**4. Corn markets**

In the US, currently available IR traits involve gene transfers from the soil bacterium *Bacillus thuringiensis* (Bt) so that hybrids express insecticidal proteins in their tissues that help control specific insect pests. Bt corn hybrids in the US focus on two pests that have had significant adverse effects on corn yield: European corn borer (*Ostrinia nubilalis*) and corn rootworm, a complex of four closely related species (*Diabrotica* spp.). European corn borer larvae feed on corn plant tissues, including tunneling through corn stalks and ear shanks, which not only disrupts plant functions and so causes direct yield loss, but also causes plant lodging and ear drops, causing additional yield loss. Corn rootworm larvae feed on corn roots, which disrupts water and nutrient uptake by the plant and so causes direct yield loss, and also causes plant lodging. Both pests have historically caused significant damage to corn plants, reduced corn

Bt corn has proven more effective in controlling European corn borer and corn rootworm than conventional insecticides, thus increasing harvested yields. In addition, farmer adoption in the US of Bt corn has reduced the aggregate use of insecticides [16]. The rapid adoption of IR Bt corn in the US reflects that US farmers have obtained significant productivity benefits from

HT corn hybrids simplify herbicide-based weed management by allowing application of herbicides on the crop without causing crop damage. Weed management without HT hybrids is managerially more complicated since several weed species look similar when they are small at the time when farmers must make herbicide decisions, but different species commonly require different herbicides for effective control. The earliest and still most popular HT hybrid is tolerant of the herbicide glyphosate, though other types of HT hybrids have been available. As a broad-spectrum herbicide, glyphosate controls a wide range of weed species, so that farmers do not need to know the specific weed species in their fields and which herbicides provide effective control. As a result, farmers rapidly adopted glyphosate tolerant corn hybrids and glyphosate quickly become the most commonly used corn herbicide, with glyphosate used on approximately 75% of US corn acres since 2008 [17]. In US, farmer adoption of HT hybrids has reduced the aggregate use of herbicides [16]. In addition, HT varieties facilitate farmer adoption of reduced tillage and no-till systems, which not only reduces soil erosion, but also lowers labor and fuel requirements [18]. Features such as these have made

yield and are somewhat difficult to control using conventional insecticides [15].

GE corn attractive to US farmers, contributing to their rapid adoption [12, 13].

While improved genetics have contributed greatly to increasing corn productivity over the last 70 years, other factors also played a role. Duvick [5] has noted that corn productivity per plant has not changed much over the last few decades, suggesting that, under favorable conditions, the efficiency of photosynthesis for corn (as a C4 plan) has not improved. If so, what is the source of corn productivity growth? Duvick [5] argued that most of the historical increases in US corn yields are due to increases in plant density. Thus, corn productivity gains have come from the interactions between the plant and its environment, along with improvements in farm management and cultural practices. Over the years, new corn hybrids have

this technology [12, 13].

16 Corn - Production and Human Health in Changing Climate

**3. The role of management**

In a market economy, technological progress affects producers, consumers and prices. **Figure 2** presents the evolution of US corn prices (\$/bu) over the period 1947–2017, reporting both nominal prices and real prices [6]. Real prices are nominal prices adjusted for inflation by dividing by the US Consumer Price Index (CPI), in this case with 1983 normalized to 1. **Figure 2** shows that the nominal price of corn has gone from \$1.52/bu (\$59.8/metric ton) in 1950 to \$3.36/bu (\$132.3/metric ton) in 2017, corresponding to an average increase of +1.19% per year. It also shows that the real price of corn has gone from \$6.30 to \$1.37/bu, corresponding to an average decline of −2.25% per year.<sup>3</sup> This sharp decline in real price means that, holding purchasing power constant, an individual can buy 4.6 times more corn in 2017 than in 1950. This dramatic change mostly arises from productivity gains. Indeed, the rate of change in the real corn price (−2.25% per year) almost perfectly matches the rate of change in yield reported earlier (+2.35% per year).

<sup>3</sup> The difference is due to inflation, the average US inflation rate between 1950 and 2017 being +3.44% per year.

treadmill occurs because, even if farmers in aggregate are made worse off by the new technology, farmers individually still have an incentive to adopt the new technology to reduce their

Globally, about 5% of the calories consumed per person come directly from corn, but this demand varies across countries. In much of Latin America, corn is mostly used for direct human consumption. For example, 33% of the calories consumed per person in Mexico come

feed, an important input in the production of meat (beef, pork, and poultry), dairy and eggs. As a result, the demand for corn is a derived demand, with meat, dairy and eggs being the

Corn also has other uses such as for making sweeteners and ethanol. Derived demands for these corn products depend in part on government policy. For example, the US has a protectionist policy toward sugar, so sugar import restrictions have increased the domestic price of sugar [30]. The higher US sugar price has stimulated the search for sugar substitutes in the US, including corn sweeteners. This policy increases demand for corn, with more than 5% of US corn production used for sweeteners, and contributes to a higher corn price, which benefits

The US ethanol policy has an even larger impact. The rapid development of the US ethanol industry after 2000 is closely associated with government policies supporting the production of biofuel [31]. Ethanol subsidies, restrictions on ethanol imports and mandates for blending ethanol with gasoline have greatly stimulated the production of corn-based ethanol, leading the US ethanol industry to consume almost one third of US corn production. Over the last 15 years, US biofuel policy has greatly stimulated the demand for corn and affected agricultural markets. Roberts and Schlenker [26] estimated that US ethanol policy has increased world food prices by about 30%. This large effect is due to a price-inelastic demand for food and a diversion of land away from producing feed/food toward producing biofuel. In general, farmers have benefited from higher food prices, but the policy has significant distributional consequences, as consumers pay significantly more for food. Using "consumer surplus" as a measure of consumer welfare, Roberts and Schlenker [26] estimated that US ethanol policy contributed to a loss in world consumer welfare of \$180 billion per year. The debate about the

Over the last several decades, productivity growth in the corn sector has been stellar, which is good news in a world where feeding a growing world population is challenging. There are current concerns that agricultural productivity growth may be slowing down (e.g., [7, 34]). So far, such concerns do not seem to apply to corn, since US average corn yields continue to climb at a steady rate, and Chavas et al. [13] provide evidence that biotechnology has helped

These estimates from https://www.nationalgeographic.com/what-the-world-eats/ based on UN FAOSTAT data for 2011.

In the US (and many other countries), corn is used mainly as livestock

Corn Productivity: The Role of Management and Biotechnology

http://dx.doi.org/10.5772/intechopen.77054

19

cost of production in a race to outrun the decline in real prices [28, 29].

directly from corn.5

final consumer good.

US farmers but costs US consumers [30].

**5. Prospects for the future**

5

economics and policy of corn-based biofuel continues [32, 33].

**Figure 2.** Historical price of corn, US. Source: The nominal corn price is the price received by farmers (\$/bu) as reported by USDA-NASS [6]. The real price of corn is the nominal price divided by the consumer price index (*CPI*) as reported by BLS, with *CPI* <sup>1983</sup> = 1.

In general, technological progress improves the aggregate welfare of society by allowing the production of greater outputs at lower cost (less resource use). But productivity growth can also have important distributional effects. In the corn sector, rapid technological progress has reduced cost and stimulated supply, which in turn has pushed market prices down. As just noted, the observed decrease in real prices reported in **Figure 2** can be attributed in large part to technological progress in the corn industry. It indicates that most of the benefits of productivity gains are actually captured by consumers in the form of expanded quantities produced and lower market prices. As most corn is not directly consumed by people, but used for livestock feed and more recently fuel, these consumer gains arise from lower prices for meat, dairy products, eggs and fuel. But these lower (real) market prices contribute to declining farm revenue.

Interestingly, technological progress in agriculture may not benefit farmers at the aggregate if the lower output price due to increased productivity generates a decline in revenue that exceeds the reduction in production cost.4 This process is called the technology treadmill or Cochrane's treadmill after the originator of the theory [27]. Early adopters of new productive technologies benefit by reducing their cost of production, but later adopters will lose if, as supply expands, the output price declines more than the decrease in production costs. The

<sup>4</sup> This can take place when the demand is highly price-inelastic, i.e., when the output price decline is "large enough" to imply a substantial decline in revenue that swamps the decrease in cost. This scenario is relevant as the demand for food in general and for corn in particular tends to be highly price-inelastic (e.g., [26]).

treadmill occurs because, even if farmers in aggregate are made worse off by the new technology, farmers individually still have an incentive to adopt the new technology to reduce their cost of production in a race to outrun the decline in real prices [28, 29].

Globally, about 5% of the calories consumed per person come directly from corn, but this demand varies across countries. In much of Latin America, corn is mostly used for direct human consumption. For example, 33% of the calories consumed per person in Mexico come directly from corn.5 In the US (and many other countries), corn is used mainly as livestock feed, an important input in the production of meat (beef, pork, and poultry), dairy and eggs. As a result, the demand for corn is a derived demand, with meat, dairy and eggs being the final consumer good.

Corn also has other uses such as for making sweeteners and ethanol. Derived demands for these corn products depend in part on government policy. For example, the US has a protectionist policy toward sugar, so sugar import restrictions have increased the domestic price of sugar [30]. The higher US sugar price has stimulated the search for sugar substitutes in the US, including corn sweeteners. This policy increases demand for corn, with more than 5% of US corn production used for sweeteners, and contributes to a higher corn price, which benefits US farmers but costs US consumers [30].

The US ethanol policy has an even larger impact. The rapid development of the US ethanol industry after 2000 is closely associated with government policies supporting the production of biofuel [31]. Ethanol subsidies, restrictions on ethanol imports and mandates for blending ethanol with gasoline have greatly stimulated the production of corn-based ethanol, leading the US ethanol industry to consume almost one third of US corn production. Over the last 15 years, US biofuel policy has greatly stimulated the demand for corn and affected agricultural markets. Roberts and Schlenker [26] estimated that US ethanol policy has increased world food prices by about 30%. This large effect is due to a price-inelastic demand for food and a diversion of land away from producing feed/food toward producing biofuel. In general, farmers have benefited from higher food prices, but the policy has significant distributional consequences, as consumers pay significantly more for food. Using "consumer surplus" as a measure of consumer welfare, Roberts and Schlenker [26] estimated that US ethanol policy contributed to a loss in world consumer welfare of \$180 billion per year. The debate about the economics and policy of corn-based biofuel continues [32, 33].
