Record Corn Demand Despite Pandemic | Blog

The USDA is estimating record corn demand and production for the 2020/2021 crop year. A copy of our condensed WASDE figures can be found on our website. The same cannot be said for the global oil demand which is expected to decline. 

What helps explain the record-breaking corn demand?

Corn’s uses are virtually endless. Corn’s number one global use is for feeding livestock. In the US, the top two uses for corn are for feeding livestock and for ethanol which is blended in our automotive fuel supply. Corn is also ubiquitous as a sweetener in food and beverages of all kinds. Corn starch holds almost all paper together. Corn also has some surprising uses which can be seen below. Once investors grasp the reality that corn is practically everywhere, the record demand estimates are easily understood.   

Here is a short list of some of the items that include corn as an ingredient:

·        Cardboard Boxes (like the ones shipped to your house)

·        Medical Products: latex, pills, gauze, and intravenous solutions

·        Office items: paper, inks & envelope adhesives

·        Consumer Staples: diapers, toilet paper, vitamins, shampoo, toothpaste

·        Electronics: battery’s, computer cases & 3D printing

This is not an all-encompassing list. To learn more about the many uses of corn we encourage you to visit iowacorn.org.

Domestic Corn Demand – A Mixed Picture

The COVID pandemic has weighed on ethanol demand with Americans staying home and making fewer trips to the gas station. In the US Ethanol usage represents nearly 33% of corn’s demand. Roughly another 1/3^rd of US corn is used as animal feed. The USDA is forecasting an increase in feed demand as farmers are having to feed their animals longer as meat processing capacity has been reduced.

Demand Supporting Prices?

Yes, corn futures prices are down year to date, but they did not fall as far as oil. At the low spot corn was down approximately 24%. Vastly different than spot oil prices which at one point traded well below zero for more than a 100% loss. Corn’s smaller percentage loss may in part be due to the record global demand estimates versus sharp declines in global demand for oil. 

Demand is only half of the pricing equation. The other half depends on supply.

Supply and Production Variability

While corn demand has continued to trend steadily higher over the years, annual production has not always kept pace.

Historically, weather has been the biggest variable periodically limiting production and helping push corn prices higher. With the US corn crop completing its planting cycle, the entire growing season is still in front of us. Weather remains the critical variable and significant adverse patterns could still impact production. 

Historically, prices have moved higher when corn supply concerns emerge. While historical performance of course is not indicative of future results corn prices at the time of this writing prices are trading below the cost of production. Current low prices may be reflective of the fact that the USDA is estimating record corn production along with record demand for ’20-’21. Estimates, of course, are just that estimates. If weather negatively impacts corn production, the USDA will revise their estimates.

While many investors have been paying close attention to the oil markets, perhaps it is appropriate to also monitor corn; another a global commodity which is currently trading below the cost of production in the midst of projected record global demand.

The Teucrium Corn Fund (Ticker: CORN) provides investors an easy way to gain exposure to the price of corn futures in a brokerage account. The fund holds a basket of futures contracts which track the Teucrium Corn Fund Benchmark. The fund does not intend to track the spot price of corn. For more information on the product and associated risks please refer to the disclosures at the bottom of our website and please carefully review the prospectus before investing.