Corn stocks below expectations, soybeans surprise

Oct 5, 2012

The recent Grain Stocks report was a heavy blow to agriculture for corn. Not only did the ending corn stocks estimates come in well below industry estimates, but blew the most recent previous USDA estimates out of the water.

The most recent Grain Stocks report was released Friday, Sept. 29 by USDA. It reported all stocks of corn in all positions—on farms and in mills, elevators, warehouses, terminals and processors—stood at 988 million bushels (mb), well below prior year comparisons and industry and earlier USDA projections.

In 2011, old crop corn stocks as of Sept. 1 stood at 1.13 billion bushels (bb) in all positions. CME collected several dozen analysts’ expectations prior to the report. The average of those collected projections placed the stocks at 1.15 bb. The industry analysts’ estimate range ran between 887 mb to 1.35 bb. Following the Grain Stocks report, CME credited the skewed analysts’ expectations to the activities of USDA.

“The trade had, on average, expected that number to be comfortably above the 1 billion mark, an expectation fueled in no small part by USDA’s increasing the estimated year-end stocks from 1.021 billion in August to 1.181 billion in September.”

Immediately following the release of the report, corn futures were trading limit up through July 2013. December and March 2013 contracts closed limit up and May and July 2013 closed just under limit up. Since that reactionary spike, little happened in the corn futures markets, but some feel prices will need to go higher to protect supplies.

“If corn production can achieve 11 billion bushels as estimated by the USDA corn is unlikely to score new highs,” said Andrew Gottschalk of Hedgers Edge.

“However, we continue to believe that final corn production may be under 10.5 billion bushels necessitating much higher price to ration demand sufficient to allow for pipeline ending stocks.”

According to the report, the 988 mb ending stocks estimate for Sept. 1 is 12 percent below the same time last year. By position, corn in off-farm holdings has decreased out of proportion with the overall decrease. At 675 mb stored away from farms, this year’s September corn stocks estimate is down 17 percent from last year’s 813 mb.

Of the reported on-farm corn stocks—data from many states has been withheld to avoid disclosing data for individual operations— there are 313.7 mb, down slightly from last year’s 314.95 mb.

Historically, Sept. 1 corn stocks across all positions have been much higher than current levels. The preceding 10-year average (2002- 2011) for Sept. 1 old crop corn stocks is 1.52 bb. In that time, the only lower stocks than seen currently was in 2004 when stocks stood at 958 mb. Prior to that, the other times in recent memory corn stocks were below 1 bb were 1997, 1996 and 1994, with 883 mb, 426 mb and 850 mb, respectively.


Old crop soybean stocks reported as of Sept. 1 were also well below year ago levels. With 169 mb of soybean stocks in all positions, this year’s Sept. 1 numbers are 21 percent below last year’s 215 mb. Both positions—on- and off-farm stocks— dropped proportionately, unlike with corn. On-farm stocks of old crop soybeans, at 38 mb, were down 21 percent compared to last year’s 49 mb. Similarly, the offfarm stocks for this year stood at 131 mb, down 21 percent from last year’s 167 mb.

Despite being below last year’s numbers, this third quarter soybean level is well above pre-report industry expectations. The average of analyst predictions had pegged the soybean levels at 130 mb. The 169 mb out stripped

even the high end of the estimate range of 110 mb to 152 mb. The average analyst predictions corresponded with the most recent USDA supply and demand report, which placed the 2011/2012 ending stocks at 130 mb. — Kerry Halladay, WLJ Editor