What Affects the Cash Price for Corn?


Quick Answer

The climate and its effects on the projected and actual yield of corn affect the price of corn. Furthermore, projected and actual demand can also change corn's price. Corn is also a common source of ethanol fuel, so demand for ethanol and the cost of oil can affect corn's price as well.

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Full Answer

Supply and demand are the overriding factors that affect the price of corn. While demand is typically predictable, unexpected changes in interest from developing regions can cause the price to change. National economies can have an impact as well. A down year in China, for example, can lead to less demand, which can cause prices to fluctuate.

Farmers in many regions grow corn, but production isn't distributed evenly. A bad growing season in one region, whether due to bad weather, disease or other factors, can cause the supply of corn to drop, which can lead to higher prices. Increases in supply, whether through investment or new technology that leads to higher yields, can also cause the price to drop.

Corn's popularity as a source of ethanol means that the price of corn can be influenced by the price of oil. When oil prices go up, the price of corn often goes up as well. The biofuel industry can have an effect as well, as greater demand for corn-derived fuel can lead to higher corn prices.

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