Corn Industry

All activities from input supply, production and processing to the delivery of finished food, feed and industrial corn products to final users. This article addresses the economic impacts of the corn industry, its supporting industries, where corn is grown, special challenges to the industry, and its future. Corn (maize) is the most valuable U.S. crop, and is of major importance to the economy of the north central U.S. The U.S. Corn Belt ranges from Ohio to western Nebraska, and corn is the foundation of major livestock and corn processing industries in the region. In 2007, U.S. production was valued at $53 billion dollars. Corn can be described as the backbone of the rural economy in Iowa, Illinois and Indiana, parts of Missouri, Minnesota, South Dakota and Nebraska, and to a lesser extent parts of surrounding states. It touches the lives of every American and billions of other people who consume meat, dairy products or foods made directly from corn.

Background on Corn

Today’s corn (Zea Mais L.) descended from wild species in Mexico that provided food for Native Americans for centuries. Its Native American name means “that which sustains life.” Major investments in research by land-grant universities, the USDA, and private firms have made corn, an efficient converter of plant nutrients, water and sunlight, into a major element of the world’s food chain. In the early 2000s, research, a dramatic increase in petroleum prices, and governmental efforts to reduce greenhouse gas emissions triggered a major expansion in the biofuels industry, thus transforming the crop into a major source of energy in the U.S., Canada and China. High prices for petroleum also accelerated research into the transformation of corn into industrial raw materials as a replacement for petro- chemicals.

Most corn is a yellow dent type. The term “dent” refers to an indentation in the top of the kernel when it is physiologically mature. However, some consumers prefer other kinds of corn. In South America, a flint type is preferred. Flint varieties, when mature, have a hard, smooth top. Research shows that flint corn incurs less kernel breakage than dent varieties when handled repeatedly as the corn is moved into world markets. Its greater durability is offset by lower yields per unit of land than dent corn, although yields on this type of corn have increased substantially in the past 15 years. For some food uses, white corn is preferred. Other types of corn are sweet corn and popcorn. Sweet corn is harvested when the kernels are immature, then canned, frozen, or sold in the ear.

Economic Impacts in Rural U.S.

Economic impacts of corn begin with industries that supply production inputs to farmers. To raise the crop, farmers purchase fuel, seed, fertilizer, herbicides, insecticides, farm machinery, trucks, parts and tires, repairs and other services, such as financing, insurance and consultation on crop production problems. Each related industry has several stages. The seed industry includes research, conversion of research into commercial varieties, production and processing of seed, and financing, transporting and marketing the finished product. At each stage, jobs are created and income is generated. The fertilizer, chemical and farm machinery industries have similar stages. In addition, the farm machinery industry involves processing of steel, rubber and other raw materials used in manufacturing. As income is generated in each related industry, additional dollars are spent in rural communities. Each dollar spent changes hands several times, creating a multiplier effect on earnings of non-farm businesses.

After corn is harvested, a new chain of activities centers around delivery of corn to users at locations, times and forms in which it is needed. Activities in this sector include drying, storage, blending to meet quality requirements, inspection and grading, domestic and foreign transportation, feeding corn directly to livestock, and processing part of the crop into manufactured livestock and poultry feeds as well as motor fuel, and other industrial and consumer products. Direct feeding of corn to livestock and poultry is the largest use, although use for biofuel may soon surpass feed use. About 18 percent of the U.S. corn crop normally is exported, with approximately 40 percent processed domestically. Most processed corn products are used in the U.S., although an expanding percentage, especially the distillers’ grain co-product of ethanol, is being exported. Less than 1 percent of the crop is used for seed. If production exceeds market demand, the excess is held in reserve to help offset future shortfalls in production.

Uses of Corn

Major food uses of corn include corn sweeteners, starch, meal, grits used in processed foods, corn flakes, chips, tacos, canned and frozen sweet corn, and corn oil for cooking salad oils, dressings and processed foods. Corn sweeteners grew from a small fraction of the U.S. caloric sweetener market to over 50 percent due to research that created liquid and crystalline highfructose corn sweeteners. Fructose resembles sugars found in fruits. It is the leading sweetener in U.S. soft drinks and is widely used in other processed foods.

Corn is used to create industrial products, including adhesives, industrial absorbents, packaging materials, diapers, biodegradable garbage bags and table service, filters, and materials to clean oil spills. Research shows promising potential as a carrier for agricultural chemicals and manufacturing of durable plastics. Corn is a major raw material in the U.S. for manufacturing motor fuels as a replacement for gasoline and as an oxygen-enhancing agent to meet the nation’s clean air regulations. The corn-based fuel industry grew out of a Corn Utilization Research Center at Iowa State University in the 1930s and Research at the USDA’s regional laboratories. The Organization of Petroleum Exporting Countries’ sharp increase in petroleum prices in the early 1970s and major tax incentives from the U.S. Government and individual states also helped accelerate the expansion in the 1980s and 1990s. As crude petroleum oil prices climbed from the mid-$20 per barrel range in the early 2000s to over $100 per barrel in 2008, the corn-based fuel-ethanol industry moved into a period of double-digit percentage rates of annual expansion.

The largest use of corn has been as feed for production of red meat, poultry and dairy products, although government-mandated volumes of corn-based ethanol production for 2005 almost insure that use for energy production will soon exceed use for animal and poultry feeds. Expanding corn production permitted Americans to increase meat consumption over the last three decades. U.S. corn is the basis for livestock and poultry feeding industries in countries where feed supplies are limited. Japan, Mexico, Taiwan and Korea, for example, depend heavily on U.S. corn for meat production because of high population densities and limited availability of cropland. Corn is also a major ingredient for pet foods for American cats and dogs.

United States Leads in Corn Production

The U.S. is by far the world’s largest producer of corn because of its large amount of highly fertile soils, abundant rainfall and irrigation water supplies, and a growing season long enough for the crop to reach maturity. A private-enterprise economy where incentives for economic efficiency are passed to individual farmers, farm supply, and marketing firms, and its large investments in agricultural research and education helped to make the U.S. the leading producer of corn. Private enterprise and economic incentives created highly efficient input and marketing industries that provide essential inputs in large volumes during the brief planting season, and can respond quickly to changing volumes to be conditioned, transported, exported, stored or processed. Longstanding systems for extending research-based information to the private sector through the cooperative efforts of the USDA and state land-grant universities contributed strongly to the development of the corn industry.

The U.S. usually produces 40 to 45 percent of the world’s corn crop and accounts for two-thirds to threefourths of global corn exports. Several other nations have rich soils but lack rainfall or have too short a growing season to grow corn in quantities produced in the U.S. Other leading producers are China, Brazil, Mexico, France, Argentina and South Africa.

Challenges to the Industry

The corn industry faces vastly different challenges than many non-agricultural industries. Production is a biological process that can be interrupted or disrupted by weather, disease, insects and other hazards beyond human control. In 1970, for example, after the hybrid seed industry shifted production to a female parent material that was male-sterile, the parent material and commercial varieties were attacked by disease, the Southern Corn Leaf Blight. This disease spread rapidly across the producing region, leaving disastrously low yields. The male-sterile corn was used to eliminate expensive hand labor in removing tassels from the plants. Detasseling prevented female plants from pollinating themselves with undesirable genetics. The industry responded quickly to the disease by producing seed the next winter in the Southern Hemisphere and in subtropical areas so that adequate supplies would be available for the next planting season.

Year-to-year variations in corn production caused by disease, adverse weather, or other factors outside the control of producers can cause huge fluctuations in corn prices. To manage price risks, futures and options markets are widely used in the corn industry to establish prices for crops delivered to the market at a future time. The Chicago Board of Trade futures market has been the world corn pricing center for over a century.

Another distinction from non-agricultural industries is that one of corn’s major inputs, land, has a fixed supply. World population expands at approximately 2 percent per year. Rising incomes increase meat and dairy consumption, thus raising the demand for corn. The industry is challenged to produce and process an expanding supply of corn for a growing population on an unchanging land base. At the same time, it must maintain soil productivity for future generations and avoid environmental degradation. The U.S. corn industry made phenomenal strides in increasing corn production since hybrid seed was introduced in the 1930s. In 1969 (the year before the corn blight disaster), the U.S. average corn yield per acre was 85.9 bushels. By 1994, with continued public and private investment in research, the U.S. average yield rose to 138.6 bushels per acre. By 2008, it was approximately 151 bushels per acre. Without large investments in research and huge increases in yields, U.S. and global food supplies would be much smaller, and much more environmentally sensitive land would be tilled. Consumers around the world would face much higher food prices and a smaller variety of foods than they do today.

Other unique aspects of the corn industry involve seasonality. For high production, the Midwest crop must be planted between mid-April and the second week of May. Research shows that planting after this short window of opportunity seriously decreases production. That means 90 to 95 million or more acres of corn in the U.S. must be planted in one month. All related industries are on alert to meet this precise timing. During the harvest (late September to early November), other participants in the corn industry must be ready to quickly transport, receive, condition and store a crop that totals nearly 350 million metric tons. Delays at any point may expose corn to devastating yield reductions from rain, snow and/or high winds that cause ear droppage, or possible molds and toxins if the crop is not quickly dried. Despite these challenges, the corn and related industries year after year provide U.S. and world consumers with an abundant supply of highquality corn and corn products.

The Future

Scientists continue efforts to increase the productivity of corn plants. New research methods involve gene transplants and mapping of corn’s genetic code to create corn with greater resistance to disease, pests, drought and short growing seasons. This work helps corn production keep pace with growing world demand. New techniques enable plant breeders to create varieties with specific end-user characteristics. Corn with higher-than-normal oil or starch content and specific oil characteristics is being developed. Other researchers develop corn with higher protein content and higher content of specific amino acids such as lysine. Others are searching for corn that will manufacture nitrogen needed for its growth. If successful, that would reduce use of nitrogen fertilizer that can contaminate ground water. Still other researchers are developing more efficient ways to harvest, transport, handle, condition and process the crop. Others are developing ways of converting the cellulose from the stalks and leaves into motor fuel and other products. For the foreseeable future, corn will be vitally important to world consumers and the U.S. rural economy.

— Robert N. Wisner

See also

• Biotechnology; Commodity Inspection; Corn Economy; Futures Markets; Grain Farming; Livestock Production; Marketing; Trade, International

References

• Conner, Charles F. “U.S. Corn Exports Are Important to the Economy.” Corn Annual 2007. Washington, DC: Corn Refiners Association, Inc., 2007.
• Food and Agricultural Organization. Maize in Human Nutrition. Rome, Italy: United Nations, 1992.
• Johannessen, S. and C.A. Hastorf, eds. Corn and Culture in the Prehistoric New World. Boulder, CO: Westview Press, 1994.
• Munro, E. “Corn Refining: An Essential Player in the U.S. Economy.” Corn Annual 1993. Washington, DC: Corn Refiners Association, Inc., 1993.
• Smith, C.W., J. Betran, and E.C.A. Runge. Corn: Origin, History, Technology, and Production. New York: John Wiley and Sons, Inc., 2003.
• Wallace, H.A. and W.L. Brown. Corn and Its Early Fathers. Rev. ed. Ames, IA: Iowa State University Press, 1988.
• Zallie, James P., “Refined Corn Products: Growing Markets Around the World.” Corn Annual 2007. Washington, DC: Corn Refiners Association, Inc., 2007.