Actually it's more triage than rationing but in the trade the mental model is that price rations who can afford the feedstock.
Hog and cattle farmers tend to stop bidding first, sending herds to slaughter rather than continuing to feed and potentially locking in losses.
Then food producers stop bidding as the end user consumer balks at paying more for their high-fructose-corn-syrup enhanced packaged food.
Lastly the ethanol producers who, thanks to the mandated use of the product, tariffs on imports and the tax credit have the money to bid.
That's the food chain, in "Brainpower Nation" we burn our food to appease Al Gore and the Gods of Iowa.
(that heretic has recanted but he waited until the industry was entrenched)
The futures were at $7.14, unchanged, last I saw.Ethanol is at a one week high.
US corn woes to lift futures 'to record highs'
Corn prices are to challenge record highs set in June, boosted by the downgrade of the US crop which has left the world facing its tightest supplies of coarse grains on record.The US Department of Agriculture's 556m-bushel downgrade on Thursday to its estimate of the American corn harvest this year made it "increasingly likely that Chicago corn prices could test" their June 10 record, when the spot contract hit $7.99 ¾ a bushel, Rabobank analysts said."Although farmers have clearly responded to record-high prices through increased corn plantings, the adverse weather is likely to extend the current elevated prices," the bank said.The USDA, explaining its corn crop downgrade, said that "unusually high temperatures and below average precipitation during July across much of the Corn Belt sharply reduced yield prospects", with drought in the South raising expectations for abandoned crops.'Critically tight'At Commonwealth Bank of Australia, Luke Mathews said that "extremely tight" supplies of the grain highlighted by the revision meant corn futures "are likely to test, if not exceed, the June record high"The cut to 714m bushels in the USDA estimate of domestic corn stocks at the close of 2011-12 "should continue to support near-record corn prices", he added.Furthermore, with estimates for US barley and sorghum harvests also cut, the country's level of feed grains looked "critically tight", putting a squeeze on global supplies too.The ratio of global carryout stocks of coarse grains, as a proportion of use, implied by the data was – at 12.8% - "the tightest on record".Ethanol factorRabobank added that, while the USDA also cut estimates for domestic corn consumption and exports, as high prices ration demand, futures may have to go higher still to deter the bioethanol plants who consume nearly 40% of American production."[It] would require corn prices in excess of $7.50 a bushel to make ethanol production unprofitable at current ethanol prices," the bank said.Chicago's December corn contract stood at $7.12 ¼ a bushel in early trade on Friday, down 0.3% on the day.Ethanol for December delivery closed up 2.2% at $2.591 per gallon on Thursday.