The Ramifications of the Increased Mandate in Renewable Energy in US Domestic Corn Production

The United States Renewable Fuel Standard mandates a percentage of the fuels consumed in the U.S must be derived from renewable sources, which includes fuel produced from domestic agricultural crops. In order to meet this mandate, corn production would have to be increased by millions of acres due to the significant difference in landmass between fields that could be plowed and those required for biofuel crops.


While this is good news for increasing the availability of food and decreasing fuel costs, there are problems that arise with the increased production of corn-based products such as ethanol and lower greenhouse gas emissions compared to other biofuels because much higher input values are used during corn production.


This article takes an in-depth look at the current occurrences found within the Domestic Corn Production industry. Through the assessment of the industry definition, this article provides the necessary key information about Domestic Corn Production. In addition, the article then moves on to analyze the Domestic Corn Production industry’s supply chain components, including its key external drivers, their exact statistical percentages, as well as the industry’s first and second-line suppliers as well buyers. Found within this article is also the overall industry structure of Domestic Corn Production, consisting of its positive, mixed, and negative impact. There is also a provided detailed research on the established key industry trends and possible future predictions. In order to complete the industry analysis, this article also takes a closer look at the overall assessment of the strengths, weaknesses, opportunities, as well as threats present within Domestic Corn Production, or the well-known SWOT analysis. Finally, this article also consists of the not-to-be-missed coronavirus impact, as well as the potential future predictions and forecasts that can be expected to be faced for this industry in the years that are to follow. It is essential to mention that all of the information provided and summarized within this article is solely based on the findings of the well-known industry research organization IBISWorld, stated within their already conducted Domestic Corn Production industry analysis report.


large basket of corns

Coronavirus Update


As stated within the report conducted by IBISWorld, revenue for the Corn Farming industry is predicted to decrease within the next period, however less than it did in the last couple of years, and especially in 2020, because of a slight restoration within industry pieces on predicted increases in livestock placements. In addition, the price of corn has decreased amidst the coronavirus pandemic, lowering profit, although it has increased slightly because of improved performance that is expected to occur in the near future. Last among the listed coronavirus impacts is the fact that revenue generated from exporting industry products has decreased and is predicted to remain steady since more production is applied for local consumption, while imports continue to decrease as well.


Industry Definition


Corn production is the process of preparing kernels on the cob for cooking. Corn production requires careful management, skilled methods and equipment, and timely inputs for best results.


There are four main steps in corn production: harvest, silage fermentation, drying, threshing. After harvest, the stalks are cut down to encourage more growing at ground level. Silage fermentation is then used to dry out the plant tissue that makes up "mid-ribs" which are then removed before drying can occur. Threshing takes place after drying where either hand or machine threshing separates the grain from the cob using a flail or sickle before winnowing separates dust from grain by tossing it through air or water currents.


Operators within the Corn Production industry mainly grow corn, except for sweet corn, and produce corn seeds. Corn generally refers either to the grains or kernels of the tall annual cereal grass known as Zea mays, a staple cereal in various different locations of the world. In the United States, it is usually applied as livestock feed as well as in the production of ethanol, sweeteners, oil, as well as other products.


That being said, the main activities involved within the Corn Production industry include growing a variety of corn, excluding sweet corn, as well as producing corn seeds. In addition, the key products and services in this industry are corn used in livestock feed, corn seeds for sowing, corn used in food and alcohol, as well as corn used in biofuel production.


Industry Analysis


When taking a closer look at the Corn Production industry’s key external drivers, it can be said that the main ones include the price of corn, demand from organic chemical manufacturing, subsidies for corn farming, the threat of natural disaster, and the trade-weighted index. The specific percentages of each of the noted key external drivers may be seen in the image below.


Key external drivers for domestic corn production
Key External Drivers for Domestic Corn Production; Source: IBISWorld

Having that in mind, the first-line suppliers of the Corn Production industry include crop services in the US, water supply and irrigation systems in the US, as well as tractors and agricultural machinery in the US. The second-line suppliers of the industry are commercial building construction in the US, coal and natural gas power in the US, as well as natural gas distribution in the US. Similarly, the first-line buyers of Corn Farming include livestock production support services in the US, corn, wheat, and soybean wholesaling in the US, as well as organic chemical manufacturing in the US. The second-line buyers, therefore, include specialty food stores in the US, supermarkets, as well as grocery stores in the US, and lastly, fruit and vegetable markets in the US.


Corn production supply chain breakdown map
Supply Chain Breakdown for Domestic Corn Production; Source: IBISWorld

As is the case for all other industries, the industry structure for Corn Farming consists of its positive, mixed, and negative impacts. The positive impact of the industry is its high and steady assistance, its low concentration, as well as its light and steady regulation and policy.


The mixed impact of Corn Farming is contained within its mature life cycle, medium technology change, medium and increasing industry globalization, medium revenue volatility, medium and steady barriers to entry, and its medium and steady industry competition.


Lastly, the negative impact of Corn Farming is reflected in the industry’s high capital intensity.


positive, negative and neutral impacts on Corn production
Industry Structure for Domestic Corn Production; Source: IBISWorld

As this analysis tackles the entire industry that is known as Corn Production, there have been established and noted key trends of Corn Farming, as stated within the report conducted by IBISWorld are as follows. Farmers have not been able to discover purchasers of their crop, which has led to an overall supply glut. In addition, industry profit as a whole has been volatile, and therefore, the overall US agriculture has followed the same pattern. In addition, exports’ share of industry revenue has reduced over the last five years. In order to satisfy demand, farmers are anticipated to apply genetically modified seeds. Moreover, IBISWorld predicts that the value of exports will increase over the next five years. The withdrawal of certain support for domestic corn production is also a potential threat to industry growth. Lastly, it has been found that the coronavirus pandemic has led to the largest decline in revenue because of a breakdown in the supply chain.


As mentioned above, the products and services offered by the Corn Farming industry include corn used in livestock feed, corn seeds for sowing, corn used in food and alcohol, as well as corn used in biofuel production. As far as products and services segmentation goes, it can be noted that the largest percentage belongs to corn used in livestock feed, equaling 47.7%, while the lowest one is accounted to corn seeds for sowing, being 0.3%.


As is the case for any other industry, the SWOT analysis for Corn Farming consists of the industry’s strengths, weaknesses, opportunities, and threats. The strengths noted for Corn Farming include the industry’s high and steady level of assistance, its low imports, high profit vs. sector average, as well as low customer class concentration. The weaknesses listed for the Corn Farming industry include its high product and service concentration, low revenue per employee, as well as its high capital requirements. The opportunities states for the Corn Farming industry are seen as a potentially high revenue growth as well as the threat of natural disaster. Lastly, the threats for the Corn Farming industry are reflected in a historically documented low revenue growth that is also possible to occur in the future, as well as low outlier growth, low-performance drivers, and lastly, the price of corn.


Strengths, weaknesses, opportunities and threats of the corn production industry
Domestic Corn Production: SWOT; Source: IBISWorld

Current Industry Performance


As it is commonly known, corn is the most produced crop in the United States is considered to be corn, as well as one of the highest-yielding crops per acre. Consequentially, corn has been accepted for a wide variety of applications, such as animal feed, artificial sweeteners, ethanol, as well as food production.


Within the last five years, heightened corn production has in part been created from the growing demand for biofuel; corn’s high yield makes corn especially significant to ethanol producers. In fact, The Energy Policy Act of the year 2005 established beginning targets of ethanol to be combined with the US gasoline supply-4.0 billion gallons by the year 2006, with yearly increments to 7.5 billion gallons by 2012. The 2007 Energy Independence and Security Act then prolonged the deadline to 36.0 billion gallons by 2022, with an individual renewable fuel standard (RFS) to be established by the Environmental Protection Agency every year.


The heightened mandate in renewable fuel production has caused ethanol producers to purchase a growing share of the US corn crop. Corn farmers afterward increased their acreage in order to increase production and therefore satisfy the growing demand. However, crop producers still continue to be sensitive towards unfavorable weather conditions, and in the year 2012, the worst drought to occur in the United States ever since 1956 impaired crop growth for the entire year; and production decreased from 12.3 billion bushels in the year 2011 to 10.8 billion in 2012, creating a 12.7% decline.


Graph of corn price from 1980 to 2026
Source: IBISWorld

Improved weather circumstances, as well as further sources dedicated to the crop, resulting in a record corn harvest in the year 2013 at 13.8 billion bushels, establishing 28.6% growth from the year before. In the same way, record local corn yields as well as production in the year 2014 kept developing the restoration in corn supplies from the abrupt decrease in the year 2012. Still, in the year 2015, corn production decreased 4.3%, based on the reduction in the planted acres of corn, additionally worsened by lower corn yields per harvested acre. In the most essential corn production areas, including Nebraska as well as Ohio, the 2015 corn production began with double the normal level of moisture, therefore decreasing harvest yields by intensely impacting recently sown crops. Conversely, USDA statistics and research suggest that corn production achieved a record high of 15.1 billion bushels in the year 2016, as steady temperatures, as well as sufficient rainfall in the country’s Midwest, caused a boost in yields. From this amount, production decreased 3.6% in the year 2017 to 14.6 billion bushels. This decrease remained to occur in 2018 and 2019 since production reduced by 1.8 and 5%.


Corn production industry performance 2013-2026
Source: IBISWorld

Corn production for the latest period is predicted to grow 4.1% with a 6.8% increase forecasted for 2021/2022. The USDA also suggests increased yield predictions, according to the weather trends that are considered as the primary reason for an increased forecasted level of production in the period that is to follow. Record high yields are also the main driving factor connected to growing production in the present period. As it turns out, increased yields have overshadowed the impact of forecasted decreases in corn acreage.


Corn production is considered as the amount of corn grown by US corn farmers, as reported by the US Department of Agriculture’s Economic Research Service. Predictions are based on the USDA’s long-lasting, annually published, agricultural forecasts as well as market analysis.


Outlook for Domestic Corn Production


Over the five years that are to lead to the year 2026, domestic corn production is projected to move upward. In addition, corn production is predicted to steadily grow because of the increasing demand for industrial as well as food applications, such as the demand for corn as livestock feed.


In addition, demand for corn will in part be caused by high fructose corn syrup (HFCS) demand, with Mexico becoming an essential HFCS export market. What is more, demand for corn for nonfood intentions, including corn applied as an input commodity for starch production, will also lead domestic corn production to increase. For instance, starch may be applied in the drywall as well as paper items production. Last but not least, domestic corn exports, especially those used in meat production, are also predicted to increase in the years that are to come, since the world economy will begin to recover as well.


Conclusion


Corn Field

Based on all of the information provided in this article, it is possible to fully understand the meaning of the Domestic Corn Production industry, the activities included within it, as well as the products and services achieved. In addition, since this article also provides the entire supply chain breakdown, starting from the industry’s key external drivers, down to its first and second-line suppliers and buyers, it is possible to grasp the overall position of the industry within the agricultural sector. Moreover, as the article also provides a detailed industry structure analysis, as well as a specific SWOT analysis assessment, we are to gain a closer perspective on the business aspect of the Domestic Corn Production industry. Through the summary of the Domestic Corn Production industry, we are able to collect the already received overall industry analysis and apply it towards developing our own understanding of the current state of the Domestic Corn Production industry, as well as the occurrences that are yet to take place in the periods to follow.


Lastly, the Domestic Corn Production industry comprises the operations of the production and marketing of corn and its extracts. Through the analysis provided above, we are able to build a more comprehensive understanding of the industry and its components. Indeed, we can also identify important drivers and challenges that this industry is facing in areas such as demand or supply, as well as usage changes over time. This is to say that although corn is already a pre-dominantly produced crop in many parts of the world, there is still room for improvement in terms of production outputs when compared to the current worldwide consumption rates.


We all know the importance of agriculture. In a world where food isn't readily available, agriculture is our lifeline. It has been around ever since we discovered that seeds could produce more food than we could eat and it has evolved with society, as we learned to grow and cultivate various foods.


Agrarian activities helped civilizations thrive and helped humans settle the planet. Agriculture provides us with a livelihood, sustenance for our families, jobs for those who work in the field or in processing plants and factories, as well as those who work in marketing and distribution centers.


 

Our mission is to increase your understanding of the agricultural sector and keep you up to date with all industry endeavors. That being said, our vision will always be to unleash the full potential of agriculture and guide everyone towards a new era of development, growth, and productivity with universal access to research, education, and participation in culture.