Is the Price of Corn Too Low?

Here’s a little grist for the mill from the Missouri Corn Growers Association.

Although corn prices have risen substantially over the past year, according to Dr. Jim McLaren, founder and president of StrathKirn Inc., it is inaccurate to think corn price increases have a large impact on food prices.

“While news coverage abounds about the price of corn pinching consumer’s pocketbooks at the cash register, an analysis actually shows the price of corn may be too low,” says Dr. McLaren. One striking fact is that the price of corn is lower than it was 20 years ago, and except for the past year, it has been declining in real-terms. Another interesting fact is that since 1999, the real price of oil has increased dramatically, especially when compared to corn.

Dr. McLaren further suggests that corn has been under priced when considering the market value of its replacement for crude oil. “If you value corn at the same increase crude oil has experienced in the past 20 years, corn would average $13.50 per bushel,” says McLaren. The impact of the price of corn on grocery prices continues to be clarified. Numerous studies confirm the large increase in oil prices has a far greater impact on food prices due to the costs of transportation and processing energy.