<< Previous 1 2 3
Birger reported that the price of corn has jumped 60 percent since the third quarter of 2007, while the price of ethanol has only risen 30 percent. That squeezes companies like Verasum Energy Corporation, Birger said. Verasum’s profits fell from 37 percent to 12 percent in the third quarter of 2007 at the same time that corn costs rose from $2.05 per bushel to $3.32 per bushel. Birger predicts the economics of Ethanol will change, with market forces favoring large-scale producers like ADM.
But even if the ethanol market cooled, University of Illinois professor of Agricultural Economics Darrel Good said international trade will help keep the price of corn high. China has reduced its corn exports, Good said, draining the pool of internationally available corn and leading more international buyers to get their corn from the U.S.
Good said America’s economic climate adds a financial bonus to overseas U.S. corn buyers.
“Importers have not felt the full brunt of the price increase because of the weak dollar,” Good said.
In theory, increasing the cost of a bushel of corn should increase the price of all corn derivatives including high fructose corn syrup, but Craig Ruffolo, a paid consultant for the corn industry, suggested that may not be the case.
HFCS buyers meet with their supplier once a year – typically between October and December – to determine the price of the sweetener, Ruffolo said. During that period last year, corn prices generally hovered below $4 per bushel, though the price spiked in early December.
Ruffolo added that other factors could play in to negotiated prices. Beverage companies turned to HFCS because it was cheaper than sugar, Ruffolo said. Recent media coverage of the sweetener linked it to America’s struggle with childhood obesity, and some beverage companies are switching to cane sugar — a more expensive commodity.
The laws of supply and demand suggest that a drop in demand could negate a price increase. Maybe it will, but it hasn’t yet.