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 betterassessment 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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