"I agree with that assessment," Darrel Good, a University of Illinois agricultural economist, said this week. "The problem is that unlike production estimates there is no way to know what is the correct stocks number. The fact that the methodology has not changed, and that significant issues with wheat and soybeans have not emerged leaves us without an explanation of the corn surprises."
Corn market analysts do their best to tout up a running tally of consumption. They use weekly U.S. government data on corn exports and weekly industry reports on ethanol production to gauge corn consumption and drawdown of stocks. But feed use remains the biggest guessing game.
"This feed usage number is all over the place. It's obviously a fudge factor for the USDA to make the balance table and the stocks report fit," said Rich Feltes, vice president of commodity research for brokerage RJ O'Brien, referring to USDA's benchmark monthly world supply/demand tables. "It just underscores how high risk this report is."
The USDA's corn marketing year begins Sept. 1, and ends August 31.
Over the past five years, corn for feed and residual use in the March-May quarter of the year has ranged from 718 million bushels in 2011 to 1.276 billion in 2010, analysts say. Last year, USDA put the number at 858 million bushels. The average trade estimate by analysts for third quarter feed use is near 840 million bushels going into Friday's report.
Analysts concoct their own formulas and ratios. Emslie said he factors in livestock herd numbers, the price ratio between wheat and corn - since wheat is commonly used as a feed substitute - and the availability of DDG's to come up with a number for feed use. They also try to factor in seasonal discrepancies, such as when new-crop corn may be harvested early in the autumn and fed in the fourth quarter.
Bill Lapp, head of Omaha, Nebraska, based consultancy Advanced Economic Solutions and a former chief economist at ConAgra, said analysts "have a limited number of tools to predict the corn stocks number" compared to straight crop production reports based on facts like planted acres, seed types, moisture and temperature, field surveys, and so on.
Lapp just completed a survey of dozens of active commercial users' USDA crop data. The bottom line? Lapp said that those responding gave the government passing marks on their grain reports - with grain stocks the exception.
"That one that stands out for the greatest room for improvement is the stocks report," said Lapp, noting that 90 percent of those surveyed said it needed to be improved.