On Jan. 12, the USDA will release the final estimates of the size of the 2010 U.S. crops. With small projected year-ending stocks of corn and soybeans, modest changes in the production estimates could have a large price impact.

The estimate of Dec. 1, 2010 grain stocks will also be released on Jan. 12. That report provides the most information for the corn market since it allows a calculation of domestic use during the first quarter of the marketing year. Based on weekly estimates of ethanol production, ethanol use of corn in the first quarter of the year was 16 percent larger than use of a year earlier. The likely extension of the blenders' tax credit for another year suggests continued robust demand for ethanol. The calculated feed and residual use of corn will also be important since there was some confusion surrounding the Sept. 1 stocks estimate and whether or not significant quantities of 2010 crop corn were fed in August.

By mid-January, prospects for South American corn and soybean production and Australian wheat production will also be clearer. Corn and soybeans in South America will be in the reproductive and grain filling stages. Between now and then, the most interest will center on Argentina due to the significant shortfall in precipitation in important growing areas since mid-October. Finally, the potential for Chinese corn imports may also be clearer in another month.

The rapid pace of U.S. and world consumption of corn, soybeans, and wheat; prospects for relatively small year ending stocks; and unsettled weather partly influenced by the ongoing La Nina weather event seem to provide a very sound fundamental base for crop prices. Volatile, but generally high prices are expected to persist for an extended period.

Source: Darrel Good, Agricultural Economist, University of Illinois