A couple of definitions from our old buddy Webster:

sup•ply - 1: to add as a supplement; 2a: to provide for : satisfy, b: to make available for use : provide, c: to satisfy the needs or wishes of, d: to furnish; 3: to substitute for another in; specifically, to serve as a supply or substitute.

de•mand - 1a: an act of demanding or asking especially with authority, b: something claimed as due, 2a: willingness and ability to purchase a commodity or service, b: the quantity of a commodity or service wanted at a specified price and time, 3a: a seeking or state of being sought after, b: urgent need, 4: the requirement of work or of the expenditure of a resource.

Two simple words, but ones that are vitally important if you want to pass Economics 101 or make your living farming. Without question, the current corn supply and demand situation has been the dominant theme of conversation at coffee shops and any other place where more than two ag-type people have gathered this past winter. The impact of $4.00 per bushel corn has been far reaching:

• Other crops, including soybeans, have hitched a ride on the corn coat tails.
• Livestock commodities, like milk, appear poised to increase in value as the realization of higher feed prices settle-in.
• Vegetable crop pay prices have increased in an effort to compete with corn acres.
• There’s been plenty of speculation on how high corn silage prices might climb next fall (perhaps $30 to $35 per ton)
• Input prices such as nitrogen fertilizer are increasing dramatically as many more corn acres are anticipated.

So what’s going to happen? It appears there are many factors that may interact to either help support corn prices or send them spiraling downward. The one that is always present is simply weather conditions in the major corn growing states. Another positive is ethanol, although as the price of corn increases, the profit margins for ethanol production decreases. There is also talk of eliminating ethanol production government subsidies as well. Randy Fortenbery, UW Extension Ag Economist, reminds us that there is a high percentage of speculative money in the current corn market. If these speculators decide to pull out, corn prices will take a dramatic turn south. Finally, there is the question of how many more acres of corn will be planted. Currently, about 9 million more U.S. corn acres are built into the market. If more than that is planted and weather conditions are at least average, expect some negative reaction. I’ve already seen estimates of up to 15 million additional corn acres. Keep your eye on the USDA’s March planting expectations report, which is due to be released on March 30th.

All of the above factors will increase supply and demand. I don’t pretend what will occur, but if history is any indicator, agriculture always seems to find a way to drive prices back down. We simply can’t stand prosperity.