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The drought that slashed U.S. harvests and sent corn futures to record highs last year persisted into 2013, keeping grain prices at lofty levels even amid an outlook for a huge, bounce-back crop, according to University of Illinois agricultural economist Darrel Good.
Corn production in 2012 dropped to the lowest in six years as severe drought gripped much of the Midwest, putting stockpiles of the nation's biggest crop on track to hit a 17-year low by late summer. While corn futures are currently down about 15% from an all-time high of $8.49 a bushel reached in August amid eroding demand, prices remain well-above pre-drought levels.
"Short crops have long tails," Good wrote earlier this week on the farmdoc agricultural news site, citing a longstanding market axiom. Market focus as a result is shifting toward the 2013 acreage outlook, with some analysts projecting the highest corn plantings since the mid-1930s.
"Such acreage would point to prospects for an extremely large crop in 2013," Good said." Early season acreage expectations, however, are often not a good forecast of actual acreage."