We in the United States like to think the world revolves around us. In the case of high corn and soybean prices, it seems true. After listening to the media and other experts discuss food and grain prices, it sounds as if ethanol's demand for corn has driven up all grain prices globally.
But if you listen to those who observe world events, you'll learn the cause of high grain prices. It can be summed up in one word — China.
China is an awakening giant that has emerged as one of the world's largest consumers of food. The Chinese are on track to consume more food and goods than Americans.
The world has been waiting a long time for this to happen. I worked for the National Pork Producers Council in the 1980s, and we often talked about China's market potential. People in China eat a lot of pork. In 1985, Chinese meat consumption was 44 lbs. per person. Today that figure has nearly tripled to 120 lbs. of meat per person. The population is growing fast, and China will need even more meat to feed its people. Meat requires feed and that puts pressure on corn and soybean markets.
So while we here in the U.S. notice how ethanol production gobbles up corn, the world is noticing a bigger run on corn and soybeans. No doubt the global demand for grain will play a larger role in future markets than ethanol alone will. As a result, we may see grain prices stay at higher levels longer than they did in the past. Four-dollar corn may be just the beginning.