Why the cost of corn matters

Corn prices are rising to record levels – nearly $7 per bushel, but why does this matter to us and our wallets?

Rainstorms and floods in the USA will reduce the yield of corn grown in that country just as the demand for this crop is soaring both as a food and as a bio-fuel. This is sending the price of corn to record highs on commodity markets.

Whilst we all associate corn with breakfast cereals and popcorn, you may be surprised to learn that it is found in many non foodstuffs such as paper and urethane based plastic products.

With its high energy yields, corn is also used extensively for feeding livestock. The rising costs of feeding farm animals will result in higher meat prices at the supermarket.

As a food for humans, corn is a staple diet for countries such as Mexico, where the rising costs of tortillas has triggered protest marches.

So as the search for oil alternatives stimulates a strong demand in corn based bio-fuels, we will experience cost rises in unexpected ways. At a time when out wallets are straining from soaring energy costs, the record price of corn will drive our food prices even higher.

Rising food and energy costs are increasing inflation so making reductions in interest rates unlikely in the near future. The Bank of England may even be forced to increase interest rates soon to help curb inflation.

So does bad weather in the USA and the soaring demand for bio-fuels matter to us on a daily basis? I’m afraid that they do.

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