Corn Prices: Up or Down

By Jim Moore

The recent escalation in feed prices has been a result of the significant increase in corn prices over the past 5 months. Corn prices have doubled during this period and there are two factors that are fueling this increase.

The first is the demand for corn created by the increase of ethanol production in the United States. Our government has pushed an energy program that requires the use of at least 10 percent ethanol in gasoline. In order to accomplish this goal, ethanol production in the U.S. must increase significantly. With the help of government subsidies, there are approximately 111 ethanol plants in production today, and another 60 plus plants under construction. Corn is the main component of ethanol and this creates the sudden increase in demand.

Secondly, the U.S. used 11.7 billion bushels of corn last year; however, we only produced 10.5 billion bushels of corn. Our reserves are below 1 billion bushels which is less than the gap between production and usage. As you can see, many believe corn is in short supply.

As corn prices go up, it also affects the price of other ingredients. Ingredients that could be used in place of corn are in higher demand, thus raising the price of these products also. The outlook for corn prices is to remain stable for at least the near term. The biggest factor for future prices will be this year's production outlook. If the crop is good, prices will stabilize or go down. If the crop is short, prices will continue to escalate.

Thank you for your loyalty to Southern States horse feeds.

Jim Moore, is Vice President, Feed Division,
Southern States