December 2010 corn futures have regained more than half the decline that occurred from Nov. 9 to Nov. 23. Cash prices have recovered even more as basis levels continue to strengthen, said University of Illinois agricultural economist Darrel Good.

"A number of factors continue to influence corn prices, with the market trying to weigh the negative versus the positive factors. There is some concern about the large, long positions held by both index and managed funds and the possible negative impact of liquidation of some of those positions," he said.

Such activity could have some short-term impact on price movement, but over a longer period, prices will follow fundamental value. As is often the case, there is both uncertainty about fundamental factors and conflicting fundamental factors.

"One of the largest uncertainties is the fate of the ethanol blender's tax credit. That credit is currently at 45 cents per gallon of ethanol blended into the fuel supply, but that credit is set to expire on Jan. 1, 2011," he added.

Congress could choose either to renew the credit at the current or lower level or let the expiration stand. All options are being debated without a strong indication of the likely outcome. A renewal of the tax credit, even at a lower level, would point to continued strong ethanol demand and the likelihood of ethanol production exceeding the mandate of 13.95 billion gallons in 2011.

"Without the tax credit, ethanol production would presumably not drop below the mandate. The relationship between ethanol and gasoline prices would determine if production exceeded the mandate, while the level of ethanol and gasoline prices would influence the price of corn," he said.

Current ethanol and gasoline prices favor ethanol blending (ethanol prices lower than gasoline prices) and would support corn prices at current or higher levels.