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| The demand base that was created by the ethanol subsidy (building many plants in a short period of time) happened at a faster pace than producers could (or did) respond with production. (a shortage)
When the building of plants ceased (when the subsidy was being phased out) production of corn to feed the plants finally caught up. Since then production has been maintained at a higher level than all the demand sources combined, thus a growing carryout and a completely understandable expected price reaction. (a surplus) The production problems in 2012 delayed price to get where we are today.
The amount of ethanol production compared to 5 years ago is only 1 small piece of the puzzle that helps determine the price of corn.
The price of corn spent a considerable time over $6, but very little of that time was the true value of corn that high. Ethanol had the subsidy to cover the difference. Other demand outlets made adjustments to make it through the shortage era.
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We have wandered through a once in a lifetime demand created supply/demand surplus/shortage/surplus cycle.
If another demand surge like ethanol is ever initiated , we may see another. | |
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Wind tower collapse
