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2007 U.S. Corn Production Risks: What Does History Teach Us?

About This Publication

From May to October each year, the corn market typically finds direction from the prospective size of the U.S. corn crop. Expectation about crop size starts with the USDA’s March Prospective Plantings report, changes with the USDA weekly reports of planting progress and crop conditions and the June Acreage report, and culminates with the USDA monthly production forecasts beginning in August. 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. During those periods, a substantial shortfall in production would be very disruptive to the corn market, require significant adjustments by end users, and have the potential to increase food prices. Instances of substantial shortfalls in the size of the U.S. crop when stocks were low and demand was strong have been rare (1974 and 1995), but years with the potential for such an occurrence have been more numerous. The current year is one of those years. Market participants are highly sensitive to prospective crop size and corn prices have been quite volatile early in the 2007 production cycle. It may be very helpful, then, to provide an early assessment of potential U. S. corn production in 2007 and the likely impact on corn prices and the implications for market participants and policy makers.

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