves that introduction of a new seed to the corn market can be beneficial due to a wide variety of perspective for corn price augmentation.

Potential Pitfalls of the Price Corn Analysis

The correlations between previous trends and future trends prove that corn prices will be raised due to a number of factors. Specifically, the supply for corn will be higher because of demand of corn-based ethanol production, food and beverage production, and feed grain production.

Despite the promising forecast, considering possible risks and pitfalls is also important. For instance, it is impossible to predict the regular increase in ethanol demand, which is among the key sources for corn farmers to receive significant net profits. In addition, it is impossible to forecast how water utilization and fertilizer can influence the yield gains. Finally, trends in prices for other crops can also be increased, which can influence the supply and demand for corn.

Recommendations to the Upper Managers

Judging from the presented projection of corn price rates for the next year, the introduction of the new corn seeds should be introduced because it will have a number of benefits. First of all, because the supply and demand rates are relatively steady, the corn price will also remain stable.

Second, the introduction of a new product will attract more farmers who want to increase demand for their products. Specifically, because they will be able to produce much greater amount of corn on the same area, they can receive much more revenues that they expect. Third, corn prices tendencies are likely to grow further due to the increased demand of corn that is often used for producing other important products, such as ethanol, corn flakes, and feed corn for cattle.

An important notice should be given to external factors that influence supply and demand rates of corn, which implies reviewing corn price fluctuation in a broader context. Finally, the presented graphs revealing information on the interdependency of corn price, supply, and demand prove the tendency of price stability in future.

Works Cited

Hoffman, Linwood, 2005, Forecasting the Counter-Cyclical Payment Rate for U.S. Corn. An Application of the Future Price. Electronic Outlook Report from the Electronic Research Service. Web.

Leibtag, Ephraim. 2008, Corn Prices Near Record High, But What about Food Costs?. Economic Research Service. Web.

National Agricultural Statistics Service 2008, Agricultural prices –corn. Web.

USDA. USDA Feed Grain Baseline, 2010-2019, Corn: Market Outlook. 2010. Web.

Introduction

The issues related to the global market of corn stay one of the most essential among the global economic matters, as the corn market is closely related to the issues of global welfare, ethanol production, and lots of agricultural issues.

To begin with, it is necessary to define the matters of prices. The existing price of corn is $3.23 per bushel, more than half yet again what it was a year ago, and starting bringing to mind the record $5.545 a bushel set a decade ago.

There are lots of motives for this price gush. The ethanol boom has provided a jagged new requirement for corn. The Department of Agriculture amended its estimation of the 2006 corn crop downhill by some 200 million bushels due to weather and other features. There is also slighter corn storage on hand than always – the smallest in a decade – which equates to lacks around the world.

Yet all this has occurred against the background of three record yields in a row, a sure signification of how solid the ethanol requirement for corn production is appearing to be. It’s coaxing to suppose that the impact of piercingly superior charges is detained principally to the farming sphere. But where corn is alarmed, we are all part of the farming sector. The traditional cheapness of corn has turned it into almost every component of the financial system, in the shape, most intimately, of corn syrup. The squat charge of corn over the previous half-century is located at the very basement of America’s traditionally (and romantically) low food consequences.

Indulging the two key requirements – cheap food and cheap fuel – applied to occur easily as both corn and oil were copious. Cheap oil assisted in keeping corn charges low as it cost growers less to run the agricultural machinery and equipment.

But humanity is entering an innovative dynamic now. While there has been a conversation recently about refining ethanol from resources other than corn that could take a jiffy. So at the instance what is now tried to do is indulge those requirements from the same source: farming territory. No matter how high costs go, what will be required to change is not the quantity of corn house attainable or even the dimension of the massive yields being already gathered.

Concepts

Demand is defined by price. Usually, the superior the price for a meticulous good, the subordinate the amount that is required. Equally, as technical proceeds cause a reduction in values, the amount required raises. Far more people own PCs today than when they were first launched over twenty years ago. Why? One rationale is as PCs are cheaper today. The same is with corn, but with some amendments: the increasing population of the Earth is requiring more corn to survive.

The sensitivity of the amount required to a change in costs is gauged by the flexibility, or elasticity, which is claimed to be discussed in this paper.

The elasticity of demand and supply

The general motive for high prices related, require surpasses the supply. Being businessmen, cultivators have switched much of their house to growing corn but though this has not prevented the strain to drive up corn costs, it has had the outcome of the rising charges of lots, many other productions consume by families across the planet.

To reveal how perceptive experts are, Elaine Kub a grains forecaster with DTN in Omaha, Nebraska, stated “It’s a demand-driven market and we may not be planting enough acres to supply demand, so that adds to the bullishness of corn”.

The only matter with farming still more corn is that it will worsen price augments of those productions created from corn or otherwise relating with corn for food production, such as farm animals whose principal diet is corn. Moreover, even if all obtainable estates were dedicated to corn farming it still would not facilitate the globe to create all ethanol permitted by ridiculous climate control laws ratified by federal and state governments for use in transport production.

It is necessary to mention, that initially, demand and supply measures depend on the following factors:

Population

1. Population increase significantly changes the demand indicator to the right as it augments market size.
2. Transformations in tastes of the people or due to population incoming the market modification the demand indicator.
3. The appearance of new illnesses and the trend towards an aging populace in some countries head for the increase in requirement for nutrition with low cholesterol.

Replacements and Complementary produces

1. The number and closeness of replacements hinges on how barely one defines the product. Modifications in the accessibility and price of these replacements will originate from shifts in the demand indicator. Raised competition from cattle breeding is supposed for instance, whereas required for poultry reduces worldwide.
2. Deceases or epidemics in rival industries such as the Bird Flue or Mad Cow Disease could originate sudden right changes in demand for corns.

Wealth

1. The financial increase will augment restaurant vends and demand for corns in general. The global GDP growth rate is presently around 4% with higher shapes in developing states such as China with 10%.
2. The financial depression or war would originate demand to lessen.
3. Features such as salaries and income, roundabout tax, employment, wealth sharing, and inflation could impact the % of throwaway benefit spent on the invention. This may not only change the demand indicator but also impact its flexibility. An augment in wealth will change the demand to the increase and a decrease in % of throwaway income will make the requirement more inelastic.

The factors that impact supply extents

Technology:

1. Technological advances will decrease production prices decreasing the supply rates.
2. Research and development will lead to the capability to grow more corn types heading to the supply increase
3. Advances in refrigeration can advance the price of storage permitting for buffer stocks and the capability to control supply.
4. Upgrading in the shipping industry, as well as better logistics, would bring about lower shipping and allocation charges resulting in a supply increase.

Input charges:

1. A reduction in input charges results from the supply increase. These entail production prices (food, medicine, equipment, salary, etc.), shipping charges (ships and trucks), and storage prices. Issues concerning those industries consequently (e.g. the weather for corn) ultimately affect the supply indicator. Corn price is supposed to augment.
2. Communally and ecologically acceptable skills, security, documentation, and traceability are turning to be increasingly significant. These signify extra input prices and therefore make the supply rate decrease.

Corn and gasoline

Partially as a consequence of the dry conditions there is more attention in income indemnity reporting and crop revenue coverage this year, as is stated by Steve Lindholm, president, Farmers & Merchants State Bank of Clarkfield. He notes an essential number of growers, anxious about drought, have selected to buy higher ranks of yield insurance, though some are going all the way to 85% exposure, which is rather costly.

Drought talk has brightened up the viewpoint for the costs of grain that planters still have on hand. Lindholm says some farmers who already arranged the sale of last year’s grain have even bought options to try to squeeze something out of any drought-caused price rise.

Acting such dreads can be complicated, says Diana Klemme, director of the grain sphere at Grain Service Corp., an ag equivocation and risk management company in Atlanta. Although supply-and-demand thinking offers that if deficiency hits, corn costs should increase, states Klemme, lots of acres are in fabrication. Hype could lead to a supply market jolt, she offers, which is the most fortunate market expansion there is. It can last two months, she states – or two weeks.

In the interim, Lindholm’s bank has approached the end of the spring setup sequence, with most growers having come in and positioned the season’s financing. Credit requirement, down a bit generally, in accordance to a recent USDA report, was about even with last year among F&M’s consumers, he says. There will be small equipment or land buying going on, he anticipates, grounded on borrowers’ business charts.

The high price of fuel at the pump has not directly hit the classic Clarkfield farmer too poorly, states Lindholm. Nourishments and other agricultural substances also come from petroleum, in part, nevertheless, and current high crude charges may be felt next season.

Fuel, ultimately, has brought up another circumstance for the nation’s farmers. That’s the detection of traces of MTBE, a fuel preservative, in some municipal water supplies. MTBE, or methyl tertiary butyl ether, is supposed of leaking from underground storage tanks at gas locations.

Fuel dispensers doing business in those districts had to add one of two “oxygenates” – octane inoculations which commence oxygen into gas, allowing it to burn more plainly and professionally. About 30% of the gas applied generally is oxygenated. MTBE is one such oxygenate; the other is ethanol. Ethanol can be gained from a huge amount of natural resources, but the key one is corn starch. Ethanol manufacturers brew corn starch and condense off ethanol, along with other salable derivatives such as carbon dioxide.

Some USA states have had their own, year-round oxygenate regulations in action since 1997, which, not astonishingly, necessitate the application of ethanol. More than a dozen ethanol fabrics dot the central and southern US states, comprising the biggest in Marshall, about 20 miles from Clarkfield. This is a place of Minnesota Corn Processors. Ethanol symbolizes a substitution market for the nation’s plentiful corn crop and has enjoyed both federal and state funding.

Farmers profit from this both as investors inconsiderately owned ethanol plants, and as ethanol makers like MCP can sometimes pay growers more for their corn than can food producers.

The MTBE disagreement has been varying for some time, and legislation to prohibit its application has been awaiting, along with other pro-ethanol invoices, in the present Congress. In late March, nevertheless, the Clinton Administration took exploit. In a joint statement, Agriculture Secretary Dan Glickman and Environmental Protection Agency Administrator Carol Browner called on Congress to phase out MTBE. Also, to chivvy things along, EPA agendas to offer its own, dogmatic approach.

One might regard this would leave ethanol attentions sitting attractively. And at a time when planters still worry about the eventual salability of genetically modified corn, such a likelihood has to be gorgeous. The National Corn Growers approximate that barring MTBE in errand of ethanol would add 35 cents to the worth of every bushel of corn planters grow.

But nothing’s ever so uncomplicated. MTBE reports for 87% of oxygenates applied, and the oil vestibule charged the Administration with aiming to buy farmers’ errands. It also stated that ethanol can’t be transferred by pipeline, which even ethanol sponsors acknowledge means lots of barging at first, pursued by the expansion of additional railing capability for transport.

Further, the corn and renewable petroleum interests were not as generous in their commend of the suggestions as might be supposed. This is as the Administration is also offering to eradicate the necessity to use oxygenates at all. Already, California, which has a special category under the Clean Air Act, has banned MTBE efficiency in 2003 and has required EPA for a waiver of any oxygenate necessity.

The Administration backs legislation that would transform from necessary oxygenates to entailing the use of renewable fuels such as ethanol.

Corn interests worry that even talking about doing away with the oxygenate obligations could undo the centralized subsidy for ethanol. They fear the government will let go of the oxygenate obligation and not pick up the renewable fuels notion.

Minnesota Corn Growers, for example, backs a bill written by Clarkfield-sphere Congressman David Minge and others that would bar MTBE openly in favor of ethanol.

Opposing bills would not be closed so positive for ethanol. Generally, with California already requiring for the total exception, states State extension agent Rich Kvols, farmers are not relying on much.

“This could be an opportunity that might be disappointing in the end,” he says, “like last week’s rain.”

Markets and social welfare

The consciousness of the probable environmental dilapidation connected to current farming schemes and the deliberation of substitute rural expansion actions have opened significant policy conversations within the farming community. Currently, the Government is willing and determined to estimate alternative policy variants relating to the transaction among welfare and environmental deprivation. These attempts entail those to decrease the probable ecological damage imposed to natural reserve donations by the use of current technologies in agricultural manufacture which necessitate the concentrated application of chemical efforts. It is expected that the meticulous methodology expanded in this research will confirm to be useful in the formulation of resonance and financially practicable policies for the farming sector in the future. It is regarded that both, the model expanded and the practices followed in this study offer a precious effort to estimate the tradeoff between social financial welfare and environmental poverty matters. It is hoped that this attempt establishes useful in the formulation of farming policies in the agricultural sector in the nearest future.

On the social and environmental front, trade liberalization in corn would also bring about welfare gains for producers and consumers alike. Farmers would reap the advantages of the output gains connected to the more competent allotment of reserves. Buyers would also increase from the lower costs of main consumer goods, and particularly of the country’s clip food, tortillas, and different corn products.

The most essential environmental influence of trade liberalization in corn classified so far narrates to the probable loss of corn genetic unpredictability. If a pessimistic impact is to be evaded, the welfare of corn manufacturers that rely most on this genetic unpredictability has to be advanced.

Since most farming programs provide work for two or more policy tools concurrently, it is prominent that little research subsists which appraises the social charges of joining tools imperfectly or efforts to find optimal tool amalgamations. The formal advance is used to study the efficiencies of government regulations for five key U.S. crops (corn, feed grains, wheat, rice, cotton). The uncomplicated replicas offer that apart from the feed grains agenda, the scrutinized programs united policy gadgets quite incorrectly. The social charges of incompetent instrument amalgamation for all five crops are approximated to be either the US $1,733 million in terms of probable welfare gains of farmers or the US $1,911 million in terms of possible welfare gains of non-farmers (see graph). It may be concluded that agricultural investigation should place augmented emphasis on finding competent groupings of policy tools.

Opportunity cost

Money has a time charge. Most people submit to this as attention. Another term applied is opportunity costs: the cost of one application for money vs. another application. Bushels of corn or soybeans in a bin are not assisting to pay off debt or earning interest. An opportunity cost can be estimated for each crop to show the per month interest costs. Thus at 7.5% interest and $5.15 soybeans, the opportunity cost is 39 cents per year or 3.2 cents per month.

Another way to believe it is “yield cash equivalent”. The costs of a product must rise by the opportunity cost to equal produce charges. It is stated, that the “harvest cash equivalent” approximation for corn at $2.25 using a 7.5% interest in on-farm storage space (1 cent per bushel per month storage charges) and profitable storage (3 cents per month storage costs). Approximations rounded to the nearest cent.

The set and changing charges of storage requirements to be deemed in the storage decision on soybeans. Moreover, the opportunity cost per bushel for soybeans is higher since the charge per bushel is higher than corn.

Conclusion

Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices discover the many components that have added to the runup in food product prices over the last 2 years.

The increases in corn prospects of a week ago were removed. The expected WASDE report turned to be an after-thought as improved weather/planting situations were projected. This led to defeats four out of the five trading daylights. On the surface, that creates intelligence and in realism, the run-up in corn values from the first of the year to the current time reproduces the tight supplies schemed for the 2008 crop. Corn prices have increased by $2.00 per bushel since late December and other than a large glitch in mid-March, this is a market that has had some troubles trending higher. Now, faced with an earlier planting pace, much of the weather best was taken out of corn futures along with some of the concerns of short supplies and corn futures tumbled more than thirty cents this past week.

Thus, it is necessary to mention, that the corn market is steadily increasing, and all the factors that impact the steady development of this marketing sphere are favorably united.

References

Begg, D, 2005 Economics McGraw-Hill Higher Education 8 edition

Cattle Market Notes 2008 Corn Bust, Feeders Improve, COF, cattle network. Web.

Editorial, 2007 the Price of Corn, the New York Times. Web.

Farm Market News, 2008, Corn Report. Web.

International Data Base (IDB) 2008, World Population Information. US Census Bureau. Web.

Production Cash Costs and Returns, Cost of Production – Corn and Soybeans 2006-2007. Web.

Saitone, L, 2008 Market Power in the Corn Sector: How Does it Affect the Impacts of the Ethanol Subsidy? Agricultural Issues Center University of California. Web.