Grain analysts are nervously expecting the U.S. Agriculture Department to drop another bombshell on Friday when it issues its U.S. quarterly corn stockpile estimate, a key number they have wildly missed forecasting the past three years.
The missed forecasts have resulted in wild price moves in the world's biggest grain market, Chicago Board of Trade futures.
"None of us has a magic bullet. I spend a lot of time trying to figure it out, and ultimately you're completely wrong," said Tim Emslie, grains research manager for CHS Inc, the largest U.S. farm cooperative and a major corn hedger.
Four times a year the USDA surveys commercial grain firms, country elevators, processors, and farmers to report on the amount of corn held in storage, a key economic indicator the grain trade uses to project the actual amount of corn on hand before the autumn harvest.
The United States is the world's largest grower and exporter of corn, which is also the largest cash grain for farmers. So USDA's grain stocks estimates for decades have been a bellwether for the futures market to adjust prices to market fundamentals.
But in recent years the calculus has grown trickier. Drought and other weather factors have jolted production and use. Export demand has surged as China tapped more U.S. supplies. Most importantly, a major new domestic corn consumer has appeared - ethanol makers, who last year ate up a full 40 percent of the corn crop from well below 10 percent a few years ago.
Corn itself is the main feed grain for U.S. livestock. But ethanol plants have muddied that picture by mammoth production of a byproduct called distiller's dried grain (DDG) - also now used as a feed and feed export. Cheaper competing grains like wheat have also thrown in another wild card to calculations.
The biggest miss in analysts' corn stocks estimates in the last 30 years occurred in March, the most recent quarterly stocks report. USDA reported March 1 corn stocks totaled 5.4 billion bushels - roughly 400 million bushels more than the average analyst estimate.
For the next report due at noon EDT (1600 GMT) on Friday, grain analysts polled by Reuters estimated June 1 U.S. corn stocks between 2.952-2.725 billion bushels, with the average at 2.854 billion - down nearly 10 percent from 2012. Some analysts, in giving their educated guesses, admitted that their estimate could be 250 to 300 million bushels above or below what USDA ends up reporting.
Complaints about the USDA report have escalated. USDA chief economist Joe Glauber told Reuters last week he had commissioned a study to research why private analyst expectations have diverged so much from USDA's official estimates. Glauber said that since there is a larger percentage of grain now being held away from farms, USDA surveys should actually be seen as more accurate, not less.