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The Rush for more corn

January 2007

Corn and the rising price per barrel

Is there enough corn to make ethanol and tortillas?

It is something that should not be a surprise to anyone, and likely expected by everyone. As part of the effort to reduce the dependence on foreign oil, alternate resources will have to be found, developed and utilized. Doing so might create a large demand for that resource which in turn, can create a hardship for those who depend on that resource for it's original known use. One such resource is corn, the same corn consumed by all of us as food, to produce ethanol. The price of a bushel of corn has already risen from $1.86 to nearly $4, and that could rise even higher.

Among the concerns surrounding using corn to make ethanol, is the argument that there is not enough available land to produce enough corn to support ethanol production. Ethanol production facilities are being planned and farmers are projected to grow even more corn in the coming years. Projections are that corn farmers will be planting approximately 8 million more acres of corn this year on top of last year's 78.3 million acres. Additional estimates reflect that anything less could result in higher prices per bushel. President Bush has called for a 500% increase in the use of alternative fuels in the next 10 years (2017), but few believe that corn based ethanol will be the only solution.

corn tortilla

The United States is already making a lot of ethanol from corn which is creating a shortage of corn, and higher prices for people who want to make corn tortillas and has the potential to lead to obscene levels of environmental destruction. Consumers will feel the impact of higher corn prices, not just in the produce isle but in a range of products. Beef and poultry prices are likely to rise as animal farmers rely on corn for feed. Soft drink prices may also jump since drink makers widely use corn syrup as a sweetener.

White corn, normally used to make tortillas, has is reported to have been hit the hardest, rising some 45 percent in 2006 when compared to the price of corn in 2005. Corn prices typically become more volatile during harvest time which falls in the last 6 months of the year, but ethanol production has created additional conditions on this renewable resource which have never been experienced before. Tortilla prices are expected to rise some 25 percent in the first quarter of 2007. Corn prices in Mexico have climbed sharply over the past year following widespread speculation in markets for both locally produced and imported grains because of uncertainty about how much U.S. corn would be available for Mexican importers.

The Mexican Government is battling with both producers and consumers over how to best control the rising price of the centuries-old dietary staple. Some lawmakers want to renew price controls which have worked in the past, while others would like to see increased production. Mexico's Economy Secretary Eduardo Sojo has also said that the government needs ''to design programs, together with producers and farmer organizations, to increase productivity and the production of corn".

 The Cost of E85
 A Gallon of E85
 Outlook for Ethanol Industry

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