It wasn't unexpected but it was still significant when December corn futures closed last Thursday at $3.44/bu., the highest level in 10 years. At the end of the week, it had dropped a couple of cents. Depending on how you bet on the crop report to be released this week, that recent high may merely be a plateau before surging on ahead.

"Cash grain prices were up 25% during the month of October and are now twice year-ago price levels," say reporters for USDA's Ag Marketing Service. "It's not that there's a shortage of America's favorite cattle feed; estimates are projecting this year's crop to be the third-largest in history. Chicago Board of Trade corn contracts are selling on excitement from the growing ethanol industry and an increase in export demand. Speculators have jumped on the bandwagon and are said to hold an estimated net-long futures position greater than 250,000 contracts. Cattle feeders can only watch in disbelief as they continuously refigure their projected cost-of-gains."

True enough, but there's also the fundamental reality of the lowest estimated ending stocks in three decades occurring in tandem with burgeoning demand.

Steep increases in corn price are certainly taking their toll on feeder and calf prices (see Markets below)