Des Moines, IA

What Effects Will Record Corn Prices Have for End-Consumers?

Toby Hazlewood

A harsh winter and dry conditions push corn prices skywards

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As the world attempts to return to normality after COVID-19, there have been many noticeable effects. Many have become accustomed to wearing masks and social distancing. Handshakes may become a thing of the past. Homeworking in some industries has become commonplace.

But other effects are less noticeable - the surge in the price of various commodities for example.

In recent months, the prices of various commodities have reached record highs (or the highest-highs seen for many years). The reasons for these increases are various, but the effects are the same - those who have a need for the commodities are being forced to pay an inflated price or to risk going without.

Timber prices soaring

The price of sawn lumber has skyrocketed - in part due to increased demand for new houses and home improvements to allow for those who now work from home or no longer need or want to live in the nation's bigger cities. This increased demand, combined with the fact that the entire industry was temporarily put on hold when COVID-19 struck, has pushed prices upwards.

The price has increased by 250% since April 2020, adding over $35,000 to the price of a single new home according to a recent survey by the National Association of Home Builders.

Oil prices climbing

Then there's the price of oil and derived products like gasoline. Various events have conspired to push gasoline near to the $3 per gallon mark in many states - a six and a half year high. This has been made worse by the recent cyberattack against the Colonial Pipeline by the Russian hacking group DarkSide.

The Colonial Pipeline runs the 5500 miles from Houston, TX to Linden, NJ transporting around 45% of the oil, gasoline and jet fuel required on the east coast. The recent hack meant that the pipeline had to be temporarily shut down in case hackers were able to take control of it. The price of gasoline spiked accordingly, even though the US currently has 235 million barrels of gasoline in storage - enough for the country to last for a month.

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The growing price of corn

Besides the price of gas and lumber, what may strike Americans most significantly is the ever-increasing price of corn.

The price of corn futures has blasted through previous all-time highs and recently reached a price of $772.50. The price increase is as a result of many factors, not least the unusually harsh winter experienced in the north western states. There are further concerns about the ability of supply to meet demand as dry conditions prevail.

While the high-prices will of course favour those who have crops to sell, there's a real chance that most Americans will start to feel the effects of the cost increases. The price of everyday foods and other products is expected to increase in line with the price of corn too. In addition to corn being an everyday food for many, it's also the primary source of ethanol in the USA - gasoline is 10% ethanol (as a means of reducing harmful emissions). Corn is also a key ingredient in cosmetics and industrial products including wallboard, insulation, paints, linoleum, wallpaper, and adhesives.

What happens next?

If supplies of corn run short, then the inflated price could climb further still. This may be good news for farmers in the Hawkeye State who have crops to sell - but as for the impacts on the cost of living as all these commodities soar? Well it seems like the cost of living across the USA could be felt by the end consumers all the more. This is far from an ideal situation when many are trying to recover financially from the effects of COVID-19.

Here's hoping that the government has a plan for handling the inflated cost of living so that things don't get out of control - time will tell.

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