Could the remarkable yields from much of the southern and eastern Corn Belt be classified as a Black Swan event? I don't think anyone came close to predicting it until late in the summer, and I don't think any crop observer would have given even 1% odds of a national yield over 175.
For example, this is Darrel Good as late as August:
Our analysis of USDA yield forecasts for corn over 1990-2013 did not reveal any evidence of bias in August, September, October, or November. There is compelling evidence that the accuracy of USDA corn yield forecasts has improved over time, particularly since 2011. It is especially interesting to note that USDA corn yield forecast errors in 2012 were extremely small, with the August forecast exactly equal to the final estimate. This performance was exceptional given the severe drought that occurred in the summer of 2012. What, if anything, do these results imply about the ongoing debate about the direction of USDA corn yield forecasts in remaining Crop Production reports during 2014? While it is, of course, true that longer-term trends in accuracy will not necessarily dominate in any particular year, an unusually large August forecast error this year (5 percent or more) would definitely be counter to the trend towards increasingly accurate USDA corn forecasts over time. (More)
USDA August = 167.4, so 5% error = 8.4.
Anything over 175.8 would be a greater than 5% error.
I'd say the unpredictable part is confirmed.
The second characteristic - disproportionate consequences, suddenly looks more likely as well. We don't know when the freefall will end or how we will use up this ~15B bu. of corn. Business plans and retirement calculations for producers are in shreds. Fertilizer applications have stopped. Seed dealers are not popular.
The third characteristic - it seems obvious looking back - is already occurring.
And we can't stop talking about cash rents.
Oddly enough, on that note there could be a double whammy here. As high payers are trying negotiate lower, more word about what the going rate actually was is filtering out, I think. People who have been getting the same $180 while the next door field was paying $350 are finding out and are not amused. Again, unforeseen and disproportionate consequences.
How resilient each operation is depends on a variety of factors, but regardless nobody is going to be hauling much margin out of the field with the prices where we are now, let alone where they could go. What happens next spring if we are looking at corn in the $2.75 or lower range and beans around $8?
- Will banks lend for a deeply red ink budget?
- Will there be a rush to the exit from Boomers?
- Will seed and fertilizer retailers blink?
- We we surprise the market again with Black Swan acres?
- Will Washington step in?
- [Fill in your speculation here]