Corn Production and Effect in Prices

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Corn Production and Effect in Prices

Commodity Description

Corn production has been increasing in the UK since the year 1970 when it started to date. It is a crop grown and harvested in grain form, after which it may be ground and used as maize flour, cornstarch, and maize syrup. Maize flour is used in baking products such as cornbread, while cornstarch is made from maize kernels and acts as thickening agents in soups. Also, corn syrup acts as a sweetener in the production of sweets and cookies. It requires temperatures of between 8 to 10 degrees Celsius, hence planted within the period of mid-April. Corn takes a period of 60 to 100 days from planting to harvest. After harvest, corn goes through the process of shelling and drying, when not consumed raw, then milled to form flour that is used in the production of other products such as cookies (Fromme et al., 2019). It may be sold as raw, with cob, or after shelling or after milling depending on consumer and producer preferences.

Corn is one of the most popular cereal grains and is a good source of carbohydrates. It has other varieties such as popcorn and sweetcorn. It is rich in fiber that helps with digestion, vitamins, minerals, and antioxidants. It has a high content of starch, almost 80%, which provides energy in the body. Minerals and vitamins boost the immune system and help in the development of the brain, bones, and blood (Rouf Shah et al., 2016). These components perform various functions in the body, hence crucial for growth and development.

Commodity Prices

According to statistics in retail and trade of commodity prices, corn prices are kept using tonne measurement. In the year 2009, the average price of corn per tonne was 116 sterling pounds, which rose to 192 sterling pounds in 2011 (“Commodity prices of maize 2002-2015 | Statista”, 2020). The change is enormous, with a difference of 76 sterling pounds. The increase in the price was due to the high production cost that was caused by high fuel prices. High production in other industries led to a rise in the cost of inputs of the product. For example, fertilizers and machines hence increasing the production of the product. High production cost has the effect of increasing the price of the product. During the period, Fuel prices rose, which is one of the essential factors in production hence increasing the cost of production. As production costs increase, producers need to get back the cost and have a profit after sale. Corn production also depends on climate; hence variations in weather affect its output. Poor weather conditions lead to low production, therefore low quantity of the product in the market, which then raises the price of corn (Prasad et al.,2018).

Costs of production and climatic condition, affect corn prices in the market. Low temperatures affect production hence ow supply of the product in the market (Loeb, 2019). The prices may also be independent on the government, quality and processing activities of the product. The price depends with the form in which corn is presented in the market. Government may also determine the prices depending on the market and economic situations. The production level is influenced by many factors that affect prices profusely.

Reasons for and effects of price changes

In 2010 and 2011, the cost of energy in the western areas increased, leading to high costs of production for most of the industries in the UK (Mittal, 2009). As energy cost increases, the prices rise to ensure a balance in the production and sales cost. This effect led to a drastic change in the price of corn from 141 in 2009 to 192 in 2011. The cost of production determines the rate at which a commodity will be sold. As the cost of production increases, the quantity in the market decreases. This effect means a shift of supply shifted to the left, reducing the amount and increasing the price.

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A shift in the supply may either increase or decrease the prices. As seen from the diagram, the original price in the market is P1, with a quantity of Q1, which is formed with the demand D1 and supply S1. As supply shifts to the left to S2, it decreases the amount of corn to Q2 and also increases the price to P2. The high cost of production shifts to the left, hence reducing the quantity and increasing the price. This impact occurs with the constant demand for the same product.

Shifts in demand either increases or decreases the price of products in the market. A right shift in demand increases both the quantity of the product and the price in the market. This is because when there is high market demand, production increases; hence the market reacts by increasing the price (McMahon, 2015). This is because people are willing to purchase more of the product. A leftward shift means a decrease in demand for corn. It causes the quantity to decrease, and the price also drops.

Changes in the price of corn are caused by production changes, government regulations, and climatic changes. Corn production depends on the weather conditions, as very high temperatures affect grain development; hence production becomes too low (Ma & Maystadt, 2017). When the environment is conducive for corn production, grain formation is appropriate; hence the supply in the market increases. Government regulations, such as having price controls, also determine the prices of the product. The restrictions ensure that the prices are not too high for the consumers nor too low for the producers. The cost of production also determines the prices set. High costs increase the price.

Government interventions

Production of corn depends on inputs such as fertilizer, water, agricultural machines, and labor. When the cost of these factors rises, it increases the cost of production. Therefore, to stabilize the prices, the government of UK provided subsidies for the production of renewable energy to prevent total reliance on the non-renewable hence reduce the costs of production (Lightfoot et al., 2017). The subsidy to renewable energy indirectly stabilizes the prices of corn as the costs of its inputs reduce hence reducing the prices in the market. Also, the UK government is providing subsidies to agricultural sectors, including corn farmers, thus reducing their costs for production. Farmers are boosted financially with some amount to cover for expenses such as fertilizers and agrochemicals required. Such subsidies and support affect the quantity and prices of the product.

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According to the above diagram, an increase in subsidy increases the quantity of corn, and decreases the prices in the market. The corn farmers receive price P2 while the government covers the rest. P2, P1 Q1D, Q1S show the subsidy provided by the government.

During the period of high production costs, such government subsidy is beneficial to farmers as they use it to ensure proper and quality products. This may be through the use of quality inputs and ensuring the crops are well taken care of as well as adequate payment of workers in the cornfields.

However, the issue of this subsidy was not a success to the corn farmers since the income of corn farmers were still below the amount of subsidies provided. This showed that there was still a problem even after getting support from the government. Therefore, the production systems need checking and the activities of the farmers that affect farming of the products. The low income of farmers also explains the constant price of corn at a high level between the years of 2010 and 2011.

Evaluation

In the year 2015 to 2019. The exports of corn from the UK have increased. This rise shows that in the short run, there is sustainability of corn production as there is a ready market for the product. Corn farming is also rising with the intervention of the government through subsidies; hence more farmers engage in the production more than other products. (“FAO Cereal Supply and Demand Brief | World Food Situation | Food and Agriculture Organization of the United Nations”, 2020) Domestically, in the UK, consumption of corn products is in the increase as people like cookies and baked products, especially for breakfast. Also, as the demand for the products increases both in the UK and worldwide, it influences production as it has to cater to the demanding market.

The weather condition in the UK is appropriate for corn farming as it has both the cold and warm weather; hence farmers can plant in April, have short rains, and harvest between November and December when it is warmers. Therefore, with favorable conditions for growth, corn farming is likely to increase in the future as more farmers will take part in the production. It also requires a shorter time, which attracts more farmers to take part in corn farming.

The government of the UK has regulations on corn production, how to plant, grow, and even harvest the produce. It includes the types of fertilizers and agrochemicals to be applied in production. These regulations ensure that the product that gets to the market is safe for consumption (“The Corn Returns (Variation) Regulations 1990”, 2020). Subsidies have ensured that the prices are not too high for consumers, thus continue to purchase more every other day. Changes in the supply of corn affect the costs, which may make consumers opt for other sources of carbohydrates such as wheat. To avoid this, the government needs to support corn’ farmers by providing disease prevention methods, subsidies, and lands to practice farming. The support will encourage more farmers to practice corn farming hence increase production, which increases supply in the market, leading to decreased prices.

References

Commodity prices of maize 2002-2015 | Statista. Statista. (2020). Retrieved 24 February 2020, from https://www.statista.com/statistics/280428/commodity-prices-of-maize-in-the-united-kingdom-uk/.

FAO Cereal Supply and Demand Brief | World Food Situation | Food and Agriculture Organization of the United Nations. Fao.org. (2020). Retrieved 24 February 2020, from http://www.fao.org/worldfoodsituation/csdb/en/..

Fromme, D., Spivey, T., & Grichar, W. (2019). Agronomic Response of Corn (Zea mays L.) Hybrids to Plant Populations. International Journal Of Agronomy, 2019, 1-8. https://doi.org/10.1155/2019/3589768Lightfoot, W., Burke, J., Craig, N., Dupont, J., Howard, R., & Lowe, R. et al. (2017). Farming Tomorrow British agriculture after Brexit. Policy Exchange, 33. Retrieved 24 February 2020, from.

Ma, J., & Maystadt, J. (2017). The impact of weather variations on maize yields and household income: Income diversification as adaptation in rural China. Global Environmental Change, 42, 93-106. https://doi.org/10.1016/j.gloenvcha.2016.12.006McMahon, T. (2020). Inflation Adjusted Price of Corn. Inflationdata.com. Retrieved 24 February 2020, from https://inflationdata.com/Inflation/Inflation_Articles/Corn_Inflation.asp.

Mittal, A. (2009). The 2008 Food Price Crisis: Rethinking Food Security Policies. Unctad.org. Retrieved from https://unctad.org/en/Docs/gdsmdpg2420093_en.pdf.

Prasad, R., Gunn, S., Rotz, C., Karsten, H., Roth, G., Buda, A., & Stoner, A. (2018). Projected climate and agronomic implications for corn production in the Northeastern United States. PLOS ONE, 13(6), e0198623. https://doi.org/10.1371/journal.pone.0198623Rouf Shah, T., Prasad, K., & Kumar, P. (2016). Maize���A potential source of human nutrition and health: A review. Cogent Food & Agriculture, 2(1). https://doi.org/10.1080/23311932.2016.1166995The Corn Returns (Variation) Regulations 1990. Legislation.gov.uk. (2020). Retrieved 24 February 2020, from https://www.legislation.gov.uk/uksi/1990/1351/regulation/2/made.