Since the majority of each year's corn crop is fed to animals, livestock and poultry numbers are important factors in determining domestic corn demand. Competition from substitute feed grains like barley, oats, rye, and milo (grain sorghum); tropical crops such as cassava (tapioca); and even various food grains including wheat, can affect corn demand, both here and abroad. Foreign demand also may be influenced by such things as exchange rates and grain production in other countries.

All other things being equal, an increase in supply can cause prices to fall, as often occurs when farmers produce a bumper crop. On the other hand, a crop failure or other decrease in supply can cause prices to rise. An increase in demand can cause prices to rise, all other things being equal, such as when a shortage of other feed grains leads to greater use of corn. Conversely, prices can fall from a decrease in demand, as when large foreign crops reduce the need for other countries to buy U.S. corn.

Corn prices can be volatile, so farmers, elevator operators, processors, exporters, and others need a way to manage this risk. The Chicago Board of Trade and the MidAmerica Commodity Exchange each offer two types of risk-management tools: futures contracts and options on futures contracts.

A futures contract is a commitment to make, or to take, delivery of a specific quantity and quality of a given commodity at a predetermined place and time in the future. All terms of the contract are standardized and established beforehand except for the price, which is determined by open outcry auction in a pit on the trading floor.

An option on a futures contract gives the buyer of the option the right, but not the obligation, to buy or sell a futures contract at a specific price, for a certain period of time. For this right, the buyer of the option pays a premium to the seller of the option. All terms of the option are standardized and established beforehand except for the premium. Premiums are determined in the same manner as futures prices, by open outcry auction in a pit on the trading floor of,-i regulated commodity exchange.