A number of factors have contributed to the strength in corn prices over the past six weeks, according to Darrel Good, University of Illinois ag economist.
First, USDA's October and November production forecasts were well below the expectation of nearly 15 billion bushels widely discussed in early October.
Second, prospects for corn consumption have improved modestly since September. USDA now projects 2014-15 marketing year corn consumption at 13.67 billion bushels, 65 million bushels above the September projection. The recent pace of consumption in some categories, however, has been above the average rate projected for the year, contributing to the post-harvest strength in both futures prices and basis levels.
Third, there’s speculation USDA's production estimate, to be released on Jan. 12, 2015 may be smaller than the current forecast of 14.407 billion bushels. These expectations reflect, in part, modest yields reported for late-harvested corn in parts of Iowa and the northern Corn Belt. In addition, questions about the accuracy of the current USDA National Agricultural Statistics Service (NASS) forecasts of planted and harvested acreage stem from the small corn acreage relative to NASS acreage forecasts that had been reported to FSA through November.
The Jan. 12 USDA stocks and production estimates will settle much of the uncertainty about 2014-15 marketing year corn supplies. For now, corn prices are expected to remain firm to slightly higher.