As just a handful of private estimates for quarterly corn stocks are released, a longer term outlook may contain a hidden surprise. While the trade anticipates USDA’s June 30th
“Planted Acreage” and “Quarterly Grain Stocks” results with most of the focus on acres, Allendale Inc’s research suggest producers and end users may want to give equal focus for the quarterly corn stocks report. Allendale Inc has released its quarterly corn stocks estimate of on and off farm of 4.321 billion bushels with one other private source approximately 100 million bushels fewer. The 3rd
quarter level of corn stocks compares to a year earlier level of 4.028 billion bushels and 2nd
quarter 2008/09 market year level of 6.958 billion bushels. As noted in this graphic
, despite the second largest quarterly usage of 2.637 billion bushels, the 4.321 billion bushels of corn stocks represent the second largest on hand dating back to 1988/89, mirror 2004/05 levels and are 41 million bushels less than 2005/06 level of 4.362 billion bushels.
As Allendale Inc looks forward into the fourth quarter of 2008/09 market year, it is known the three year average use has been 2.343 billion bushels and five year average use has been 2.249 billion bushels. Be reminded when USDA publishes its September quarterly grain stocks report, the level of corn stocks should mirror end stocks for the 2008/09 market year. When using the three year average fourth quarter usage level of 2.343 billion bushels from Allendale’s March 30th quarterly corn stocks of 4.321 billion bushels, it implies fourth quarter stocks of 1.978 billion bushels and the five year average usage level of 2.249 billion bushels implies 2008/09 end stocks of 2.072 billion bushels. Presently USDA is projected 2008/09 end stocks of 1.6 billion bushels.
Allendale Inc is aware 3rd quarter usage is running 1.2% below average and suggest if the fourth quarter usage were to maintain this reduce pace could imply fourth quarter corn stocks of 2.007 billion bushels. In all three examples explained above, the real surprise for June 30th USDA reports, may in fact be held within the quarterly corn stocks report. How might USDA smooth the rather copious large differential of near 419 million bushels (average of 3 yr, 5 yr and 1.2% weaker pace) more than what USDA is projecting 2008/09 end stocks of 1.6 billion bushels? We must add, Allendale’s research for soybean stocks does not find significant discrepancies.
Herein is the 419 million bushel question, how will USDA find a way to use 419 million more bushels before the fourth quarter corn stocks report is released? Could USDA artificially accelerate corn exports, ethanol and or feed use to create the solution? Could USDA find a way via creative accounting, in its July WASDE the 2008/09 corn production was overstated or suggest carry-in stocks were less than originally estimated?
However the single largest question may be how might producers and end users prepare for such creative measures?
What are your thoughts on potential ramifications of the forthcoming quarterly grain stocks reports?...........Joe Victor
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