Domestically, ethanol production continues to be well below the rapid pace of a year ago. Production last year, however, was accelerated by the impending end to the blenders' tax credit. Through the first quarter of the 2012-13 marketing year, cumulative ethanol production was about nine percent less than during the same period last year.

The USDA has projected a 10 percent decline in the amount of corn used for ethanol production during the current marketing year. The decline in expected ethanol production reflects the plateauing of domestic consumption, increasing imports from Brazil, and steady to declining exports of ethanol.

The so called blend wall will continue to limit domestic ethanol consumption and production, but corn use this year should at least reach the USDA projection.

The rate of feed use of corn is not known. The USDA projects use for the year at only 4.15 billion bushels, nearly nine percent less than apparent use of last year.

However, marketing year feed and residual use estimates and projections are confused by the harvest of a large quantity of corn before the start of the 2012-13 marketing year on September 1. Taken together, current livestock inventories, slaughter numbers, and slaughter weights suggest strong overall feed demand.

The number of cattle on feed on November I was five percent less than that of a year ago, but the number of dairy cows during October was only 0.3 percent less. The placement of broiler-type chicks during the first four weeks of November was only 0.7 percent less than those of a year ago.

The average number of layers on hand during October was 1.4 percent more than that of a year earlier. October hog slaughter was record large and exceeded that of a year ago by 10 percent. Average cattle and hog slaughter weights in October were near those of a year ago.

The USDA's December 1 stocks estimate and 2012 final U.S. production estimate to be released on January 11 will add some clarity to corn market fundamentals. Current conditions point to continued strong corn prices until then.