July 2012 corn futures are currently trading about $1 below the peak reached in August 2011 but $1.40 above the low reached a month ago.

December 2012 futures are trading $1.50 above the low of June 15, 2012, and within 15 cents of the high reached on August 31, 2011, said a University of Illinois agricultural economist.

"Much of the recent strength in corn prices has been associated with very hot, dry conditions in the central and eastern Corn Belt and indications that yield prospects have been reduced substantially in those areas," said Darrel Good.

As much of the crop in the Corn Belt has or soon will enter the reproductive stage, the market will continue to try to determine production prospects.

Moreover, the market is assessing the likely strength of demand to determine what price is needed to balance potential supply with likely consumption.

"On the demand side, corn exports continue to lag behind the pace needed to reach the USDA projection of 1.65 billion bushels for the current marketing year. With nine weeks left in the year, inspections need to average about 33 million bushels per week to reach that projection," he said.

According to Good, the average for the five weeks ended June 28 was only 25 million bushels. A shortfall in exports would add to year-ending stocks and available supplies for next year.

"The USDA has projected exports during the 2012-13 marketing year at 1.9 billion bushels. Sales for export next year stood at 233 million bushels on June 21, compared to 190 million bushels at the same time last year and the average of only 60 million bushels for the 10 years from 2001 through 2010," he said.

Early sales are not always a good indicator of actual exports, but the large early sales support the USDA projection.

For the current marketing year, the USDA has projected corn use for ethanol production at 5.05 billion bushels. 0.6 percent more than used last year. Through the first 10 months of the year, ethanol production is up approximately 2 percent, so the projection is likely to be reached.