The 300 million "extra" grain stocks in last week’s report may be the result of several smaller things adding up, believes Diana Klemme of Grain Service Corp., a consultant to grain elevators. The early harvest is unlikely to make up for the total, she says. "By September 9, USDA reported 6% of the corn crop harvested. If you assume the percentage on the Sept. 1 survey date was 3% and a 13-billion crop, that would be 390 million bushels. It’s unlikely every one of those were counted when elevators were asked to leave them out and some were in transit or used immediately."
How likely is it that elevators made mistakes about new and old crop, as some traders argue? "Very few elevators aren’t either state or federally licensed warehouses, which are subject to surprise inspections," says Klemme. "Licensed warehouses had better know exactly what their inventory is because the penalties are very high."
In addition, she notes the changes from June to September didn’t occur in the states where early harvest took place. "You would expect new-crop stocks to be an issue in Louisiana, Arkansas, Kentucky, Tennessee, and even southern Illinois but those states didn’t show increases," she says.
The states that jump out in an analysis of the March, June and September reports are Iowa and North Dakota. "They are not consistent with surrounding states. It seems doubtful usage fell—ethanol production, sugar production and even feeding were likely steady or higher," she notes. "So why would stocks rise in these states? It’s possible last year’s crops were underestimated. Or perhaps corn came into these states."
We’ll probably never totally reconcile the anomaly, which caught a lot of people on the wrong side of the market, prompting the panic. Now it’s likely a waiting game to see changes in yield, acreage and later stocks reports to determine whether or not rationing will be needed in 2011.
For help in figuring out your moves on stored grain given recent market moves, sign up for the free Webinar on Grain Storage Risk Management offered by Top Producer and AgWeb on Oct. 12.