• Although corn prices have behaved as expected, the consumption response to high prices was not as expected.
The drought-reduced U.S. corn crop of 2012 created expectations that corn prices would follow a “short crop, long tail” price pattern characterized by a price peak early in the marketing year followed by an unpredictable pattern of declining prices and a return to pre-drought price levels, said University of Illinois agricultural economist Darrel Good.
“With a short crop, high prices early in the marketing year signal the necessity to reduce consumption with subsequent price declines reflecting the reduced rate of consumption and eventually a return to more abundant U.S. and world supplies,” Good said.
Prices were elevated even before the drought of 2012, due to a combination of below-trend yields in the United States in 2010 and 2011, a small Argentine corn crop in 2012, and robust corn demand for ethanol production, he added.
See the entire article at ACES News.
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