Grain Market Viewpoint

How Did the USDA Find Nearly 400 Million Bushels of Corn?

This seems to be the question of the year so far in the corn market and one that many in the trade seem to be asking themselves. Below are a few of the more thought out responses I have heard on what may have actually taken place:

  • A "production" error was made following harvest as the national yield estimate was simply too low. Thoughts are, producers in Minnesota, the Dakotas and other areas to the north may have actually had much better yields late in the season than what the USDA had estimated.
  • This is the first time EVER in the March Quarterly Stocks Report that off-farm stocks were larger than on-farm stocks. This generally never happens until the June report. Thoughts are, the farmers (who now have more storage than ever) were not accurately reporting the number of bushels they had in storage. Once more of the corn was moved to the commercials, the accuracy and participation rate of the voluntary surveys greatly increased, and the USDA followed by making the appropriate adjustments.
    • It is reported that the USDA surveys about 9,000 commercial entities (ethanol plants, mills, elevators, etc.) and receives around an 85-90% response rate from this group. On the flip side, there are about 80,000 farmers surveyed and I would have to believe both the accuracy and the response rate are much lower. Hence when more corn is moved into commercial hands, the USDA is able to get a better assessment of total supply. This may have been some contributing factor. 
  • There is talk a mistake could have been made in regards to corn "in transit." Meaning, the USDA didn't have a good handle on what was being transported or moved. Remember the Mississippi river was having some serious problems around this time frame, and perhaps more grain was stuck on the river or "in transit" than many had estimated.
  • A mistake was made by adjusting the feed usage numbers higher back in the March report. There may have been more feed alternatives being used than recognized. Most believe this feed usage number will need to be reversed. The question is by how much: 200 million, 250 million, 300 million?

Corn traders will also be waiting to see what the USDA has to say about South American production. Remember, the April and May rains will do a lot to determine the overall yields of the large second crop planted in Brazil. I thought it was interesting to hear talk out of Brazil this weekend that they are thinking about importing corn from Argentina to their most Northeast regions that have been hit hard by the recent drought. The rumor is there are not many alternatives, especially since the freight truck companies aren't interested in carrying corn to this region with  the soybean and sugar business in full-swing.

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Discuss this Blog Entry 25

on Apr 10, 2013

It seems alot of rookie mistakes for things that are not new. First, there is more than one way to get a handle on the production. Storage should be somewhat accurate but there is no terminal date on the surveys - like commericial storage should be asked what is your on site inventory on January 1. The farmer should be asked - what is your on site inventory on January 1. The commericial storage would be asked - how many bushels are in transit to or from your site on January 1. The way they have the survey now - theoritically - these bushels could be counted at least two times. And you could ask - how many are committed to be local use as milled or processed, exported, fed, used as seed, etc. This would give a much truer picture of what we have and what it would be used for. But, I don't think they want to be precise because - then they can't find reasons to control the market such as finding more grain. And, what is the incentive to a farmer - who has to take what he gets and a commericial business to pay what it costs- to be accurrate on a survey that influences the market that causes your company or farm to lose money or pay more for your raw products. Yet we are threatened - its the law. And, apparently it doesnt reveal anything because there are estimate mistakes that always influence the market - yet no condition really changed. They could also test their accuracy by just asking elevators what there total grain sales were for the past year and check that against their estimates for that crop year. The local grain terminals, ethanol, and milling plants are the hub of crop traffic so that is the point that all commercial grain travels through. They should be able to monitor them at any date. In theory, they should be able to look at crop insurance yield reports in March and tell exactly what happened in 2013 because we have to report total production. The report seems rarely friendly to farmers or accurate, so many of us farmers don't even watch it anymore - If you think the ecomomy is bad now, wait til $4 corn puts farmers paying the highest expenses in history in a situation where they can't pay their bills. Banks and ag related businesses will lose millions instead of thousands - very quickly.

on Mar 21, 2014

Interesting article! Constant survey should be implemented regarding commercial storage, site inventory and number of bushels. Often these reports are against the expectations of these farmers and hence most of the farmers have lost interest in farmers watching it. Please keep sharing.

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on Nov 1, 2014
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