"Assuming that available supplies will limit corn consumption during the year ahead, two important issues emerge. The first is: How will available supplies be allocated among the major consumption sectors? The second is: What price of corn will be needed to limit consumption to the level of available supplies?" he said.

The USDA's World Agricultural Supply and Demand Estimates (WASDE) report released on Aug. 11 projected a further decline in exports and domestic feed and residual use of corn during the year ahead.

Domestic processing use is projected to increase as ethanol production continues to expand modestly.

According to Good, U.S. exports during the 2011-12 marketing year are projected at an eight-year low of 1.75 billion bushels. The projection reflects expectations that wheat will substitute for some corn feeding around the world.

"Wheat feeding outside the United States is expected to increase by about 340 million bushels, or 8.2 percent," he said.

Sales of U.S. corn for export during the 2011-12 marketing year have been relatively large.

"As of Aug. 4, the USDA reported that 327 million bushels of corn had been sold for export. Sales were 68 percent larger than those of a year earlier and represent nearly 19 percent of the projected exports for the year," he said.

Good said that all the major importers have purchased larger quantities of U.S. corn than at this time last year. With the large carryover sales from the current year, the 2011-12 marketing year will start with very large corn export sales on the books.

Domestic feed and residual use of corn during the 2011-12 marketing year is projected at 4.9 billion bushels, 2 percent below the projection for the current year.

If supplies were available, feed consumption of corn would likely be larger than the USDA projection.

"The 2011 calf crop is expected to be only 1 percent smaller than the 2010 crop, dairy cattle numbers exceed those of a year ago, and pork production has stabilized. Placements of broiler chicks are down about 5 percent from those of a year earlier," he said.

Only a small increase in distiller's grain production is expected, less sorghum will be fed, and wheat feeding may decline next summer.

The USDA expects high corn prices to limit corn feeding.

According to Good, the use of corn for ethanol and co-product production is expected to increase by a very modest 80 million bushels (1.6 percent) during the year ahead. Ethanol production (consumption) will be influenced by total fuel consumption, gasoline prices, and perhaps the fate of the blender's tax credit.

Corn consumption during the year ahead could be rationed by weaker demand and/or higher corn prices.

Ongoing economic and financial weakness speaks to some demand weakness, but the majority of any needed rationing will likely have to come from a continuation of high corn prices.

"What remains to be seen is how much rationing, if any, will be needed. Based on the way the growing season is ending, the size of the 2011 crop could be smaller than the August projection, requiring even more rationing than currently anticipated," he said.