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Leesburg, Ohio | Demand, by definition, is a curve on a graph. The curve represents a given price at a given quantity. The price is usually shown on the vertical axis (up and down on the left side) and the quantity is shown horizontally across the bottom.
As the quantity increases, the price decreases.
Think of an icecream cone on a hot July day. Let's say you would pay $2 for one. And maybe $1 or so for another. But you would probably not pay very much at all for a third, fourth, or fifth one. As quantity goes up, price goes down.
Now, in January, same person, same ice cream cone, you might not pay $2. The demand curve has shifted to the left. You are experiencing seasonal demand.
The point here is that you can't define demand until you know both the price and the quantity.
We have seen tremendous price increases in commodities, but in this case, quantity didn't go down (in corn), it went up! Obviously demand has shifted. The big question is, will demand revert back to its historical norm? I think probably not, AS LONG AS we have renewable fuel standards in place, Congress and the Administration support ethanol, and the price of oil stays fairly high. Lots of ifs there.
Looking at long-term charts, we can see a significant shift in price (and draw some inferences about demand) around the time of the Russian grain sales in '73. Obviously prices spiked, but came back down with the Carter embargo. But they came back down to a generally higher level than the "norm" of the previous 60 years. We went from a largely domestic market to a world export market. The demand curve changed.
As to your original question, I would say no, we have never had this much demand (for corn). We have never produced this much volume. And we are seeing record prices. So the demand curve has changed.
And your second question: what should the price be? It should be what it is. The market has "perfect" knowledge. You and I don't. Simple as that. Are there sometimes "quirks"? Some would say yes. Will it change tomorrow? Of course. But the price is what it is in a relatively free marketplace. Works a heck of alot better that the old Soviet system, wouldn't you say?
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Demand now vs. then
