Food grade corn market has both incentives and challenges for growers
Jan 30, 2024
Think about the last food you ate. Was it a bowl of Honeycomb cereal for breakfast, or a bag of Cheetos or Funyuns from the gas station? Maybe you got a plastic boat of nacho chips and cheese at the concession stand before hitting the bleachers.
All these foods have a common source: corn. Whether the key ingredient is corn meal or corn syrup, many foods found in your grocery store aisles derive from corn.
This is good news for corn producers in Nebraska and the Midwest, as the increase in demand for food grade corn should require more supply. The food grade corn market offers premiums to producers to keep those store shelves full year-round. But before you call your seed salesman to order the best hybrid of white corn, you need to have a thorough understanding of the food grade corn market and what is required to earn the extra premium.
“The food grade corn market is a small percentage of the overall marketplace,” said Dale Broekemeier, director of value-added grains with Central Valley Ag (CVA). His 30 years of experience with the specialty grain industry has given him insight into the food grade corn market.
White corn, which is primarily grown for human consumption, makes up maybe 1% of the total corn market, said Broekemeier. When other varieties of food grade corn are added, the total percentage increases to about 5%.
Even though food grade corn makes up a fraction of the overall demand for corn, it is an important commodity in Nebraska.
“Nebraska is No. 1 in white corn production, and probably No. 1 in overall food grade corn production. If not, it’s a close second,” said Andy Jobman, who recently closed out his first year as chairman of the Nebraska Corn Growers Association (NeCGA).
During his time as president, Jobman served on numerous national committees. His new role in 2024 is chairman of the National Corn Growers Association’s Risk Management Transportation Action Team.
Jobman farms near Gothenburg, Nebraska, with his father Terry and younger brother David. He has a thorough understanding of this topic because all of the corn grown at Jobman Farms is food grade.
“We are such a concentrated spot for food grade corn production with Frito Lay in our backyard here at Gothenburg,” said Jobman.
The Jobmans have supplied food grade corn for Frito Lay since 1996, the first harvest season that the company’s plant officially opened. The Frito Lay corn gathering plant had moved from Texas to its current location in Dawson County just north the Platte River “to capitalize on Nebraska’s water availability and corn quality,” according to the Gothenburg Improvement Company (GIC) website. Frito Lay did not respond to requests for an interview.
On average, the Frito Lay plant in Gothenburg turns 12 million bushels of corn annually into crunchy Doritos, Fritos, Tostitos, Cheetos, Sun Chips and other snacks. This has improved the demand for white corn and food grade yellow corn in the Gothenburg area, said Jobman.
If you are aiming to grow crops for a local market, there is likely demand for your corn in this niche market. About 95% of the corn used at the Gothenburg facility comes from Central Nebraska, -according to the GIC webpage.
“Nine years out of 10, Frito Lay has been the best market for us locally. It has been really consistent year after year,” Jobman said.
CVA is also tapping into the supply of food grade corn in the Gothenburg area. Jobman said that CVA has started buying corn there because the demand from their customers in the U.S., Mexico and Central America has grown.
Unlike Frito Lay, CVA does not directly process corn into food products. The cooperative acts as a broker between the corn grower and the processing facilities. CVA has food corn handling locations in Nebraska at Bradshaw, Hordville, Monroe, Oakland, Polk, Royal, Stromsburg and Tamora. It also does business at Gothenburg and Superior, said Broekemeier.
A new corn cleaning plant at the CVA location in Hampton, Nebraska, is anticipated to be completed by harvest this year.
“By investing in projects like this corn cleaning plant, we can assist our farmers in meeting demand for food-grade corn,” stated Jeff Bechard, SVP of grain at CVA, in a press release.
The existing elevator will remain dedicated to corn and soybeans, while the new addition will handle cleaning and shipping of food grade corn, according to the press release.
CVA accepts many different value-added commodities: white corn, non-GMO white corn, food grade yellow corn, non-GMO yellow corn, waxy yellow corn, high amylose yellow corn, blue corn, organic white corn and organic soybeans.
What sets food grade corn apart from regular field corn? Not much more than subtle differences, such as kernel color, starch content or kernel density.
Food grade corn has tighter specifications for receiving, explained Broekemeier. For example, the kernel color cannot be too pale. The yellow food corn industry prefers a darker, orange-colored kernel. Also desired are higher-density kernels.
“About 15% of corn hybrids would match food corn specs,” estimated Broekemeier.
Frito Lay has even tighter requirements for the food grade corn it will accept, based on the fact that their products have a specific end use.
“Certain varieties of corn will cook best and make a better-tasting chip, so they have an approved list of corn hybrids,” Jobman said, adding that seed corn companies are “hard at work” developing new varieties to meet Frito Lay’s testing specifications.
nly the highest quality corn is used in the food industry. The processing facilities expect a clean, damage-free product.
“Responsibility lies on the farmer to deliver the whole kernel, not damaged by excessive drying or mechanical damage during farming or transportation,” Jobman said.
Food grade corn not used in the food industry does not go to waste. After all, it’s still corn. White corn can be fed to livestock, although supplementing Vitamin A may be necessary as it lacks the yellow hue of carotene. Extra corn from the Jobman farm is fed at a feedlot. Almost any corn variety could also be processed into ethanol, but typically no one wants to go that route because of the higher premium for food grade corn, said Broekemeier.
“Food grade corn can be fed as feed, and regular corn could be used for food. However, specific food grade yellow corn hybrids work better in most cases,” Broekemeier said.
For this reason, supply of food grade corn isn’t a problem. No matter how much cereal, corn chips or other corn-based products consumers demand, there’s supply to meet it.
“If we need an extra million bushels, the market will buy it,” stated Broekemeier simply.
Problems in the supply chain will arise if the industry dictates that the corn must be non-GMO or organic. As Broekemeier said, you can’t turn GM corn into non-GMO corn. He also mentioned that non-GMO corn is more difficult to source.
Mexico’s 2020 decree banning GM corn has caused a hiccup in the U.S. corn market. Jobman said it could cause “a really big issue” that the Nebraska Corn Growers Association is trying to resolve.
“We are really concerned that would set an anti-GMO precedence other countries would use to keep grain out or as an excuse for trade dispute,” said Jobman. “Simply, the decree does not follow science, and that concerns us.”
Even though Mexican President Andrés Manuel López Obrador put up a barrier for his country, the demand for corn products in Mexico has not changed. On average, Mexicans consume more than 725 pounds of white corn annually, according to a Jan. 17, 2023, article in The Washington Post. The country as a whole eats 6.3 billion corn tortillas daily.
“They domestically cannot raise enough corn to supply their needs, which is why they have been buying corn from the U.S.,” said Jobman.
Americans have not quite reached the same rate of consumption as their southern neighbors, but we have been eating more corn products over a 50-year trend, according to the USDA Economic Research Service (ERS). This comes as no surprise when we consider the innovative ways that corn is being processed into different forms: flour, meal, hominy, grits, oil, starch, syrup, high fructose corn syrup, dextrin, dextrose, sorbitol and others.
A movement towards plant-based foods is another factor that is driving the demand for corn upwards. Additionally, more Americans are reducing gluten intake or choosing a gluten-free lifestyle. The same ERS report mentioned above reveals that wheat consumption has been declining since its peak in the 1990s. Other grains—including corn—are making up the bulk in some people’s diets instead.
The influx of immigrants is also changing the dietary landscape in the U.S. Grocery stores are offering more diversity of cultural foods and restaurants serving ethnic cuisine are becoming more widespread.
“Demand for corn tortillas is going up because we’re all eating a lot more Mexican food,” said Broekemeier. “A lot of that is corn-based products, mainly made out of corn masa, or corn flour.”
The 2023 Tortilla Production in the U.S. Market Report indicates a revenue increase CAGR (Compound Annual Growth Rate) of 4.4% by 2023, for a total of $6.4 billion.
“Tortillas have become a staple in U.S. kitchens, driven by rapidly growing Hispanic and Latino populations in the U.S.,” the report says.
Overall, the food grade corn market has grown at 1-3% per year over a 10-year period, said Broekemeier.
“Some say the increased demand for food grade corn has increased the market by 10%, but I would argue that only certain sectors are seeing increases that high,” Broekemeier added.
The food grade corn market cycles based on supply and demand, just like any other commodity. Food grade corn prices are based on the market value of regular field corn.
Broekemeier predicts lower demand for food grade corn in 2024, partly because the yields were generally good in 2023. He said farmers brought in 230 bushels per acre as opposed to an average 210 bushels per acre previously. On 1 million acres, that’s another 20 million bushels of food grade corn to market.
“The extra supply is probably causing demand to be down for 2024 because any extra corn will carry into the following year,” said Broekemeier. He could see demand stabilizing for the 2025 crop.
Quality storage facilities are necessary for producers to participate in value-added grain markets, said Broekemeier. The highest premiums are not offered at harvest time, so producers will generate the most income by storing their grain. Plus, the food industry needs supply 12 months out of the year. “Basically, we buy a little corn every month,” said Broekemeier.
If you want to receive the highest premium, extra care must be taken to ensure a quality product is delivered to the elevator. Jobman said that the food grade corn producers have done “a lot of little things over the years to cater to the high quality.”
Broekemeier recommends that farmers have as clean and high quality grain that they can raise, without foreign material or damage.
“You can get on average $100 per acre premium for growing value-added grain than you can by growing just yellow corn, but at the same time it requires more management and more storage,” Broekemeier said. “If it was easy, everybody would do it.”
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