What’s Causing the Rise in Corn Prices?

Corn prices have sky-rocketed over the past year.

After plummeting to only $3 per bushel in April of 2020, corn prices have rallied to $5.60 per bushel a year later – an astonishing price increase of nearly 80%.

A few big questions linger in the minds of US farmers –

  • What’s causing the drastic hike in corn prices?
  • Will prices continue to rise?
  • What impact will high corn prices have on livestock feed in 2021?

What’s causing high corn prices?

In one word – China.

The Chinese corn market is currently suffering the fallout of years of mismanagement. From 2004 to 2016, the Chinese government provided farmers with supports that buoyed domestic corn prices far above global market prices.[1] These questionable policies have created a situation in which buying imported corn is more cost-effective for many Chinese farmers than buying domestically grown corn. At the moment, huge piles of corn are rotting in Chinese warehouses while foreign corn arrives on cargo ships at the nation’s ports.

The Chinese government changed course in 2016 and has instituted more modest corn supports. Even so, the mismanaged Chinese corn market is still causing Chinese farmers to demand increasing amounts of US corn in 2021.

In addition, Chinese hog farmers continue to battle waves of African swine fever, a sickness that has wiped out a significant portion of the Chinese pork market. The Chinese government linked the fever to the practice of feeding kitchen waste to hogs and subsequently banned the practice in late 2018.[2] The ban has forced Chinese farmers to look for other feed sources such as corn.

These two factors – high domestic corn prices and African swine fever – are prompting China to order growing amounts of US corn.

Will prices continue to rise?

This depends on whether or not US farmers will rush to plant more acres of corn in 2021 to meet the growing demand and on whether or not China will continue placing corn orders deeper into 2021.

Rising corn prices in late 2020 and early 2021 seemed to indicate that US farmers would plan to increase corn production during the 2021 growing season. However, the USDA’s March 31 prospective planting report predicted a mere 1% rise in acres dedicated to corn production. This seems to indicate that US farmers are wary of these massive Chinese corn orders and are not willing to massively increase supply.

However, if China follows through on its current orders and continues to place orders throughout the year, then US corn prices will certainly continue to rise as demand continues to outpace supply.

What impact will high corn prices have on livestock feed?

As higher-priced corn makes its way into American feed production in 2021, feed manufacturers will need to increase prices to keep up with rising costs. On the other hand, consumers can expect a far more moderate price increase from Cascade Cattle and Sheep this year.

Brothers and partial owners of Cascade Feed, Randy and Justin Smucker, explain that their relatively lower production costs come from two directions.

First, the price of corn distillers, the by-product that supplies fat and protein in Cascade’s flagship Cattle and Sheep feed, has increased at a slower rate than the price of corn. While the cost of corn has risen about 80% in the past year, the cost of corn distillers has increased by only 40%.

Second, increased corn distillers prices have had an under-sized impact on Cascade’s production costs because corn distillers make up only one-fifth of the Cattle and Sheep formula. Grass seed screenings supply the balance of the formula and have seen little to no cost increase in 2021. This basic formula has allowed Cascade to limit the company’s need to raise prices. (To read more about Cascade’s production methods, click here.)

“We’ve had to increase wholesale prices by 5% so far,” said Justin Smucker, “and we anticipate another 5-10% rise in 2021.”

However, compared to the massive impending increase in corn-based feed prices, Cascade Cattle and Sheep’s position as a budget-friendly, high-impact livestock feed remains strong. Now more than ever, cattle and sheep farmers in the Pacific Northwest should be making Cascade Cattle and Sheep an integral part of their 2021 feeding plan.

Cascade Cattle and Sheep is sold at Wilco Farm Stores and Coastal Farm and Ranch locations.

[1] Wu, Q. and W. Zhang. 2016. “Of Maize and Markets: China’s New Corn Policy.” Agricultural Policy Review, Fall 2016. Center for Agricultural and Rural Development, Iowa State University. Accessed April 5, 2021.

[2] Patton, Dominique and Hallie Gu. “China blames feeding kitchen waste to pigs for African swine fever spread.” Reuters. Published 24 October 2018. Accessed 3 April 2021.

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