Even with the USDA's recent cut in 2008 corn and soybean production forecasts, price prospects are far from settled, says Darrel Good, a University of Illinois Extension marketing specialist.

"Changes in U.S. and world production prospects, energy prices and world economic conditions will continue to influence prices," says Good. "A further drop in U.S. corn and soybean production forecasts is expected in October.

"It is also encouraging that prices are holding up well in the face of poor economic news and declining crude oil prices."

Good's comments came as he reviewed the USDA's September forecasts of the prospective size of the 2008 U.S. corn and soybean crops. As anticipated, both were smaller than the August forecasts.  Outside the U.S., both wheat and soybean production prospects increased while prospects for corn deteriorated slightly.

The 2008 U.S. corn crop is now forecast at 12.072 billion bushels, 216 smaller than the August forecast. The national average yield is forecast at 152.7 bu., compared to 155 bu. last month.

"The decline reflected a dry August in many areas and was well reflected in the weekly crop condition ratings," says Good. "The largest declines in average yield prospects occurred in Michigan and Ohio, 8 bu. each. Average yield forecasts were lowered 3 bu. for Iowa and 2 bu. for Indiana, but unchanged for Illinois."

On the consumption side, the USDA's World Agricultural Outlook Board lowered the projection of feed and residual use of corn during the current year by 100 million bushels, to 5.2 billion bushels.

"That would be the smallest since 1995-1996," he says. "The year-over-year decline of 850 million bushels – 14% – appears large.

"The small forecast reflects a combination of reduced livestock output, more feeding of distillers grain, reduced feeding rates per animal due to higher feed prices and smaller residual use due to a smaller crop. Residual use during the 2007-2008 marketing year appears to have been quite large, perhaps indicating the 2007 crop was overestimated."

U.S. corn exports are still expected to decline by 17.5% to 2 billion bushels from the record level of 2007-2008 despite prospects for a smaller crop and smaller exports for Argentina. World trade of corn is expected to decline by 425 million bushels – 11% – due almost entirely to smaller imports by the European Union (EU). Feed use of wheat in the EU is expected to increase by 485 million bushels from the extremely low level of last year as production there is up by 1.02 billion bushels.