Corn Production Shocks in 2012 and Beyond: Implications for Harvest Volatility

Corn prices increased sharply in the summer of 2012 due to expected production shortfalls in the United States, which produces roughly 40% of the world's corn. A heat wave in July adversely affected corn production. We extend earlier statistical models of county-level corn yields in the Eastern United States by allowing the effect of various weather measures to vary in a flexible manner over the growing season: Extreme heat is especially harmful around a third into the growing season. This is the time when the 2012 heat wave hit the Corn Belt. Our most flexible model predicts 2012 corn yields will be 23% below trend, which is close to the observed realization. While extreme heat was significantly above normal, climate change scenarios suggest that the 2012 outcomes will soon be the new normal.