In the recent weeks, the market gyrations have driven down the prices of several traditional investments and most commodities. In the earlier times of the market chaos, the stock market investors were advised not to panic, but to wait for the recovery of the prices. This advice is proven to be prudent as the values have come back quickly after the market crashed over after 30 years. If your question is if this advice will apply to the agricultural commodities, especially corn, and how long it will take for the recovery of the prices back to their pre-cash levels, then it is important to know that the current price levels influence the production in future and the investment decisions.
The season average prices were compiled by the USDA dating back to 1866. It was in 1862 that the USDA was established and the Civil War that ended in the year 1865 left the earliest date for the existence of reliable data as 1866. The changes in the data collection techniques were executed in 1948 and so the 148 year time period is divided into two segments – 1866 to 1947 and 1948 to 2014. In each of these sub-periods, the season average price for every year is compared with the season average price for the next year. In case, the price of the next year is lower, it is defined as a year-to-year decline. Later, the season average price of every year is noted to know if it is equal or higher than the starting value.
There are data limitations in these are the season average prices. It would have been higher than the average prices and lower than the average prices each marketing year. The results presented here can overstate the number of years that are needed for a specific recovery price that was achieved. Using averages, we can be certain that a specific price actually took place in a year.
While the two sub-periods have notable differences, the results were similar and let us draw general conclusions about the price behavior of the corn market in the past 148 years. The prices have recovered from a downturn, and past results might not be a reliable predictor of the performance in the future. The question of when the price recovery will take place is quite tricky. In the past periods, the prices have recovered within five years, and so there is a chance for the price level to restore by 2018 if the price drop happened in 2013, for instance.