What do you think of when you see a kernel of corn? Maybe a bowl of popcorn or corn on the cob? Perhaps your mind goes to corn syrup, animal feed, or even ethanol. That yellow kernel is used in so many different ways across a variety of industries from human food to animal food to fuel, and more. But did you know that America’s corn is also sold across the world? Indeed, corn is a global industry. The United States is the world’s largest corn producer, followed by China, and Brazil. However, policy decisions in China may soon have major implications for the industry as a whole and America’s corn farmers in particular. Geopolitics has long played a role in agriculture. America’s farmers have both benefited and been challenged by policy decisions in other countries. In fact, it’s not unusual for countries to interfere in agricultural trade flows using policy instruments such as tariffs or non-tariff barriers like quotas or subsidies.
The situation in China, however, is a different sort of threat. As part of its effort to become more self-sufficient and reduce its dependency on imports, China is investing heavily in its own corn production. Despite being the second largest corn producer in the world, China remains a long way behind the United States when it comes to crop yields and crop quality, and currently imports corn to fill the gap between what it produces and demand. Now though, China is looking to move away from the United States as a source country and instead fill the gap with corn from Brazil. For U.S. farmers, this could be devasting. China is currently one of the United States’ biggest export markets for corn. Losing it as a customer would be a major blow to America’s corn farmers. While it’s likely that some U.S. corn could be exported to other countries, especially those that had previously relied on corn grown in now war-torn Ukraine, those markets, even together, would be much smaller than China’s. Moreover, the shift would likely push Brazil to the leadership role in corn production. Adding to the challenges facing American farmers is the potential for downward pressure on corn prices. Brazil’s harvest is expected to be larger than usual this year suggesting lower prices will follow, and that Brazilian corn will be more competitive in global markets.
Discussion Questions:
1. Discuss the global nature of the market for commodities like corn. What are the implications of a bumper corn crop in Brazil for U.S. corn farmers? What threat does reduced demand from China mean for U.S. producers?
2. Higher corn prices have prompted some livestock farmers in China to switch to less expensive wheat for animal feed. Consider what this means for global wheat producers and for food companies producing wheat-based products. How might it affect the production of other grains?
3. Using the corn industry as a starting point, reflect on the implications of government for farmers. What is the role of government in shaping which producers are more or less likely to be successful?
Sources| Bloomberg: https://www.bloomberg.com/news/articles/2023-05-12/china-may-cancel-more-us-corn-in-shift-to-cheaper-brazil-cargoes; Reuters: https://www.reuters.com/article/usa-corn-exports-china/china-gobbles-up-us-corn-as-prices-fall-idINL1N35W1KQ; ERS: https://www.ers.usda.gov/amber-waves/2023/march/removing-nontariff-import-barriers-could-increase-china-s-imports-of-pork-beef-corn-and-wheat-ers-research-shows/; Agricensus: https://www.agricensus.com/Article/US-corn-growers-face-multiple-woes-amid-China-cancellation-Brazil-threat-28477.html; Unsplash: Photo by Lynn Danielson on Unsplash