Why corn prices are highly likely to remain volatile

The US corn balance appears headed for further revisions of stock levels, which could lead to more price volatility over the remaining of 2011 and spillover into other crops. The US corn ethanol governement mandate, heavily subsidised and further protected by discriminatory tariffs, has partly helped to send prices rising for all users, including ethanol producers. Demand factors worth considering are the direction of Chinese demand for animal feed, the planned use of other feedstocks and political considerations, among which mounting domestic opposition to the US corn mandate. Another important consideration is the planned replacement of corn by a renewable and sustainable feedstock, cellulose. According to a number of sources, the use of cellulosic ethanol may not be highly significant before 2014-15, at which time corn use will probably exceed 50% of US production, sending volatility to higher levels and endangering livestock and ethanol producers alike (not only in the US). My understanding of price directions in the face of demand increasing faster than yield gains is fast rising prices for another 5-10 years (of course there will be peaks and troughs along the way), at which time cost of cellulosic ethanol will be reduced to the point of justifying further investment and reducing starch use.