Forming expectations about feed and residual use of corn is more difficult than expectations for the other two categories. There are no on-going measures of feed use of corn. Consumption in this category is calculated as a residual, starting with total use during the quarter as implied by quarter-ending stocks, and then subtracting estimated use in the other two categories. As a result, there is considerable variation in quarterly estimates of feed and residual use of corn over time.
On an annual basis, the USDA suggests that there is a positive correlation between crop size and residual consumption of corn which further complicates the formation of expectations. For any particular quarter, forecasts of consumption prior to the release of the stocks estimate is based on a combination of the implied rate of consumption in the previous quarter, the level of livestock production and inventories, and consideration of the use of other feed ingredients.
For the 2012-13 marketing year, the estimate of feed and residual use during the first quarter of the year may be overstated since large quantities of 2012 corn were harvested and presumably used before the start of the marketing year on September 1. Conversely, the estimate of use during the fourth quarter of the 2011-12 marketing year was likely underestimated for the same reason.
To gauge the pace of recent consumption we have looked at combined consumption in the last quarter of the previous marketing year and the first quarter of the current marketing year. Implied feed and residual use of corn during those two quarters was nearly five percent larger than in the same two quarters in the previous year.
Looking broadly since November 2012, dairy cow numbers have been about equal to those of a year ago, broiler chick placements have been modestly larger than those of last year, cattle-on- feed numbers have been down about six percent, and hog numbers have been about equal those of a year ago.
Feed and residual use of corn during the second quarter near the level of the past two years would not be surprising. If use in that category was near 1.55 billion bushels, total use would have been near 3.145 billion bushels leaving March 1 stocks near 4.935 billion bushels.
Stocks at that level would be the smallest in 15 years. Market reaction to the stocks estimate will hinge on the size of the deviation from average trade expectations.