Corn Wars

Writing in the Wealth of Nations in 1776, Adam Smith stated that, "corn is a necessary, silver is only a superfluity (sic)." Faced with a growing population and flattening agricultural productivity, essentially what Smith was pointing out was the world needed more corn and less silver.

Things have changed in the last 240 years.

Now the world seems is awash in corn—we're almost about to buried in the stuff. Meanwhile, it is the demand for silver—due to the metal's use in everything from cellphones to polyester fabrics—that is fast outpacing supply.

Domestic corn production has increased 52 percent in just the past four years. And this increase is in spite of a 55 percent drop in the price of corn over the same period. At first glance this seems to fly in the face of the most basic principle of economics. When price goes down, supply should likewise decrease. What's going here? The answer comes down to one word: subsidies.

In 2016 the U.S. Department of Agriculture doled out almost $4 billion in cash to corn farmers. The subsidy on corn production is by far the largest for any agricultural product, accounting for over two-thirds of all USDA payments across all crops. So while the market price of corn has been dropping precipitously, farmers have been producing more and more since they know their profits will be protected by a government check. And actually, the more they grow, the lower the market price drops and the more in subsidies they get from Uncle Sam.