Corn: Supply and Demand Drivers

Corn is the largest agricultural commodity by volume at over 1.2 billion tons of annual production and among the most traded at over 200 million metric tons shipped cross-border each year.  Corn is also among the versatile crops, capable of being used as a livestock feed, transformed into food ingredients, or processed into transportation fuel.  While ancient in origin, today’s corn plant has benefited from decades of research and development to boost its productivity.  

1) Key Trading Parameters:

Exchange Traded: Chicago Mercantile Exchange (CME), ICE Futures US

Price Quote: US dollars per bushel

Unit of Trade: 56-pound bushel

Futures Contact size: 5000 bushels

Contract Months:  March, May, Jul, Sep, Dec

Settlement: Physical Delivery 

2) Market Drivers

1. Supply and Demand Dynamics:  The US is the leading producer of corn globally, accounting for about one-third of total supply, followed by China and Brazil.   Although a large producer, China consumes all its corn domestically and will at times supplement with imports. The US, Brazil, Argentina and Ukraine are the leading exporters.  Leading importers include the EU, Mexico and the Southeast Asian region led by Japan and Korea.

2. Impressive yield growth:  Corn has benefited, perhaps more than any other crop, from advances in hybrid seed technology over recent decades. Enhancements to increase yield and improve resistance to pests and disease, as well as development of targeted varieties for multiple latitudes, has enabled corn to increase planted area and boost overall productivity.

3. Multiple applications:  Corn is an excellent source of carbohydrates and is the predominant ingredient in commercial poultry and hog feed rations. In the food space, corn can be processed to produce food starch, sweetener, corn flour, vegetable oil and specialty food ingredients.  In the industrial space, corn serves as a feedstock to produce ethanol, for fermentation into citric acid and other industrial products and can even be converted into biodegradable plastic substitutes.