Corn Crush Case Study

Corn Crush: Ethanol Corn Crush otherwise known as ethanol plays a major role in the corn market. Roughly 40% of all corn produced is used for biofuels. That makes up a major portion of corn. Since 2005 the market for ethanol has grown exponentially. This is due largely in part by the Energy Policy Act of 2005. This act increased the amount of biofuels that have to be mixed with gasoline (mainly ethanol). So not only did the demand for ethanol increase but the demand for corn also was increased because of this. Since 2006 the amount of corn that was used for biofuels increased from 2-5 billion bushels. This is roughly a 150% increase in corn usage for ethanol. With this new standard it required gasoline to be made of at least 10% ethanol. This gasoline is now called E-10. Other mixtures such as E-85 which is made up of 85% ethanol can be found as well. E-85 is a very efficient blend that most modern car models can use. Along with the new fuel standard corn production had to change with it. An increase in supply was needed. One very …show more content…
Possibly the most important number that the USDA releases on a monthly basis is the carryout estimate. This is also known as the ending stocks. Ending stocks are how much is left over after all of the demand is satisfied. When a carryout is low the price tends to be higher. When the carryout is high the price tends to be lower. This is basic supply and demand when there is more they charge less when there is less they charge more. Based on the last several years the carryout as a percentage of the total supply has been between 6.9-11.2%. This is slowly increasing from 2011-2016. This is due to a higher demand for ethanol as well as a larger production of corn. Ethanol is being used more and more and has increased from 5,011 million bushels of corn used for ethanol 5 years ago to 5,200 bushels of corn used for ethanol this past