SIC 0115
CORN



This entry includes establishments primarily engaged in the production of field corn for grain or seed. Establishments primarily engaged in the production of sweet corn are classified under SIC 0161: Vegetables and Melons , and those producing popcorn are classified under SIC 0119: Cash Crops Not Elsewhere Classified.

NAICS Code(s)

111150 (Corn Farming)

Industry Snapshot

The United States is the world's leading producer and exporter of corn, growing about 40 percent of the global supply. Argentina, the next largest exporter, is a distant second. Although corn is grown in all 50 states, more than 80 percent of it comes from the section of the Midwest known as the Corn Belt, which consists of parts of Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin. The leading corn-producing states are Iowa, Illinois, and Nebraska. In 2001 the U.S. corn crop was estimated at 9.5 billion bushels.

Throughout the 1990s corn was the number one U.S. crop in terms of acreage, with more than 70 million acres devoted to it. Throughout the decade, planted acreage of corn accounted for approximately 24.0 percent of all major field crops, the highest in the United States. By 2001 this percentage remained relatively unchanged. At that time, corn represented almost 25 percent of all crops harvested in the United States, accounting for some 75 million acres. Corn has been the leading U.S. feed grain. Bushel usage rose steadily during the late 1990s and leveled off in 2000 and 2001 near 6.0 million bushels. Corn was a major source of livestock feed in the 1990s and early 2000s, with approximately 50 percent of the annual harvest being fed to chickens, hogs, and cattle.

By the early 2000s corn had a large variety of industrial and food applications. Although sweet corn was classified elsewhere (as a vegetable rather than a grain), field corn was an ingredient in many processed foods including breakfast cereals, salad dressings, margarine, syrup, soft drinks, and snack items. Corn had also been adapted for use in the manufacturing of ceramics, construction materials, disposable diapers, paper goods, textiles, and health and medical products such as penicillin, antibiotics, and vitamins. It had also been converted into fuel (ethanol) and biodegradable plastic.

Organization and Structure

Harvesting. In terms of harvesting, corn is the largest U.S. crop. Corn is planted in the spring and harvested in the summer and fall. The marketing season for the crop runs from September 1 to August 31.

Most corn is harvested with a combine, which picks the corn from the stalk, removes the husks, and shells and cleans the corn. The shelled corn is dried for storage. Corn can also be harvested with a machine that picks the corn and strips the husk but leaves the kernels on the ear. The ears are then stored in bins that allowed the corn to dry.

Harvesting of corn for grain begins when the moisture content is about 28 percent, and harvesting for silage corn begins when the moisture is about 50 percent. A forage harvester chops the corn stalks close to ground level and grinds it into small pieces. The silage is blown into a wagon following behind and is then stored in a silo where fermentation preserves it.

Federal Price Supports. Government price supports for corn began with the Agricultural Adjustment Act of 1933. The legislation granted federal payments to farmers who reduced production of surplus crops. In 1938 Congress enacted a law to set up nonrecourse loans that gave farmers money for their crop so they could hold onto it and sell it when prices went up. The loans also guaranteed the farmers a minimum price for their corn. If the farmers could not sell their crop at a higher price than the government had lent them against the crop, they could simply forfeit the crop to the government. However, the 1996 "Freedom to Farm" legislation promised to end this method of agricultural support. The law called for the gradual reduction of loans over a seven-year period, ending with the termination of government subsidies altogether after 2002. This move, the government hoped, would make farmers more dependent on the market and less on the government. However, in 2002 the federal government enacted new legislation—the Farm Security and Rural Investment Act of 2002—that ensured support to farmers for another six years.

Acreage Reduction Programs (ARP) paid farmers to set aside an amount of land on which they would not grow corn; the amount of land set aside depended upon the corn reserves already available. However, the optimal amount of set-aside land depended upon one's perspective. For example, the agriculture secretary announced a five percent set-aside for 1992, ordering all farmers who received government corn subsidies to set aside five percent of their corn acreage. Farmers wanted to see higher set-asides to limit production and keep prices up. Grain companies, however, wanted to see no land set aside in order to increase production and lower prices to make corn more competitive on the world market.

A government program for conservation reserves paid farmers not to plant corn or other crops on highly erodible cropland for ten years. They instead were required to plant grass or another ground cover and could not use that land for hay or grazing their livestock. According to James Bovard, a policy analyst and author of The Farm Fiasco, the conservation program was idling land that was equivalent to the entire state of Ohio and would cost the United States more than $20 billion by the time it expired in 1999. Bovard claimed that this program paid three times the going price for renting land.

Corn and other feed-grain supports raised costs for livestock producers, and those expenses were passed on to consumers. However, farmers and others who supported the government agricultural programs claimed that U.S. consumers had stable food supplies and prices because of the programs.

Critics contended that these programs, which were initially adopted in 1933 to confront an emergency situation, had become a burden to U.S. consumers and taxpayers and were hurting the United States in world trade. While U.S. farmers were being paid not to plant, thus reducing the amount of grain available for export, farmers in some nations were planting as much as they could to take over world markets, the critics said. Among the critics were grain dealers who urged that the United States and other countries end price supports and exercise free trade policies instead.

Background and Development

Corn has figured prominently in the history of people in America. Native Americans cultivated it long before the Europeans arrived. Corn became a staple in the diet of the Europeans, and each wave of settlers moving farther and farther west across the continent carried corn to plant.

In 1837 John Deere introduced a steel plow, which made turning the heavy midwestern soil easier because soil did not stick to it as it did to wood or cast-iron plows. Mechanical corn planters were also developed during the 1800s, and mechanical corn pickers became common in the 1930s and 1940s.

During the 1920s corn pushed wheat aside as the country's main grain crop. This change reflected in part the changing eating habits of Americans, who began eating more poultry, red meat, and dairy—and less bread and other wheat products. Poultry, cattle, and dairy livestock thrived on corn, which was cheap and abundant.

Since 1920 the total number of farms has declined from 6.5 million to fewer than 2.2 million. During that same time, the average farm size has grown from less than 150 acres to 450 acres. Much of this consolidation was due to technology, as improvements in seeds, fertilizer, and machinery allowed fewer people to farm more acreage.

During the 1970s easy credit prompted many farmers to purchase expensive machinery and more land. The value of farmland tripled and, in some cases, quadrupled. In the early 1980s, however, the value of farmland in the Corn Belt dropped 52 percent, according to Hugh Ulrich in Losing Ground. Interest rates shot up and grain exports dropped, resulting in low prices and a surplus of grains. Farmers were unable to repay their loans; in order to maintain their income, they bought and planted more acreage and went deeper into debt. Droughts in 1986 and 1988 decreased production, and farmers needed federal aid. The mid-1980s saw thousands of family-owned farms fail. However, in the 1990s corn became a precious commodity domestically and internationally with its multifarious food and industrial applications.

The North American Free Trade Agreement (NAFTA) of 1993 has brought the U.S. corn industry increased access to the Mexican market. Corn exports to Mexico have risen, because the trade accord has reduced support for Mexican corn growers, forcing the country to rely on imported corn. In its first year of implementation, Mexico imported 2.5 million metric tons (98.5 bushels) of corn. Another emerging key importer of U.S. corn was the Pacific Rim in Asia.

During the 1990s, environmental concerns came to the forefront of the industry. For starters, increased crop yields were taking a toll on the nation's water supplies. Pesticides and fertilizers contaminated ground water in major agricultural areas and invaded the drinking water of people who depended on wells for their water. The nation's fertile topsoil continued to erode and, as farms expanded, erosion became more of a problem because larger fields were more vulnerable to topsoil erosion. Use of heavier equipment also contributed to the problem. As the United States and other nations began to deal with environmental issues more intensely, erosion and pollution caused by farming received more attention, especially from farmers growing corn.

By the 1990s, the development of better hybrids and improved production methods, farmers could grow more grain even though they were planting less acreage. In 1932 almost 2.9 billion bushels of corn were grown on almost 110.5 million acres, resulting in an average production of about 28.4 bushels per acre. Twenty years later, three billion bushels were grown on only 81.8 million acres, for an average of 37.6 bushels per acre. Although weather, soil, disease, and pests played a big part in the size of the crop each year, production and production efficiency continued to increase, culminating in a record 1994 harvest of 10 billion bushels, with a yield of 138.6 bushels per acre. After hovering around 72.6 million harvested acres in 1996, 1997, and 1998, acreage fell slightly to 70.5 million in 1999 and then rose to 72.4 million in 2000. However, overall average yields increased over the same time period, climbing from 127.1 bushels per acre in 1996 to 136.9 bushels per acre in 2000.

Current Conditions

Consistent with past trends, in the early 2000s farmers continued to benefit from better hybrids and improved production methods, resulting in better yields on less acreage. In 2001, although average harvested acres were at their lowest levels since 1995 (68.8 million), average yield reached a near-record level of 138.2 bushels per acre.

As of the early 2000s, a large portion of the corn grown in the United States was still used by the farmers who grew it or by their neighbors. About 60 percent of the crop was consumed by livestock on the farm on which the corn was grown or by animals on nearby farms.

Corn that went on the market for export, industrial use, or trade passed through the hands of agribusinesses, such as Cargill Inc. or ContiGroup Companies Inc. (CGC). These privately-held grain trading companies bought corn, stored it in their huge grain elevators, processed it into cornstarch or corn syrup, or sold the corn and milled corn products in the United States and around the world.

The rest of the crop was exported or sold for processing to other companies. Wet millers prepared the crop for use, with starch being the leading product. Corn oil is produced by pressing the germs of the corn and is used in making margarine, mayonnaise, and other foods. Further processing turns cornstarch into corn syrup or high fructose corn syrup. High fructose corn syrup has emerged as the leading sweetener in the United States, with more consumed per capita than cane sugar and beet sugar combined. It is produced by converting some of the glucose in cornstarch into fructose and is now used in place of other sugars in soft drinks and processed foods. It became popular with food and beverage processors because it was cheaper than cane and beet sugar, which were supported by federal price levels and quotas on foreign sugar. By the late 1990s industrial demand for corn as high fructose corn syrup began to increase, and in 2001 a record 548 million bushels were used for its production.

Legislation. One important development in the agricultural industry during the early 2000s was the Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Act. According to the U.S. Department of Agriculture (USDA), the legislation "provides direct government income support to eligible feed grain producers mainly through three programs: direct payments, counter-cyclical payments, and the marketing loan program." Signed on May 13, 2002, and made effective for a period of six years, the bill replaced legislation enacted in 1996 that attempted to make farmers more dependent on the market, as opposed to government assistance. Citing information from the Congressional Budget Office, the National Corn Growers Association (NCGA) reported that the new bill was "projected to increase spending by $46 billion on a wide range of titles dealing with farm commodity programs, conservation, trade, research, nutrition, rural development, credit, forestry and energy."

In order to help minimize their profession's inherent risks, farmers also continued to rely on other forms of insurance and subsidies in the early 2000s. In particular, corn growers were benefiting from clean air regulations and related subsidies connected to the production of ethanol.

Research and Technology

Improved Seeds and Techniques. Farmers have always tried to find the best ways to increase crop yield and quality. They knew that the size of their crop depended on the seed they used, so they saved the best and largest ears of corn for seed. They carefully observed the results of their seed selection and learned to develop strains adapted for their locations and conditions. Farmers could increase the quality of their crop and the bushels per acreage yield by selecting the right seed. Scientists and farmers began to apply knowledge of hybrid corn-seed breeding, which involved fertilizing one strain of corn with another to produce corn with particular characteristics.

With the realization that biotechnologists would be able to genetically engineer seeds to produce corn with specific traits—such as modified proteins, oils, or starches and resistance to disease and insects—the NCGA has supported the creation of a comprehensive gene map of corn in order to realize the industry's goals of creating corn hybrids for different environments, thus reducing the reliance on pesticides and fertilizers. In its report The World of Corn 2002 , the NCGA emphasized its support of this initiative: "Mapping the corn genome has the same importance to the corn industry as mapping the human genome has to human health."

The NCGA indicated that the majority of corn crops (75 percent) in 2001 were non-biotech in nature. Some 18 percent of planted acreage was insect-resistant, while 7 percent was herbicide-tolerant. The USDA revealed that these totals had increased by 2002, reaching 24 percent and 10 percent, respectively. The agency expected planting of insect-resistant corn to increase because of rising infestation levels attributed to the European Corn Borer (ECB). In addition, it indicated that biotech corn was seeing the highest adoption rates on larger farms.

Corn-Based Products. In 1975 a team of USDA scientists developed a starch substance that could absorb 2,000 times its weight in moisture. This discovery was widely applied by manufacturers of disposable diapers.

Ethanol, a corn-based fuel, increased corn demand on an even larger scale. Sales of ethanol have skyrocketed. Only a few million gallons of the fuel were produced in the early 1980s. By the late 1980s, more than 850 million gallons were produced, and 86 percent of it was distilled from corn. Although some analysts predicted that ethanol use would rise steadily in the 1990s and early 2000s, ethanol use increased only slightly: about 7 percent of the U.S. corn crop or 690 million bushels of corn generally have been used for ethanol production.

When the Environmental Protection Agency (EPA) mandated that lead be removed from gasoline, ethanol became an octane booster, for ethanol added to gasoline created an oxygenated fuel that cut carbon monoxide exhaust emissions. Sixty major metropolitan areas in the United States failed to meet EPA carbon monoxide levels and were mandated to oxygenate gasoline during the winter months. The ethanol industry grew rapidly from 1980 to 1986, but when crude oil prices dropped, the ethanol market dried up. Moreover, ethanol, also known as gasohol, was an expensive product.

Corn was also becoming an environmentally friendly product in the plastics industry. New technology was able to process starch into methylglucoside, a biodegradable plastic. This corn plastic breaks down after being buried in landfills for only seven months, while oilbased plastic never breaks down completely. By 2003 the NCGA was working with the U.S. Department of Energy and other experts within the agricultural industry to develop a number of plant-based alternatives to petroleum-based products. These initiatives had the potential to benefit corn producers in numerous ways. Corn also has been used to create calcium magnesium acetate (CMA), a deicing substitute for rock salt. Since CMA contains neither sodium nor chloride, this deicer was safe for watersheds and agricultural areas, and it would not damage roads, bridges, and automobiles.

Further Reading

"Corn." CRB Commodity 1999 Yearbook. 1999.

Economic Research Service, U.S. Department of Agriculture. "Briefing Room: Corn." 21 October 2002. Available from http://www.ers.usda.gov .

——. "Genetically Engineered Crops, U.S. Adoption & Impacts." Agricultural Outlook. September 2002. Available from http://www.ers.usda.gov .

National Corn Growers Association. "Farm Bill." St. Louis, MO: National Corn Growers Association. 11 January 2003. Available from http://www.ncga.com .

——. "World of Corn 2002." St. Louis, MO: National Corn Growers Association, 2002. Available from http://www.ncga.com .

"Tortilla Wars: NAFTA Opens Floodgates to Cheap Corn from USA." The Progressive. June 1999.

"U.S. Corn Prices to Remain Weak Despite Record Domestic Use." Agricultural Outlook. October 1999. Available from http://www.econ.ag.gov .



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