Is USDA too optimistic on weather?
The USDA projections for supply and demand for corn show a buildup in ending stocks to 2.1 billion bushels by the end of the next marketing year. As Economic Research Service economist Mark Ash explained, that would end several years of tight stocks, which are a key reason why prices have been high. "A succession of bumper harvests worldwide may put an end to that trend in 2014-15," Ash said. Since the USDA economists don't really know what worldwide weather will be, their approach has always been to assume normal weather. If weather this year has more normal rainfall and doesn't have unusually high temperatures, "yields in some of the major corn- and soybean-producing states are going to improve quite a bit."
The USDA projections for supply and demand for corn show a buildup in ending stocks to 2.1 billion bushels by the end of the next marketing year. As Economic Research Service economist Mark Ash explained, that would end several years of tight stocks, which are a key reason why prices have been high. "A succession of bumper harvests worldwide may put an end to that trend in 2014-15," Ash said. Since the USDA economists don't really know what worldwide weather will be, their approach has always been to assume normal weather. If weather this year has more normal rainfall and doesn't have unusually high temperatures, "yields in some of the major corn- and soybean-producing states are going to improve quite a bit."