What Can History Teach Us About This Year's Corn Crop Risks?

US - Market participants and policy makers should be aware of the consequences of a large shortfall in U.S. corn production in 2007 and begin making plans even if that outcome is unlikely, conclude two University of Illinois (U of I) agricultural economists.
calendar icon 5 June 2007
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"At this stage of the 2007 growing season, there is certainly no indication of a substantial shortfall in U.S. corn production, nor are we predicting such an outcome," says Darrel Good, U of I Extension marketing specialist who with his Department of Agricultural and Consumer Economics colleague Scott Irwin prepared a recent report on the topic. "Discussion of market and policy implications of such a shortfall, then, may appear to be premature, unrealistic, or event alarmist.

"However, it is important to recognize potential worst-case scenarios and that history indicates that production shortfalls as large as 30% or 40%, though unlikely, are possible. By thinking ahead, market participants and policy makers can develop plans to manage such shortfalls and consider appropriate policy responses."

In their report, Good and Irwin outline the current conditions in U.S. markets where corn prices are especially sensitive to the prospective size of the U.S. crop in years when stocks are relatively low and/or in years of robust demand for corn.

Source: Agriculture Online

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