AgTalk Home
AgTalk Home
Search Forums | Classifieds (159) | Skins | Language
You are logged in as a guest. ( logon | register )

Why we should sell spring rallies
View previous thread :: View next thread
   Forums List -> Market TalkMessage format
 
zenfarm
Posted 11/21/2017 08:17 (#6379322 - in reply to #6379293)
Subject: RE: Why we should sell spring rallies


South central kansas


  When looking at  weather and corn yield patterns from the past we find only one other period with comparable tranquil weather was from the the late 1940's to the late 1960's.

Farmdoc article: http://farmdocdaily.illinois.edu/2017/06/role-of-weather-in-the-corn-price-pattern-over-time.html


Figure 4 shows the sum of below trend yields in each 20-year rolling window since 1895 through 1914. This computation emphasizes the magnitude of negative trend deviations not simply the count of below trend yields. Periods with major weather problems, mainly drought, will score highest on this measure, while periods with more benign weather will tend to score lower. The average total negative yield deviation for all of the 20-year rolling windows was 71.3 percent. The sums have ranged from a high of just over 120 percent in the 20-year window ending in 1993 to a low of 40 percent in some of the more recent time periods. The 20-year windows that include the 1930s and 1970s and 1980s have the highest sums of negative deviations because of the major weather problems that occurred during these periods. The relatively low frequency of negative yield deviations and the relatively small sums of negative yield deviations in recent years reflects an extended period of relatively benign weather for U.S. corn production with the notable exception of 2012. In fact, the sum of negative deviations for the 20-year window ending in 2016 is among the smallest of all possible 20-year windows since 1895. This reflects the fact the U.S. essentially has had only one truly bad corn crop since 1996. The only other comparable period of benign weather was the late 1940s through the late 1960s.

fdd061417_fig4.jpg

The recent period of relatively favorable weather for U.S. corn yields, particularly since 2013, has been a major factor contributing to the lengthy period (now 34 months and counting) of prices below the expected average price for the price era that began in November 2006. History suggests that this period of relatively benign weather, generally good corn yields, and low prices will transition to a period of less favorable weather, lower yields, and higher prices. History is less clear about the exact timing of the transition.

Implications

The analysis of historical corn yield deviations from trend values is useful in forming expectations about future supply shocks and the implications for corn prices. In this regard, it is especially important to understand the nature of runs of unusually poor or good weather. We calculate corn yield trend deviations based on 20-year rolling windows since 1895, and find that yields show a below trend value for an average of 7.7 out of 20 years. The average cumulative value of the negative yield deviations during the 20-year rolling windows was 71.3 percent. While the frequency and magnitude of U.S. average yields below trend value have varied considerably over the past 122 years, a clear pattern of reverting to average trend values is shown in the data. The reversion to average trend contains no obvious pattern and occurs after varying lengths of time above or below average trend. The recent pattern has been for less frequent and smaller negative yield deviations than the long-run average. In fact, the sum of negative deviations for the 20-year window ending in 2016 is among the smallest of all possible 20-year windows since 1895. This reflects the fact the U.S. essentially has had only one truly bad corn crop (2012) since 1996. The only other comparable period of benign weather was the late 1940s through the late 1960s. History suggests that a period of more frequent and larger negative yield deviations than that experienced most recently can be expected in the future. History, unfortunately, does not provide many clues for predicting the exact timing of the transition.



Edited by zenfarm 11/21/2017 08:18
Top of the page Bottom of the page


Jump to forum :
Search this forum
Printer friendly version
E-mail a link to this thread

(Delete cookies)