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.
Goes against historical patterns
On the other hand, Good thinks the June 1 stocks estimate of 3.67 billion bushels implies third quarter feed and residual use of 735 million bushels, a rate that is not consistent with the historical seasonal pattern and the rate of use during the first half of the year. (Note: The USDA’s Economic Research Service will report estimates of third quarter corn consumption by category in the Feed Outlook report to be released on July 14.)
Good took up the stocks report in a mid-June release of his Weekly Outlook newsletter. In it he noted a June 1 stocks estimate of about 3.455 billion bushels would have been consistent with both the historical seasonal pattern of feed and residual use and the rate of use during the first half of the year.
The “surprise” component of the USDA stocks estimate, then, was about 215 million bushels. Good, in this week’s Weekly Outlook newsletter, plumbed the report for the location of those extra bushels of corn.
Total inventories on June 1, he writes, were 56.3 percent as large as stocks held on March 1, 2011. For Iowa and Minnesota, June 1 stocks were 61 percent as large as March 1 stocks, while inventories in the rest of the country were only 52 percent as large.
Of the total inventory on June 1, 54 percent was held in off-farm facilities. Off-farm stocks accounted for only 48 percent of the total on March 1.
In Iowa, off-farm stocks declined by only 26.6 percent from March 1 to June 1. Off-farm stocks in the rest of the country declined by 39 percent.
On-farm stocks on June 1 were 50 percent smaller than on March 1.
Compared to March 1, then, a larger share of June 1 stocks were held in Iowa and Minnesota and a larger share was stored in off-farm facilities.
Taken at face value, the June 1 stocks estimate suggests that year-ending (Sept. 1, 2011) stocks could be 200 million bushels or so larger than the most recent WASDE forecast of 730 million bushels. For the 2011-12 marketing year balance sheet, the increase is equivalent to an additional 1.25 million harvested acres of corn.
The USDA’s July WASDE report, to be released on July 12, will reflect revised expectations about 2010-11 marketing year consumption by category and the magnitude of year-ending stocks.
Ultimately, Sept. 1, 2011 stocks will be reflected in the Grain Stocks report to be released on Sept. 30.
A year ago, says Darrel Good, the smaller-than-expected June 1 stocks estimate was followed by a larger-than-expected Sept. 1 stocks estimate. Some believe the Sept. 1, 2010 stocks estimate reflected the reporting of some newly harvested corn.
However, Darrel Good believes that stocks estimate resulted in very logical estimates of corn consumption during the 2009-10 marketing year, seemingly “correcting” the small June 1 estimate.
Still, he says last years’ experience creates a bit more uncertainty about the Sept. 1 stocks estimate this year and adds to the overall supply uncertainty stemming from acreage and yield uncertainty.