What is in this article?:
- Corn prices must convince some end-users to cut consumption
- Will foreign countries cut imports?
• Ultimately, the question is how high corn prices have to be to get a sufficient number of end-users to reduce consumption.
This year's corn crop is not big enough to meet the entire consumption base that has been built.
Prices will have to be high enough to convince some end-users to reduce consumption from current levels. Can the pork industry compete with other end-users? asked Purdue University economist Chris Hurt.
"The answer is complex and will depend on many factors, including how small the U.S. corn crop is and production in the southern hemisphere this winter," he said. "Ultimately, the question is how high corn prices have to be to get a sufficient number of end-users to reduce consumption."
The largest competitor for corn in the coming year will be the ethanol industry where USDA analysts currently estimate 5.1 billion bushels of corn use.
"To meet the mandated domestic Renewable Fuels Standard (RFS) will require about 4.7 billion bushels with nearly 400 million additional bushels used to make ethanol that will be exported. The 5.1 billion bushels of mostly mandated usage is 39 percent of the 2011 crop," he said.
Mandated corn use was troublesome to the animal industries when corn was abundant. Now with short corn supplies, the concerns are even greater.
"Clearly, use of 400 million bushels of a limited corn supply to produce ethanol to be exported to countries like Brazil is far beyond the intent of Congress in the 2007 energy legislation that established the current RFS," Hurt said.
The short corn supply increases the odds that some end-users, including the animal industries, will appeal to the EPA to consider exercising the emergency clause to reduce ethanol mandates for 2012, he added.
Without a reduction in mandates, the cutback in corn usage will primarily be thrust upon the non-fuel sectors represented primarily by the domestic animal sector and corn exports.
There has been a general assumption that foreign customers would reduce consumption as prices rise. However, in 2007-08, foreign customers increased purchases.