"Issues" will follow USDA's Sept. 1 corn stocks estimate
Oct 06, 2010
Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm. In fact, I don't even have horse chores to do anymore! My daughter is off to college, and instead of buying hay for another long winter, the horses are gone. (Seems like an excellent "trade" to me!!)
But I actually felt like I was doing some "farming" last night! With the horses gone, my 15-year-old son is fired up about transforming the pasture into a wildlife food plot. So, I was doing some tillage work last night and this afternoon/evening I'll be planting my first "crop" of winter wheat. (I know... I'm a little late, but with the weather we're having, I should be able to get a good stand before the snow starts to fly.)
Speaking of wildlife, we've got a new neighbor in our small patch of timber -- a red fox! We've caught him on a trail-cam and I saw him "live" this morning for the first time. It's really cool to see a fox in the area. The coyotes have been so thick in recent years that they've either killed all the fox or the fox was smart enough to get out of the county before the coyotes found them!
Anyway... onto the markets...
I was thinking…
... I've let last week's Quarterly Grain Stocks Report from USDA sink in long enough -- it's time for a few comments about it.
It's been very interesting reading and listening to all the complaints about USDA's Sept. 1 corn stocks tally. And there's good reason for the complaints! Lose 300 million bu. in the June 1 stocks and find those bushels again in the Sept. 1 stocks!?!?!?! Come on... that's ridiculous! Did USDA's NASS miscount on the June 1 stocks? Did some 2010-crop sneak into the 2009-crop supply? NASS has been asked by several people to explain the change and all we keep getting is a restatement of how NASS does the survey for grain stocks. That... and a statement that the Sept. 1 corn stocks tally did not include any 2010-crop supplies.
Question: How do they know? Well... they asked. At least that's what they say. And I believe them... I'm sure they did ask the grain elevators and farmers to separate old- from new-crop supplies. But... I'll bet somebody forgot to tell growers that were mixing some low-quality 2009-crop with higher-quality 2010-crop and delivering the corn before the end of the survey period that they were supposed to tell elevators that the semi had 100 bu. of 2009- and 800 bu. of 2010-crop corn in it! In fact, the whole thing was probably delivered as old-crop corn.
Obviously, this creates some "issues" going forward.
One of those "issues" is crystal clear in the form of a much-higher-than-expected 2009-10 corn carryover.
Another "issue" won't show up until the Dec. 1 stocks estimate. If some of the 2010-crop corn did sneak backwards into the 2009-10 marketing year (which seems inevitable), the Dec. 1 stocks will probably come in lower than traders will expect based on "typical" first-quarter use combined with USDA's corn crop estimate.
Lower-than-expected stocks on Dec. 1 (after the 2010 corn harvest is complete) will (should) lead to an even lower 2010 corn crop estimate in the January Annual Production Summary (because all the S&D estimates are squared to grain stocks). Smaller stocks (and a smaller 2010 crop estimate) will set the stage for a tighter-than-expected 2010-11 corn carryover estimate in the World Board's Supply & Demand Report (released the same day as the Annual Production Summary and the Quarterly Grain Stocks Report).
Because all this data comes on the same (probably) cold day in January, there's really no way to factor in these "issues" until that day. And if the 2010-11 corn carryover estimate does snug right down close to 1 billion bushels for the first time in the January S&D Report, there really won't be much need for the corn market to try to buy acres for 2011 production until that time.
Unfortunately... the "gig will be up" by then as growers prep acres for 2011 this fall and book all their inputs. So... if USDA waits until January to tell us we've got "issues" with the 2010-11 corn supply (and, therefore, similar issues with the 2011-12 corn supply), it could be too late for the market to do it's job and to provide growers with adequate (and timely) incentive to plan for more 2011 corn acres.
What's the solution?
A clear explanation from USDA's NASS of how 300 million bu. of corn were lost as of June 1, but found on Sept. 1. Unfortunately, I don't think we'll get one. If, however, we did get the explanation, the market could respond now to accurately plan 2011 plantings.