The WASDE increased ending stocks to 903 million bushels for 2011-2012 corn, up from 851 previously. The USDA has the July Corn yield at 146.0 and cut demand over 1 billion bushels. It is important to note what the yield is as of July 1 for the USDA. One can make the argument that since July 1 we have lost more bushels and we are probably closer to a 140 yield now.
With a 146 yield and the reduction in demand due to higher price, the USDA has a carry out of 1192 million bushels. That puts corn prices around $6.00. As yields come down, prices increase, and demand is rationed. Below is my table for yield 140, 135, 130, 125 and finally 120. As you can see in the table below, as yields decrease, the US will start to import more corn where possible, feed use for corn decreases, ethanol slightly dips, and exports decrease. The worst case scenario is a yield of 120. A 120 yield would be considered a complete disaster. A 120 yield would go down in history as one of the worst US droughts for crops we have ever seen and corn could go to $9.00/bushel.
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