What is in this article?:
- Sorting out the June 1 corn stocks report
- Goes against historical patterns
• It is important to understand some of the basic methodology for making the corn stocks estimate.
• Part of the surprise in the June 1, 2011 corn stocks estimate resulted from an unrealistically low expectation.
• The “surprise” component of the USDA stocks estimate, then, was about 215 million bushels.
It is an understatement, thinks University of Illinois Ag Economist Darrel Good, to say that last week’s USDA estimate of June 1, 2011 corn stocks was a surprise to the market.
At 3.67 billion bushels, the estimate was about 370 million bushels larger than the reported average trade guess.
Before examining the implications of the report, Good says, it is important to understand some of the basic methodology for making the stocks estimate.
As spelled out in the Grain Stocks report, the estimate of quarterly stocks is based on separate surveys for off-farm and on-farm stocks. For off-farm stocks, the estimate is based on an enumeration of all known commercial facilities, currently totaling about 9,000.
Reports are normally received from operations that represent about 90 percent of the off-farm storage capacity, with estimates made for non-respondents.
The estimate of on-farm stocks is based on a probability survey that includes about 70,000 farm operators selected from a list of producers that assures all operations have a chance to be selected.
Because the off-farm stocks estimate is based on an enumeration with a high response rate, the reliability of the estimate is very high. The on-farm stocks estimate is subject to sampling variability since not all operations are surveyed.
The USDA indicates there is a 95 percent chance the June 1 on-farm survey estimates for corn will be within 4.6 percent of the value that could be developed by averaging the estimates produced from all possible samples of the population.
Both off-farm and on-farm survey results are subject to non-sampling errors, such as reporting and recording mistakes.
Part of the surprise in the June 1, 2011 corn stocks estimate resulted from an unrealistically low expectation, says Darrel Good. The Illinois Ag Economist says, “Based on our calculations, stocks at the expected level of 3.3 billion bushels would have implied feed and residual use during the third quarter of the 2010-11 marketing year of about 1.105 billion bushels.
“That rate of use would have been higher than indicated by the historical seasonal pattern of use and the magnitude of the livestock inventory this past spring.”