Widespread drought conditions continue to reduce the 2012 U.S. corn and soybean yield potential.

Yields are now expected to be well below trend value, so that this year’s production will qualify as “short crops,” according to University of Illinois agricultural economist Darrel Good.

“It is widely anticipated that corn and soybean prices will reach a peak early, sometime in a relatively wide window around harvest time, and then decline as the marketing year progresses,” Good said.

“The anticipated pattern is generally described by the adage that ‘short crops have long tails.’ At this juncture of the 2012 season, it appears likely that the corn and soybean price pattern will follow a more or less typical short crop price pattern, at least in terms of the timing of the price peak.  

“Based on historical patterns, however, the timing of the price peak could range from the current month until after harvest. With an early harvest, a price peak by September seems most likely, assuming that prices go high enough to slow the pace of consumption sufficiently. Prices are probably not yet high enough for either crop to accomplish that objective,” Good said.

According to Good, for both corn and soybeans there is considerable risk that the U.S. average yield will be lower than now anticipated.

For soybeans, demand is also very strong due to the shortfall in the 2012 South American crop and ongoing large purchases of U.S. soybeans by China.

Good explained that for producers with substantial quantities of 2012 crop corn and soybeans to sell, the window for the best price opportunities may be open for a while, but it is not possible to predict the timing and magnitude of the price peak.

A strategy of spreading sales over the next several weeks may be prudent. For producers with little or no crop to sell, the major focus may be on maximizing crop insurance payments.

For those with insurance products that include a harvest (October) price guarantee, Good said there may be concern that the price peak will come and go before October.