Purdue economist Chris Hurt warned that ‘demand destruction”
caused by exceptionally high corn prices could create market
instability and volatility in the future. If corn users find
ways to ration and scale back on corn purchases during a time of
tight supplies, a big corn crop could turn the situation upside-
down, with supply exceeding demand. One participant asked Hurt
how much of an impact a reduction in corn use for ethanol would
have on feed prices, since production of distillers’ grains also
would be reduced. Hurt pointed out that when a bushel of corn
goes into ethanol production, about two-thirds ends up as
ethanol and one-third as distillers’ grains for feed. Shifting
that bushel of corn from ethanol to feed use results in a
reduction of 18 pounds of distillers’ grains but contributes 56
pounds of corn for feed. And because of the strong relationship
between the prices of corn and distillers’ grains, lower corn
prices could result in lower prices for distillers’ grains in
spite of shorter production