From The Editor
September 14, 2012
Hello Pro Farmer Members!
Hats off the USDA's World Ag Outlook Board (WAOB). This is the USDA agency responsible for producing the monthly Supply & Demand Reports. I've argued plenty with WAOB estimates over the years, but there is clear evidence the analysts are working to adjust to changing times in the farming industry.
In September 2010, WAOB's corn carryover estimate was about 300 million bu. below actual Sept. 1 corn stocks. It just didn't plan on 2010-crop harvested corn slipping back into the 2009-10 marketing year. And if they did, they didn't anticipate a big enough move. And in that report, the use of new-crop corn in the old-crop marketing year barely got a mention.
In September 2011, WAOB's corn carryover estimate was about 150 million bu. below actual Sept. 1 corn stocks. But in this report, analysts attempted to do a better job of explaining how the backward movement of new-crop corn into the old-crop marketing year was impacting the feed & residual usage estimates for corn.
In September 2012, WAOB brought more transparency to the process. Here's what it said about 2012-crop corn harvested before Sept. 1:
"Feed and residual use for 2011/12 is lowered 150 million bushels based on the record level of crop maturity and harvest progress as of September 1. State-level crop progress reports indicate that nearly 11 percent of the 2012 corn crop was harvested before the September 1 start of the 2012/13 marketing year. Based on state-by-state production forecasts from the September 12 Crop Production report, nearly 1.2 billion bushels of new-crop corn are estimated to have been available for use before the end of the old-crop 2011/12 marketing year. This is up more than 700 million bushels from a year ago. Early new-crop corn use is expected to displace use of 2011 old-crop corn and boost old-crop inventories on September 1. As a result, early new-crop usage reduces the feed and residual calculation in the balance sheet."
Obviously, WAOB analysts are doing a better job of accounting for corn that moves back in time than they used to. And just as importantly, their doing a much better job of explaining how they account for that corn. It may not be "generally accepted accounting practices," but they are explaining the situation much more clearly than in the past.
That, however, won't stop me from once again asking USDA to consider changing the start and finish of the marketing year. With increased corn production in the South and the amount of corn harvested ahead of September 1 likely to continue to increase in the years ahead, now is the time to consider starting the marketing year for corn on Aug. 1. That would greatly reduce the amount of new-crop corn harvested ahead of the start of the marketing year -- and that's the corn that "muddies" the outlook and creates surprises from the September Quarterly Grain Stocks Report. While some corn was harvested in the far-South in July this year, it wasn't enough to create the carryover uncertainty we face today.
By switching the marketing year to Aug. 1 - July 31 schedule, the old-crop stocks situation would be much more clear cut than it is today. But the August-July marketing year isn't without problems. Imagine getting a 1-billion-bu. Aug. 1 stocks tally in a year like 2009 when the crop was planted late, matured slowly and was harvested very late. Corn supplies would be exceptionally tight by the time harvest started.
It would also result in moving the Dec. 1 corn stocks estimate to Nov. 1. Again using 2009 as an example, there could be plenty of corn left in the field when USDA's NASS surveyed for "Nov. 1 corn stocks." So... no... this isn't the "perfect" solution -- it has problems. But an August - July marketing year would give the market a much more clear dividing line between old- and new-crop supplies.
That's it for now...
Have a safe harvest!
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