Until the year 2006 the corn prices were relatively stable. If we look to the years before 2006 you see that the price is always increasing or decreasing a little bit every month or year but not spacious. Mostly the price was around the $100 dollars per metric ton. But in 2006 it changed immense.
The immense increases in corn prices beginning in 2006. The main reason for this is the immense increase in ethanol production that was in the same year. In the fall of 2006 the production of corn ethanol plans exploded. As a result of this, suppliers increased their projections of future corn demand, so the price of corn increased. But their happened more in 2006. Corn yields and planted acreage in 2006 were lower than expected, which also put upward pressure on corn prices. Beside that the world wheat supplies were lower in 2006 because of drought in Australia and hot weather in European.
The main reason for the exploded corn ethanol is the RFS, Renewable Fuel Standards. A law by the federal government which requires a minimum quantity of ethanol content in gasoline. Several large states, like New York and California, have put that percentage at 10%. Ethanol got also an added boost from president Bush who touted the alternative energy source (which in the us is mainly made from corn) as one of the key steps to reducing us dependency on foreign oil. But why they use corn based