Corn

Corn is a member of the grass family of plants and is a native grain of the American continents. Fossils of corn pollen that are over 80,000 years old have been found in the lake sediment under Mexico City. Archaeological discoveries show that cultivated corn existed in the southwestern US for at least 3,000 years, indicating that the indigenous people of the region cultivated corn as a food crop long before the Europeans reached the New World. Corn is a hardy plant that grows in many different areas of the world. It can grow at altitudes as low as sea level and as high as 12,000 feet in the South American Andes Mountains. Corn can also grow in tropical climates that receive up to 400 inches of rainfall per year or in areas that receive only 12 inches of rainfall per year. Corn is used primarily as livestock feed in both the United States and the rest of the world. Other uses for corn are alcohol additives for gasoline, adhesives, corn oil for cooking and margarine, sweeteners, and as a food for humans. Corn is the largest crop in the US, both in terms of the value of the crop and of the acres planted.

The largest futures market for corn is at the Chicago Board of Trade. Corn futures also trade at the Bolsa de Mercadorias & Futuros (BM&F) in Brazil, the Budapest Commodity Exchange, the Marche a Terme International de France (MATIF), the Mercado a Termino de Buenos Aires in Argentina, the Kanmon Commodity Exchange (KCE) in Korea, and the Tokyo Grain Exchange (TGE). The CBOT futures contract calls for the delivery of 5000 bushels of No. 2 yellow corn at par contract price, No. 1 yellow at 1-1/2 cents per bushel over the contract price, or No. 3 yellow at 1-1/2 cents per bushel below the contract price.

Prices – Corn prices in 2003 on the nearest futures chart fluctuated in a range between about $2.05 and $2.60 per bushel, with the year’s low of $2.04 being seen in late July. Prices then staged a rally in the latter half of 2003 and closed the year at $2.53, only mildly below the 1-1/2 year high of $2.62 posted in May. Prices fell during the summer due to a bumper crop of corn in the US. However, corn prices then firmed up during the latter half of the year as stronger export demand emerged. In 2004 US exports are expected to post a 5-year high because of a poor crop in Argentina (which may have the smallest crop in 8 years in its 2004 growing year) and because of lower exports from China, which in the latter part of 2003 restricted its corn exports due to tight domestic supplies.

Supply – World production of corn in 2002/03 was 603.465 million metric tons, up slightly by 0.7% from 599.349 million in 2001/2 (USDA). World production is forecasted to rise by 0.6% to 607.118 million in 2003/04 (USDA). The US is the world’s largest producer of corn with 228.805 million metric tons in 2002/03, accounting for 38% of world production. The second largest producer is China with 121.300 million metric tons (20%), then Brazil with 45.000 million (7.5%), and then the EU with 40.089 million (6.6%). World ending-stocks in 2002/03 year period rose to 630.803 million metric tons from 621.830 million in 2001/02 and are expected to rise further to 641.930 million in 2003/04 (USDA). The crop year goes from September to August, but the international trade year goes from October to September. US farmers planted 79.054 million acres of corn (up from 75.752 million acres in 2001/02) and a slight increase to 79.066 million acres was forecast in 2003/4. Yields in 2002/03 fell sharply to 130.0 bushels per acre from 138.2 bushels in 2002/01, but are expected to recover to 143.2 bushels in 2003/4. US production in 2003/4, according to preliminary figures, was 10.278 billion bushels (11-1-03 USDA estimate), up by a hefty 14.1% from 9.008 billion bushels in 2002/3. The largest corn producing states in the US in 2003 were Iowa (18.7%), Illinois (17.0%), Nebraska (10.5%), Minnesota (9.9%), and Indiana (8.0%).

Demand – World consumption of corn rose to 630.803 million metric tons in 2002/3 from 621.830 million in 2001/2 and is expected to rise further to 641.930 million in 2003/4. The US was the world’s largest consumer of corn in 2002/3 with 201.669 million metric tons (32% of world total), followed by China at 126.500 million (20%), Brazil at 36.500 million (5.8%), and Mexico at 24.700 million (3.9%). Corn is the leading U.S. feed grain with sorghums a distant second. Animal feed usage in 2001/02 of 5.80 billion bushels compares with 5.89 billion in 2000/01. Corn used to make ethanol in 2003/4 was 1.10 billion bushels, up 15% from 953 million in 2002/3, accounting for a hefty 45% of overall corn usage. Demand for corn as a sweetener (high fructose corn syrup or HFCS) was 530.0 million bushels in 2003/4, accounting for 22% of overall corn demand. Corn demand in 2003/4 for glucose/dextrose was 220.0 million bushels (9% of total consumption) and for starch was 260.0 million bushels (11%).

Trade – World trade in corn was forecast at 77.520 million metric tons in 2003/4, slightly lower than the 77.924 million in 2002/3 and the 78.067 million in 2001/2. The US was the world’s largest exporter in 2002/3 at 41.177 million metric tons, accounting for 53% of total world exports. After the US, the world’s largest exporters in 2002/3 were China at 15.244 million (20%), Argentina at 12.349 million (16%), and Brazil a distant fourth at 3.181 million (4%). Argentine corn exports are volatile and are expected to be about 9.000 million metric tons in 2003/4, down from the record 12.349 million in 2002/3 but above 8.581 million in 2001/2. US exports in 2003/4 are forecasted to rise sharply to 50.000 million, more than recovering from the decline to 41.177 million seen in 2002/3 from 47.271 million in 2001/02. Importers of corn are spread among a variety of countries with the leaders in 2002/3 being Japan at 16.868 million metric tons (22%), South Korea with 8.786 million (11%), Mexico with 5.284 million (6.8%), and Taiwan at 4.758 million (6.1%). The US is a very small importer of corn at 374,000 metric tons (2002/3), accounting for only 0.5% of world imports.