The USDA will release an estimate of March 1, 2014, corn stocks on March 31 with potentially important implications for old-crop corn prices. According to a University of Illinois agricultural economist, it has been difficult to correctly anticipate quarterly stocks estimates in recent years, with large surprises reflected in some estimates.
“The estimate of Dec. 1, 2013, stocks was surprisingly small and implied a record 2.426 billion bushels of feed and residual use of corn during the first quarter of the 2013-14 marketing year,” said Darrel Good. “That estimate started a price rally that was subsequently augmented by surprisingly large export sales of corn. March 2014 corn futures increased about 70 cents from Jan. 9 through March 7.
“While it has become difficult to anticipate the quarterly stocks estimate, it is useful to calculate the magnitude of stocks that might be considered neutral for corn prices,” Good said. “A large deviation from that calculation would be expected to trigger a price response. A stocks estimate that would be neutral for corn prices is one that implied that feed and residual use of corn during the first half of the marketing year supported the USDA’s forecast of 5.3 billion bushels of feed and residual use for the entire marketing year. Even that calculation is difficult to make, however. The difficulty stems from the change in the seasonal pattern of feed and residual use that has occurred over the past seven years. For the 10 years from 1996-97 through 2005-06, feed and residual use of corn during the first half of the marketing year averaged 64 percent of the marketing-year total use, in a range of 62 to 66 percent. For the four-year period from 2006-07 through 2009-10, use during the first half of the marketing year averaged 68 percent of the total, in a range of 66 to 70 percent. During the three-year period from 2010-11 through 2012-13, use during the first half of the year averaged 74 percent of the marketing-year total, in a range of 73 to 76 percent.”
Good continued, saying that the increase in feed and residual use of corn during the first half of the marketing year and the sharp decline in use during the last half of the year are difficult to explain. Most of the shift has been from the fourth (summer) quarter to the first (fall) quarter. From 1996-97 through 2006-07, first-quarter use ranged from 35 to 39 percent of the marketing-year total, and fourth-quarter use ranged from 11 to 17 percent. From 2007-08 through 2012-13, first-quarter use ranged from 38 to 48 percent, and fourth-quarter use ranged from 6 to 13 percent. For the four most recent years, fourth-quarter use averaged only 8 percent of the marketing-year total and declined to 6 percent in 2012-13.