What is in this article?:
- Surprises in USDA corn stocks estimates becoming problematic
- One of largest differences in 30 years
• While it should be expected that the market will not always correctly anticipate USDA estimates, the recent pattern of large and seemingly alternating direction of the surprises in the quarterly corn stocks estimates is problematic.
One of largest differences in 30 years
The difference between the USDA’s March 2013 stocks estimate of 5.399 billion bushels released on March 28 and the average trade guess was about 370 million bushels, one of the largest differences in the past 30 years.
Old crop corn futures declined by more than $0.80 per bushel in the initial reaction to the larger than expected estimate. The dilemma now, however, is what to expect for the June 1, 2013 stocks estimate.
The implied rate of feed and residual use of corn in the first half, and particularly in the second quarter, of the 2012-13 marketing year is quite low.
The slow rate of feed and residual use does not seem consistent with livestock numbers, a sharp reduction in the production of distiller’s grains, and the implied negative feed and residual use of wheat during the same six month period.
March 1 wheat stocks also exceeded market expectations by a large margin.
Experiences over the past three years suggest that the June corn stocks estimate may “correct” for some of these apparent inconsistencies. If that turns out to be the case, the magnitude of the current price weakness may not be justified.
Because the reasons for the sometimes large deviations between USDA estimates and market expectations are not obvious, the June estimate may or may not provide another surprise.
While not normally an issue, the March 1, 2013 soybean stocks estimate was also a surprise. At 999 million bushels, the estimate was about 50 million bushels larger than the average trade guess.
While the USDA no longer estimates quarterly feed, seed, and residual use of soybeans, the stocks estimate implies negative use in that category for the quarter.
The only other instances of negative use during the second quarter of the marketing year in recent history were in 1988-89 and in 2009-10.
The June 1 stocks estimate this year will also be difficult to anticipate.
With the large March 1 stocks estimate, the “small crop-long tail” price pattern for corn and soybean prices continue.
While planting intentions for corn and soybeans revealed on March 28 were near expectations, new crop prices have also weakened as expectations for larger stocks at the end of the current marketing year provide some additional supplies for the 2013-14 marketing year.
Focus will now turn to planting conditions and planting progress. Without widespread planting delays, new crop price weakness is expected to continue.
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