Does America Produce Enough Corn?

Economics Editorial

            In 2011 America harvested 84 million acres of corn; however, only 12% was consumed as food, according to the EPA. Much of the rest is used in various products such as candles, crayons, dyes, and shoe polish. You can find corn in countless foods, diapers, sandpaper, antibiotics, paints, and even patriotic fireworks. With so many uses for corn, one may wonder why we export approximately 20% of our harvest each year. Why do we produce that extra 20%, when we don’t need it at home? Certainly a bit extra is good insurance, but 20% is a large portion. The answer can’t be sheer profits: 1 acre of corn in 2011 was worth ~$760, while 1 acre of rice was worth over $1115. So, why produce the extra corn?

            Most people would agree that the primary goal of agriculture is too feed people. And with rapid growth in population, that is obviously a growing challenge. Recently, America has been producing record levels of corn, which has vastly increased the supply of corn and should logically cause the price of corn to plummet. But it hasn’t. This is because of the rapidly growing global population, which needs to be fed. The demand for corn has increased rapidly enough for the price to stay constant, so that the supply still does not exceed demand. In fact, coupled with the demand for an ever larger amount of manufactured products and synthetic goods, the demand for corn has risen faster than suppliers can keep up, according the Chicago Board of Trade, such that inventory of corn has steadily fallen over the past few years. Thus, prices have risen from around $2 in 2006, to about $4.50 in 2013.

            The conclusion, despite producing 34% of the world’s corn, we need more. Obviously our current massive operation is insufficient at meeting the demand. Much of this demand is driven by government, not consumer, spending, through subsidies, but it is demand that affects the industry in the same way. But why corn, and not rice, which would be more profitable, and would provide more calories per acre?

Globally, America has a comparative advantage in corn, as it can produce the most corn in its fertile valleys the most cheaply. Although it could produce rice, it is not best at doing so. India, specifically the Indus Valley region, is best at producing rice, with China’s Yellow River basins a close second. India thus should focus on rice, and so should China, given that India’s production is not sufficient to meet the needs of a booming Asian population whose diet relies heavily on rice.

By: Jonathan Wood