Today's post reviews the evidence from our report about potential problems with USDA corn stocks estimates. This is the second in a series of farmdoc daily posts discussing the findings in the recent report, which can be found here. The research was funded by the Office of the Chief Economist of the USDA. We begin with a brief overview of the USDA grain stocks estimates.
USDA Grain Stocks Estimates
The National Agricultural Statistics Service (NASS) of the USDA provides estimates of U.S. corn and soybean inventories at the end of each quarter of the marketing year. The reference dates for those estimates are December 1, March 1, June 1, and September 1. Estimates of on-farm grain stocks (inventories) are based on data collected in the quarterly Agricultural Surveys in which a sample of producers are asked to identify the storage capacity of all structures normally used to store whole grains or oilseeds and to estimate the total number of bushels stored on the reference date on the total acres operated by the respondent regardless of ownership or intended use of the crops. Estimates of off-farm stocks are based on data collected in the Grain Stocks report from mills, elevators, warehouses, and other storage facilities. This survey is intended to be a census of all commercial facilities. Respondents are asked to identify the number of storage locations operated and being reported, the rated storage capacity of all locations being reported, and to estimate the number of bushels of grain stored at those facilities on the reference date.
NASS estimates of quarterly grain stocks provide important market information regarding the magnitude of consumption during the previous quarter of the marketing year as well the supply available for future consumption. Unlike the USDA crop production forecasts, which can be compared to a final production estimate in order to evaluate forecast accuracy, there is no independent estimate for judging the accuracy of quarterly NASS stocks estimates. Instead, we analyze the history of the NASS quarterly corn and soybean stocks estimates relative to pre-release estimates by private sector analysts. While this type of analysis is limited due to the lack of a "final" benchmark, the history of differences between USDA and analyst stocks estimates should reveal estimates that market analysts found particularly problematic.
Newswires report the expected stocks estimates of various market analysts from which an average analyst estimate is computed. Using the average analyst estimates reported by the Dow Jones Newswire (or their predecessor, Oster Dow Jones and Knight Ridder), the difference from NASS stocks estimates was calculated for each quarter for the 1990 through 2012 marketing years. Since analysts' estimates of stocks are really estimates of usage or implied usage during the quarter that ends with the reference date of the NASS Grain Stocks report, we compute the differences as a percentage of quarterly usage. This difference is commonly referred to as the "market surprise."