Microeconomics: Corn Market Problems

Corn Market Problems Since April there have been some major issues with the production in the Corn Belt of America. The central and west areas of the Corn Belt are relatively unaffected, but the north and east areas have seen some major decreases in corn output due to underweight corn and corn diseases. North Dakota, Indiana, Illinois and parts of Iowa have seen the most damage, mainly because of molds and mycotoxins. Many fear that this shortage of corn will affect the grain trade and the economy as a whole since many of the corn is too damaged to be used for feed or energy.Some farmers have experimented with mixing good quality corn with the underweight corn in order to meet the national standard for corn weight, so this may help a little. With a shortage like this, on a product that has so many purposes, it would be hard to find a substitute; therefore we can expect the demand of corn to rise. A rise in demand will also lead to a rise in price and a rise in quantity demanded. Farm ers will strive for maximum efficiency and cut corners to yield as much corn as possible, but the supply still will not be enough.The shortage of corn will cause the supply curve to move to the left. This means that price will increase, but the quantity supplied is going to be limited. Hopefully there can be enough corn in other areas to pick up after the north and east ends of the corn belt. The market-equilibrium price will be affected as well. Since there is an obvious shortage and corn suppliers are unable to produce as much corn as normal, the rise in demand and decrease in supply will inevitabley lead to an increase in market price.