SIC 0115

Companies in this industry

Industry report:

This entry includes establishments primarily engaged in the production of field corn for grain or seed. Establishments primarily engaged in the production of sweet corn are classified under SIC 0161: Vegetables and Melons, and those producing popcorn are classified under SIC 0119: Cash Crops Not Elsewhere Classified.

Industry Snapshot

The United States is the world's leading producer and exporter of corn, growing almost 42 percent of the global supply on 86.5 million acres. China is a distant second with 19.5 percent of global supply. As was traditionally the case, in 2009 corn far surpassed other U.S. crops in value at nearly $48.7 billion. For comparison, soybean crops, the second leading field crop, were valued at about $32.4 billion. Although corn is grown in all 50 states, most of it comes from the Corn Belt in the Midwest, which includes parts of Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin. In 2009, Iowa led in production of corn, with nearly 2.44 billion bushels, followed by Illinois (2.07 billion bushels), Nebraska (1.58 billion bushels), Minnesota (1.25 billion bushels), and Indiana (994 million bushels). The total U.S. corn crop was estimated at 13.15 billion bushels.

Corn has been the leading U.S. feed grain, accounting for 90 percent of the feed grains raised in the country. It has a large variety of industrial and food applications. Although sweet corn is classified elsewhere (as a vegetable rather than a grain), field corn is an ingredient in many processed foods, including breakfast cereals, salad dressings, margarine, syrup, soft drinks, and snack items. Corn also has been adapted for use in the manufacturing of ceramics, construction materials, disposable diapers, paper goods, textiles, and health and medical products such as penicillin, antibiotics, and vitamins. It has been converted into biodegradable plastic and, increasingly, into fuel as ethanol. According to the National Corn Growers Association, there are over 4,200 uses for corn products.

Although large corporations, such as DuPont's Pioneer Hi-Bred (Johnston, Iowa), Dow AgroSciences LLC (Indianapolis, Indiana), and Monsanto (St. Louis, Missouri) contribute to the industry by providing seeds (including a wide variety of hybrids) and chemicals, the actual process of planting and harvesting falls primarily to family farmers. According to the Census of Agriculture, approximately 82 percent of U.S. corn production is under the control of individual or family farmers. Another 6 percent are family-held corporations, and 11 percent are partnerships. The remainder--some 4,000 farms--are corporate owned and operated or are in the hands of estates, trusts and institutions. Indicative of small family farmers, the average size of corn farms is less than 250 acres; just 8 percent are greater than 2,000 acres. The majority of corn farms (66 percent) have revenues of less than $250,000 annually; 7 percent gross more than $1 million. Of the nation's approximately 280,000 corn farmers, about 75 percent are over 45 years old.

The number of acres planted, number of acres harvested, and value of corn all rely on a number of interrelated factors including weather, supply and demand--both domestically and globally and as foodstock and for fuel--the value of the U.S. dollar, and the cost of producing corn (e.g., fertilizer prices). Each year farmers in the Corn Belt determine how many acres to plant of soybeans or corn (or other field crops) depending on what return they expect to receive on their investment.

The 2007 Census of Agriculture, which is updated every five years by the U.S. Census Bureau, reported an estimated 347,540 farms that harvested corn, down from 348,590 in 2002. Although the number of farms decreased, the number of acres harvested increased from 68.2 million to 86.2 million during the same period, and the number of bushels produced rose from 8.6 billion bushels to 12.1 billion bushels. In 2009, 79.63 million acres were harvested (of 86.42 million planted).

In terms of harvesting, corn is the largest U.S. crop. Corn is planted in the spring for harvesting in the summer and fall. The marketing season for the crop runs from September 1 to August 31. Most corn is harvested with a combine, which picks the corn from the stalk, removes the husks, and shells and cleans the corn. The shelled corn is dried for storage. Corn also can be harvested with a machine that picks the corn and strips the husk but leaves the kernels on the ear. The ears are then stored in bins that allow the corn to dry.

Harvesting of corn for grain begins when the moisture content is about 28 percent, and harvesting for silage corn begins when the moisture is about 50 percent. A forage harvester chops the corn stalks close to ground level and grinds them into small pieces. The silage is blown into a wagon following the forage harvester and is stored in a silo where fermentation preserves it.

Federal Price Supports
Government price supports for corn began with the Agricultural Adjustment Act of 1933. The legislation granted federal payments to farmers who reduced production of surplus crops. In 1938 Congress enacted a law to set up non-recourse loans that gave farmers money for their crop so they could hold onto it and sell it when prices went up. The loans also guaranteed the farmers a minimum price for their corn. If the farmers could not sell their crop at a higher price than the government had lent them against the crop, they could simply forfeit the crop to the government. However, the 1996 "Freedom to Farm" legislation promised to end this method of agricultural support. The law called for the gradual reduction of loans over a seven-year period, which ended with the complete termination of government subsidies after 2002. The government hoped this move would make farmers more dependent on the market and less dependent on the government. However, in 2002, the federal government enacted the Farm Security and Rural Investment Act of 2002, or 2002 Farm Act, which ensured support to farmers for another six years.

Acreage reduction programs (ARP), which ended with 1996's Freedom to Farm bill, paid farmers to set aside an amount of land on which they would not grow corn. The amount of land set aside was dependent on the available corn reserves. However, the optimal amount of set-aside land depended upon one's perspective. For example, the Agriculture Secretary announced a 5 percent set-aside for 1992, ordering all farmers who received government corn subsidies to set aside 5 percent of their corn acreage. Farmers wanted to see higher set-asides to limit production and keep prices up. Grain companies, however, wanted to see no land set aside in order to increase production and lower prices to make corn more competitive on the world market.

A government program for conservation reserves paid farmers not to plant corn or other crops on highly erodible land for ten years. They instead were required to plant grass or another ground cover and could not use that land for hay or grazing their livestock. According to James Bovard, a policy analyst and author of The Farm Fiasco, the conservation program was idling land that was equivalent to the entire state of Ohio and would cost the United States more than $20 billion by the time it expired in 1999. Bovard claimed that this program paid three times the going price for renting land.

Corn and other feed-grain supports raised costs for livestock producers, and those expenses were passed on to consumers. However, farmers and others who supported the government agricultural programs claimed that U.S. consumers had stable food supplies and prices because of the programs. Critics contended that these programs, which were initially adopted in 1933 to confront an emergency, had become a burden to U.S. consumers and taxpayers and were hurting the United States in world trade. While U.S. farmers were paid not to plant, thus reducing the amount of grain available for export, critics said that farmers in some nations were planting as much as they could to take over world markets. Among those critics were grain dealers who urged that the United States and other countries end price supports in favor of exercising free trade policies.

An important development in the agricultural industry during the early years of the first decade of the twenty-first century was the 2002 Farm Act. According to the U.S. Department of Agriculture (USDA), the legislation "provided direct government income support to eligible feed grain producers mainly through three programs: direct payments, counter-cyclical payments, and the marketing loan program." In order to help minimize their profession's inherent risks, farmers continued to rely on other forms of insurance and subsidies in the early years of the new century's first decade. In particular, corn growers benefited from clean air regulations and related subsidies connected to the production of ethanol.

To replace the expiring 2002 Farm Act, the USDA proposed legislation in 2007 that put forth various changes, including implementing a revenue-based program instead of the price-based countercyclical program, updating the program's commodity marketing assistance loans, and putting a cap on subsidy payments for individuals at $360,000, along with amending conservation programs and increasing support for renewable energy. Among others, the American Corn Growers Association (ACGA) and the National Corn Growers Association (NCGA) provided input into the legislative process, including a compromise for the proposed reduction of corn subsidies related to ethanol that involved the use of price supports. In May 2008, Congress was able to override President Bush's veto of the bill, and the Food, Conservation, and Energy Act of 2008, more commonly known as the New Farm Bill, was passed into law.

Background and Development

Corn has figured prominently in the history of people in the United States. Native Americans cultivated it long before the Europeans arrived. Corn became a staple in the diet of the Europeans, and each wave of settlers moving farther and farther west across the continent carried corn to plant.

In 1837, John Deere introduced a steel plow, which made turning the heavy Midwestern soil easier because soil did not stick to it as it did to wood or cast-iron plows. Mechanical corn planters were also developed during the 1800s, and mechanical corn pickers became common in the 1930s and 1940s.

During the 1920s, corn moved ahead of wheat as the country's main grain crop. This change reflected in part the changing eating habits of Americans, who began eating more poultry, red meat, and dairy and less bread and other wheat products. Poultry, cattle, and dairy livestock thrived on corn, which was cheap and abundant.

Since 1920, the total number of corn farms declined from 6.5 million to fewer than 350,000 that were harvested for grain in 2002, while the number of acres planted decreased only about 20,000 acres during that same time. Much of this consolidation was a result of technology as improvements in seeds, fertilizer, and machinery allowed fewer people to farm more acreage.

During the 1970s, easy credit prompted many farmers to purchase expensive machinery and more land. The value of farmland tripled and, in some cases, quadrupled. In the early 1980s, however, the value of farmland in the Corn Belt dropped 52 percent, according to Hugh Ulrich in Losing Ground. Interest rates shot up and grain exports dropped, which resulted in low prices and a surplus of grains. Farmers were unable to repay their loans, so in order to maintain their income, they bought and planted more acreage and went deeper into debt. Droughts in 1986 and 1988 decreased production, and farmers needed federal aid. The mid-1980s brought the failure of thousands of family-owned farms. However, in the 1990s, corn became a precious commodity domestically and internationally with its multifarious food and industrial applications.

In 1976, production first topped the 6 billion bushel mark, and by 1981, that number soared to 8 billion bushels with a yield of 108.9 bushels per acre. Although weather, soil, disease, and pests played a big part in the size of the crop each year, production and production efficiency continued to increase, culminating in a record 1994 harvest of 10 billion bushels with a yield of 138.6 bushels per acre. After hovering around 72.6 million harvested acres in 1996, 1997, and 1998, acreage fell slightly to 70.5 million in 1999 and then rose to 72.4 million in 2000. However, overall average yields increased over the same time, climbing from 127.1 bushels per acre in 1996 to 136.9 bushels per acre in 2000. By 2003, the yield increased to 142.2 bushels per acre with 10 billion bushels produced, which surpassed the previous record harvest in 1994.

The North American Free Trade Agreement (NAFTA) of 1993 brought the U.S. corn industry increased access to the Mexican market. Corn exports to Mexico rose because the trade accord reduced support for Mexican corn growers and forced the country to rely on imported corn. In its first year of implementation, Mexico imported 2.5 million metric tons (98.5 million bushels) of corn. Another emerging key importer of U.S. corn was the Pacific Rim in Asia. The agreement ended in 2008.

During the 1990s, environmental concerns came to the forefront of the industry as increased crop yields took a toll on the nation's water supplies while pesticides and fertilizers contaminated ground water in major agricultural areas, invading the drinking water of people who depended on wells for their water. The nation's fertile topsoil continued to erode, and erosion became more of a problem as farms expanded, because larger fields were more vulnerable to topsoil erosion. Use of heavier equipment also contributed to the problem. As the United States and other nations began to deal with environmental issues more intensely, erosion and pollution caused by farming received more attention, especially from farmers growing corn. By the 1990s, the development of better hybrids and improved production methods allowed farmers to grow more grain even though they planted fewer acres.

The crop of 2004 resulted in the highest production and yield in the industry's history: 11.8 billion bushels with 160.4 bushels per acre. While this surge was short-lived, overall production was consistently high. In 2006, 78.3 million acres were planted resulting in 68.8 million harvested acres with an average yield of 149.1 bushels per acre, producing 10.5 billion bushels. The total value of that year's corn crop amounted to a record $33.8 billion with the average price per bushel also the highest in history at $3.20 per bushel. Additionally, nearly 6.5 million acres were harvested for silage. Meanwhile, biotech crops accounted for 25 percent of the entire corn crop with 21 percent as herbicide tolerant and 15 percent as stacked traits, leaving 39 percent classified as non-biotech. About half the corn grown in the United States is still used by the farmers who grow it or by their neighbors.

Corn that went on the market for export, industrial use, or trade passed through the hands of agribusinesses such as Cargill Inc. This privately held grain-trading company bought corn, stored it in its huge grain elevators, processed it into cornstarch or corn syrup, and sold corn and milled corn products in the United States and around the world. The rest of the crop was exported or sold for processing to other companies. Wet millers prepared the crop for use, with starch being the leading product. Corn oil is produced by pressing the germs of the corn and is used in making margarine, mayonnaise, and other foods. Further processing turns cornstarch into corn syrup or high fructose corn syrup. High fructose corn syrup has emerged as the leading sweetener in the United States, with more consumed per capita than cane sugar and beet sugar combined. It is produced by converting some of the glucose in cornstarch into fructose and is used in place of other sugars in soft drinks and processed foods. It became popular with food and beverage processors because it was cheaper than cane and beet sugar, which were supported by federal price levels and quotas on foreign sugar.

In 2008, U.S. farmers planted 86 million acres of corn and harvested 78.6 million acres to reap a total corn crop value of $47.19 billion. Average yield was 153.9 bushels per acre, the second highest on record after 2004's figure of 160.4. Production numbers were also the second highest ever at 12.1 billion bushels, slightly less than the 13 billion bushels produced in 2007. A majority (44.4%) of the corn was used for feed, 14.6 percent was exported, and a record 30.1 percent was used for ethanol and related products. The remainder was used for high fructose corn syrup (3.8%) and other uses (7%). The average price for corn in 2008 was $3.90 per bushel.

Participants in the corn industry waited to see how much an outbreak of the swine flu in Mexico in April 2009 that later spread to the United States would affect the corn industry. Experts predicted a drop in the demand for pork as a result of the epidemic, which would ultimately result in a reduced number of hogs and thus a decreased demand for feed. Restrictions on importers of pork were also expected to affect the market. Despite this, during the first half of the year, the Census Bureau predicted corn exports would exceed USDA inspection estimates by 35 million bushels, and some experts were cautiously optimistic. Darrel Good, a University of Illinois Extension marketing specialist, told The Corn and Soybean Digest that the "increase in the weekly rate of shipments and sales over the past month is encouraging and suggests that the USDA projection is reachable."

Other issues concerning the corn industry in mid-2009 included a possible limitation of ethanol consumption in California. Initially, said Good in the same article cited above, "California's calculation of the indirect land use implication of corn-based ethanol increases the 'carbon footprint' of ethanol and makes it less attractive in reducing carbon emissions in the state." At the same time, farmers were being challenged by the weather, as widespread rainfall across the Midwest slowed planting, especially in the eastern portion of the region.

Current Conditions

The lower cost of the fertilizer anhydrous ammonia made corn more attractive in 2010, compared to soybeans. Generally, high fertilizer prices favor soybeans; when fertilizer prices decline, farmers are more inclined to plant more acres of corn. In 2010, anhydrous ammonia prices fell close to 2005 levels. In addition, South America was expected to produce a significantly large crop of soybeans, thus flooding the commodities market with plenty of soybeans and driving U.S. farmers toward planting more acres of corn.

The result was a record corn crop in 2010. According to initial estimates by the World Agricultural Supply and Demand Estimates (WASDE), issued May 2010, the national average corn yield for the 2010 season is 163.5 bushels per acre, up 1.7 bushels per acre from the previous year's yield of 161.8 bushels per acre and up 2.7 bushels per acre over the 10-year trend line yield of 160.8. Based on the increase in acres planted and the high yield per acre expected, the WASDE estimated the 2010 corn crop could surpass 2009's record crop of 13.11 billion bushels to reach 13.37 billion bushels. With a carryover of 1.74 billion bushels of old crop and an additional small amount of imported corn, the nation's total available corn for 2010 was estimated at 15.12 billion bushels for the 2010-11 marketing year.

According to the WASDE report, corn used for animal feed was expected to drop slightly in 2010-11 from 5.38 billion bushels in 2009-10 to 5.35 billion bushels. Corn used for food, seed, and industrial use was expected to increase from 5.73 billion to 5.95 billion bushels. Specifically, corn used for seed and food are relatively small and stable segments of the industry. Corn used to produce high-fructose corn syrup, starch, cereal, and beverages remains relatively unchanged from year to year. The industrial use of corn to produce ethanol, however, has brought significant change to the corn industry.

The face of the corn industry changed dramatically during the late years of the first decade of the 2000s as the demand for corn for ethanol rose substantially. In 2000, 628 million bushels of corn went to ethanol production; in 2009, that number had jumped to 4.2 billion bushels. Some blamed the new dependence on corn for ethanol; others blamed big oil for creating chaos at the pumps. The corn industry, such as Corn Farmers Coalition, worked to distill rumors that ethanol use would run corn supplies short or drive prices too high: "What has recently come to be characterized as the 'food versus fuel' debate has always been a bogus one, based on the false premise that farmers can't grow reasonably priced corn fast enough to meet demand from the factories sprouting around the nation that use it to make ethanol and feed people and animals." By 2009, corn prices stabilized around $4 per bushel, which helped quell the debate.

About one-third of total corn production (4.6 billion bushels) was projected to be used for ethanol production in 2010-11, according to WASDE. However, corn farmers' role in ethanol is highly dependent on federal regulation. The federal ethanol blender's tax credit expires on December 31, 2010. If this tax credit is not extended or renewed, the ethanol industry is expected to face serious hardships and undergo significant restructuring, which would, in turn, affect U.S. corn growers who supply ethanol plants with the corn to make their product. Also, Environmental Protection Agency regulations stipulate a maximum 10 percent blend of ethanol with gasoline. However, the ethanol industry is growing at a rate so that production will soon exceed demand for U.S. gasoline blending. Once ethanol production outpaces U.S. gasoline blending needs, ethanol suppliers will need to find new markets for their product--either through exports or new regulations that provide uses for higher blends of ethanol products.

America and the World

In the 2009-10 season, the United States accounted for over 61.3 percent of the world' exports of corn, sending out over 2 billion bushels. Brazil was a distant second, exporting 354 million bushels (10.6%), followed by Argentina with 295 million bushels (8.8%). Japan continued to be the United States' best corn customer with imports of 642 million bushels in 2007-2008, followed by Mexico (374 million bushels), South Korea (295 million bushels), and Taiwan (171 million bushels). The United States also held the lead for corn consumption with 11.0 billion bushels, followed by China with 6.3 billion bushels and the European Union with 2.4 billion bushels.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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