A brief history (7 year) of corn prices shows we have entered a new long tern pattern. In 2004, prices for corn and soybeans spiked (from 250 to 325) and the rapid increase had an impact on meat and poultry prices. The markets returned to their normal pattern and held through 2005. Markets saw constant increases in 2006 ending the year over 400.

There was a breather in 2007 and the market prices fell back to a level just above 300 in the summer before spiking to a year end close in the 500 range. We all remember the $5 gas prices in the election year of 2008. Corn futures skyrocketed to over 750 as ethanol production increased dramatically.

As the economy tanked, the corn market fell in late 2008 and briefly touched 300 before a year end close near 400.

In the most recent 2 year period, corn has traded in a range between 300 and 450. Gas prices have stayed well below $4 and this summer remained below $3 in many states.

If we take an overview, the increased use of ethanol has shifted the corn price curve by 50% from pre-2006 levels to the recent levels. We can expect any economic recovery to put upward pressure on corn prices.



Source: http://futures.tradingcharts.com/

Why is the cost of corn important?

If you are forecasting the year ahead for purposes of pricing your menu and budget preparation, you need to consider the corn price impact. Any nationwide economic growth will increase gas consumption which will increase corn consumption. Even in the recession period, corn is 50% above 2004 levels. An economic pickup will send corn prices above 400.

As national comparable cover counts increase, it is very likely your cost of goods sold will increase at the same rate or faster. Sales increases due to menu price increases would not impact the corn markets. Actual restaurant traffic across the country is the signal. There are signs pointing to solid economic growth in 2011 and beyond. This will help put more money in restaurants but you will see pressure as gas prices increase and your food costs rise.