Why are corn prices are so high?

Answer 1

Corn prices are so high because the Democrats want to invest in alternative energies, turning to corn. The corn is made into boifuels or ethonol, meaning less corn for people to eat. Thanks to the Democrats, all your prices are going to go up.

Edited: corn prices are definitely up because of the use of alternative energy sources, however a few things are incorrect about the above statement:

1) This has nothing to do with "Democrats" and Republicans." Please stop making everything political...it really makes your arguments seem ridiculous.

2) Corn prices are up for a variety of reasons:

a) Bad year for wheat in Russia and Australia. Entire crops were wiped out. While corn is not easily substituted for wheat in all cultures, there has been an enormous substitute effect for corn. See cross-price of elasticity, demand shifters. It's Econ 102 I believe.

b) The livestock industry has a lot of corn in its feed. Feed is one of those things that is darn near a science in and of itself and there are particular protein/carb/calorie requirements for feed. Since the demand for feed in this market is highly inelastic, shorter supply causes scarcity and drives the price up. While there is evidence that scarcity should in fact lower prices initially, that is a short-run effect.

c) Biofuels have ABSOLUTELY created a higher demand for corn, however, this will be a short-lived effect. Since markets are generally pretty good at figuring themselves out, once corn is more expensive than the next best option, (e.g. wheat/whatever other sugar-fermentation process is cheapest), corn demand will dramatically decrease, corn supply will increase (since farmers can make a killing right now) and we'll actually end up with a huge surplus in a year or two. Then biofuels will jump back on the bandwagon and we'll see another price increase, but it will be less dramatic than what we've seen this year.

d) There are a variety of other small reasons that have a combined effect on corn demand and corn supply, as well as derived demand for corn.

Answer 2

Corn prices are so high because the Democrats want to invest in alternative energies, turning to corn. The corn is made into boifuels or ethonol, meaning less corn for people to eat. Thanks to the Democrats, all your prices are going to go up.

Edited: corn prices are definitely up because of the use of alternative energy sources, however a few things are incorrect about the above statement:

1) This has nothing to do with "Democrats" and Republicans." Please stop making everything political...it really makes your arguments seem ridiculous.

2) Corn prices are up for a variety of reasons:

a) Bad year for wheat in Russia and Australia. Entire crops were wiped out. While corn is not easily substituted for wheat in all cultures, there has been an enormous substitute effect for corn. See cross-price of elasticity, demand shifters. It's Econ 102 I believe.

b) The livestock industry has a lot of corn in its feed. Feed is one of those things that is darn near a science in and of itself and there are particular protein/carb/calorie requirements for feed. Since the demand for feed in this market is highly inelastic, shorter supply causes scarcity and drives the price up. While there is evidence that scarcity should in fact lower prices initially, that is a short-run effect.

c) Biofuels have ABSOLUTELY created a higher demand for corn, however, this will be a short-lived effect. Since markets are generally pretty good at figuring themselves out, once corn is more expensive than the next best option, (e.g. wheat/whatever other sugar-fermentation process is cheapest), corn demand will dramatically decrease, corn supply will increase (since farmers can make a killing right now) and we'll actually end up with a huge surplus in a year or two. Then biofuels will jump back on the bandwagon and we'll see another price increase, but it will be less dramatic than what we've seen this year.

d) There are a variety of other small reasons that have a combined effect on corn demand and corn supply, as well as derived demand for corn.