Corn and soybean prices have experienced an impressive rally over the past month, but a price rally of this magnitude may be difficult to sustain, says Darrell Good, a University of Illinois Extension agricultural economist.

"From the lows in late June to the high on Aug. 2, December 2010 corn futures rallied nearly 75¢, November 2010 soybean futures rallied $1.40 and September wheat futures rallied $2.55," says Good.

The increase in prices was triggered by the June 30 USDA reports showing smaller-than-expected June 1 domestic inventories of corn and soybeans and smaller-than-expected planted acreage of corn, he says.

There are concerns about the yield potential for the U.S. corn and soybean crops. Although crop condition ratings have remained high, the effects of the unusual combination of extremely wet and warm conditions in June and July in the Corn Belt are not clear.

"Total June and July rainfall in the Corn Belt was the second largest in the past 50 years, with only 1993 having a larger total. And the two-month average temperature in the Corn Belt was the fourth highest of the past 50 years," Good says.

This combination of extreme rainfall and temperatures had not been observed in the previous 50 years. Additional crop yield concerns are being generated by the very warm start to August and the prospects for additional stress on the crops in the Delta region, he notes.

"Supply concerns have come at a time of generally strong demand for U.S. crops. With just under five weeks left in the 2009-2010 marketing year, it appears that both corn and soybean exports could be slightly larger than the current USDA forecasts," he says.

According to Good, corn exports will need to average 38 million bushels/week during August to reach the forecast of 1.95 billion bushels. The average for the six weeks ended July 29 was 40.1 million bushels.

For soybeans, weekly exports during August will need to average 4.8 million bushels to reach the forecast of 1.46 billion bushels. The average for the six weeks ended on July 29 was 7 million bushels, he says.

Although soybean exports could exceed the USDA projection, the 2009-2010 marketing year domestic soybean crush may fall a bit short of the projected 1.745 billion bushels. The crush for July and August will need to total 250.9 million bushels to reach that projection, 2.3 million bushels more than were crushed in July and August 2009, he says.

"Monthly crush was less than in the previous year in April, May and June. Although the crush in July and August last year was very small, a year-over-year increase is not expected this year," Good says.

Near-term prospects for corn and soybean prices are tied closely with prospects for the U.S. crops, and expectations about crop size fall in a wide range. The USDA's August Crop Production report will provide an important benchmark. The current price rally has been large enough to justify some sales in front of that report, he says.