Although the USDA's estimate of the Sept. 1, 2011 inventory of old-crop corn is old news, there are ongoing questions surrounding the quarterly stocks estimates. For corn, quarterly stocks estimates have not been well anticipated since June 2010, said a University of Illinois agricultural economist.
"The June 1, 2010 estimate of stocks was surprisingly small and implied feed and residual use during the previous quarter that was too large. The Sept. 1, 2010 estimate of stocks was larger than anticipated based on the level of June 1 stocks but seemed to 'correct' for the small estimate in June. The implied feed and residual use for the 2010-11 marketing year based on that estimate was reasonable," said Darrel Good.
The Dec. 1, 2010 and March 1, 2011 estimates of stocks were marginally smaller than expected and implied a high rate of feed and residual use during the first half of the marketing year, 8 percent above that of the previous year, he said.
"In contrast, the June 1, 2011 estimate of stocks was much larger than expected and implied a very dramatic slowdown in the rate of feed and residual use during the third quarter of the 2010-11 marketing year. Unlike in the previous year, the Sept. 1, 2011 stocks estimate did not correct for the large June estimate, but instead compounded the implications of the June estimate," he noted.
Implied feed and residual use of corn during the final quarter of the marketing year was unreasonably small, and implied use for the last half of the 2010-11 marketing year was a third less than in the same period a year earlier, he said.
"Such a large decline seems unreasonable given that the number of livestock fed was larger, average slaughter weights were about equal, implied feed and residual use of wheat was 45 million bushels less, feeding of soybean meal was down 4 to 5 percent, and feeding of distillers' grains was only about 3 percent larger," he said.
Calculated feed and residual use of corn for the 2010-11 marketing year is unreasonably small. The estimate of large Sept. 1 stocks also appears at odds with the ongoing very strong corn basis, he said.
Explanations offered for the surprisingly large Sept. 1 stocks include the possibility that the 2010 corn crop was underestimated and/or the amount of corn used for ethanol production has been overestimated, he said.
"If correct, either of these explanations would result in a larger calculation for feed and residual use and might make sense if the September stocks estimate was the only one available for the year," he said. "However, neither explanation is consistent with the level of stocks on Dec. 1, 2010 or March 1, 2011," he said.