GRAINS OVERVIEW

Corn | Soy Bean | Wheat | Oats

CORN Contracts | Quote Board

During the last decade, Corn has been the leading crop in terms of production and acreage grown.  The major producing nation for Corn in the world is the United States of America, with over 80% of the production of Corn in the United States centered in the mid-western states known as the Corn Belt: Iowa, Illinois, Nebraska, Minnesota and Indiana.
Supply / Production Considerations

Planting in the Corn Belt states of Iowa, Illinois, Nebraska, Minnesota and Indiana tends to start in mid April and run through mid May.  In recent years, the majority of planting in the Corn Belt has started by April 20 th and been completed by June 8th. Ideally, planting should be done when the temperature is moderate and conditions are dry.  If the fields are either too wet or a late snow hits, then planting will have to be put off.  Late planted crops tend to produce lower yields.  Historically, the probability of delay is quite large, so very often during planting the Corn market begins to build a risk premium into the crop at this time.

Several days after the Corn crop has been planted, sprouts begin to emerge from the soil.  These sprouts grow into the tall lanky plant we all recognize as Corn.  As the Corn plant matures, ears grow.  The kernel which grows inside the ear of Corn is a seed, and before seeds can be produced, the plant must pollinate.  In order for pollination, the Corn ear produces a tassel, which is used to capture pollen.  Tasseling usually occurs 10 days before the Corn plant begins to silk, or the emergence of a silk like strand from the end of the ears.
 
Silking, or pollination, is the most crucial stage of development of the Corn plant.  Pollination only occurs when the crop receives an adequate amount of moisture and temperatures are semi moderate.  If pollination does not go well, crop production will drop substantially.  However, once pollination has occurred, the Corn crop is almost impervious to damage, and often referred to as a “made crop”.  The median date for pollination is the fourth of July, and hence the Corn market tends to reach its maximum price by the first week of July.  In several years, seasonal tops are put in by late May as the last of the new crop Corn is planted.  In most years after planting, Corn prices tend to be weighed down by progress of the crop.  Only in years when severe droughts have interfered with pollination have Corn prices continued to rise.

Seasonal aspecs of supply and demand are already factored into the futures prices and these prices do not move in tandem with the respective cash market. Additionally, the option premiums do not move in tandem with the underlying futures contracts.
 
Demand / Consumption Considerations
Livestock feed accounts for roughly 60 to 65 percent of the total use of the cash Corn crop.  In recent years, corn has accounted for a quarter of all livestock used.  Corn is so attractive as a livestock feed for two major reasons:

Corn is good grain for fattening livestock and poultry because of its high starch content.  In addition, it contains more oil than other cereal grains, making Corn an excellent source of nutrients and a very high energy feed.

Acre for acre, Corn yields more animal feed in both grain and forage than any other crop, although the cost to produce Corn in terms of labor and equipment, is no more expensive to plant and harvest than other cereal grains (and most other crops).
Because the main use of Corn is for animal feed, any significant increase or decrease in animal production can have dramatic affects on the price of Corn.  With large and growing animal numbers worldwide, the demand for Corn (and all grains) has been tremendous in recent years.

Corn is also heavily used for industrial purposes.  Paper and wallboard are made from the stalks, while husks are used as fillers.  Cobs are used to make charcoal, as fuel in burning, or processed into industrial solvents.  However, the kernel of the Corn plant is still the most valued part of the plant for industry.

Corn kernels are used for corn oil, starches, dextrin, syrup, adhesives, glues, textile fibers, soaps, sizing, paints, varnishes, explosives, as well as a host of other industrial and human consumption products.  The aforementioned materials are typically produced after the Corn kernel has been processed by a technique known as wet milling.  Wet milling is when the Corn kernel is soaked in diluted sulfuric acid for roughly 60 hours.  The hulls are now separated from the kernels which are used to make the laundry list of items mentioned earlier.

Dry milling is used to make cereals, flour, hominy, grits, feeds and various industrial products.  The process of dry milling involves spraying the cornhusk with steam to soften the cob, and then removing the kernels which are then ground. With the plethora of uses for Corn, it is no wonder that Corn is the most widely exported commodity in the United States.  The United States is the world’s largest producer of Corn and the world’s largest exporter. .

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