U.S. Grain Stocks, Corn Use Estimates & Projections: Questions Still Searching for Answers

October 20, 2011 11:35 PM
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via a special arrangement with Informa Economics, Inc.

Analysts and statisticians admit there are issues, but data lacking to determine why

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The attention focused on USDA survey data and projections continues to grow as markets digest the information, with particular attention recently on the combination of USDA’s Quarterly Grain Stocks and Supply & Demand reports.

Prepared by separate USDA entities – the National Ag Statistics Service (NASS) and the World Agricultural Outlook Board (WAOB) – the data recently have become a source of frustration and friction.

Since June 2010, the Grain Stocks data has been a hot market topic as the actual figures released by NASS have varied considerably from expectations heading into the report. Accenting this situation has been a shift in the nearly on-the-mark pattern of the pre-report estimates coming close to the actual figures.

Those differences have become an acute focus with the strong demand base and relatively tight corn supplies in particular.

 The Grain Stocks data is a combination of estimates of on- and off-farm figures. The off-farm portion has about a 90% response rate, says Statistics Division Director Joe Prusacki. “Off-farm stocks for the survey respondents are pretty solid,” he noted. “We have even double-checked with some to make sure on old- versus new-crop stocks to make sure of the data.”

The on-farm portion of the data is based on telephone surveys with farmers relative to the stocks of grain they have on hand, he noted. Some observers suggest that this portion of the Grain Stocks survey work could be a potential source of where the issues are – particularly the December producer survey that covers stocks at the end of the first quarter of the marketing year.

But Prusacki insists that NASS is doing the best they can with the resources available to them. “If we could have more dollars, perhaps we could do different things with that December survey. We could do more interviews and could do things like actually checking bins, etcetera,” he noted. “But again, we don’t have the extra resources.”

In the case of the September Grain Stocks of 1.13 billion bu., off-farm stocks were estimated at 813 million bu. while 315 million bushels were held on farms.

The average pre-report estimate was for total stocks to be 962 million bu., only about 150 million bu. above the actual level of just off-farm stocks.

Some note it appears pre-report expectations tend to cluster around the most recently released data – for the Sep. Quarterly Grain Stocks report, many were close to the 2010/11 carryover figure released in the Sep.

Supply/Demand report. In the Sep. S/D report, USDA projected the 2010/11 carryover at 920 million bushels. And that prompted a surprise via the Grain Stocks issued by NASS.

While NASS and the WAOB are separate, the Grain Stocks data from NASS figures prominently into calculating usage data that is published in the monthly Supply & Demand report compiled by the WAOB.

Corn usage patterns have been shifting, according to WOAB grains analyst Jerry Norton, but it’s not clear yet what is behind the shift that has seen a decline in feed/residual usage in the fourth quarter of the corn marketing year and also the second half of the marketing year. “From 1995 to 2005, things were very stable in terms of the usage pattern,” he noted. “If you knew usage for the first half, then you could pretty much forecast the second-half usage. But that trend has now changed and it’s not clear why.”

The rise in ethanol production could be a factor, Norton said, but there isn’t the kind of statistical data corn used for ethanol production like there is for some other usage categories.

As for residual use, Norton said in soybeans, that category is typically about 2 percent each marketing year. But there is no similar correlation for corn residual use.

The WAOB has used a conversion ratio of 2.7 gallons of ethanol extracted from a bushel of corn, a rate that some in the industry say is too low. But Norton says there’s just a lack of data to prompt the WAOB to shift that extraction rate higher. “There’s not a survey of ethanol producers which indicates how many bushels of corn they use,” he said. “If we had that data, then we could justify a shift in our extraction rate.”

While many of the newer ethanol plants have extraction rates that are likely at 2.8 or higher, Norton said there are also several plants still on line that use older technology and are not as efficient. “Plus, there are wet-mill plants,” he added. “Those are specialized and account for about 20 to 25 percent of the production, and they are less efficient than dry-mill plants.”

Further, Norton commented that if those extraction rates were higher, that would affect the usage data for the entire year, not just the second half or fourth quarter of the marketing year.

Another piece of missing data relates to dried distillers grains (DDGs) that have risen as a feed component along with ethanol production. Again, Norton said there are no surveys of bushels used in this area, either, relative to feed use. “We don’t have the data to know the answer to that,” he said relative to whether that could be a factor in the reduced usage for the fourth quarter of the 2010/11 marketing year. “We know we had a lot of cattle in feedlots and we know from some studies that feed conversion can be a little better with DDGs,” he observed.

If DDG use is combined with high prices for corn and a slowing of exports in the final quarter of the 2010/11 marketing year, Norton said that could be an explanation but he again reminded that there is not the hard data to back up things on the ethanol/DDG side.

The now-ended Census report on fats and oilseed crushing did have a component on DDGs, contacts note, but there continued to be questions relative to the figures in that report and the actual data. But the disappearance of the Census crush data is something that Norton said was a negative relative to usage data.

Norton also expressed disappointment that NASS was going to discontinue its Distiller Co-Products for Feed Survey.

That survey work was dropped by NASS, Prusacki said, after a review undertaken by the agency which considered the following relative to their statistical/survey efforts, including whether the data was directly mandated by Congress; whether it was requested or required by other federal agencies to meet their legislative mandates; if it was data needed by federal agencies to evaluate or administer existing federal programs or data frequently requested by data users and the availability of administrative data.

NASS and WAOB officials were pressed by industry representatives this week on the corn usage figures in particular at a data users meeting the agencies hold each year. NASS organizes the meeting but there is participation from WAOB and other USDA agencies. Those present also lamented the discontinued Census crush report.

At that meeting, WAOB head Gerald Bange assured those present USDA was “as surprised as you were when we got the notice on that. I can tell you up front we were not consulted about it." But he remarked that it was not “a totally dead issue.”

Lots of talk in the period leading up to the end of the Census data focused on the potential for NASS to take over conducting that report. Bange’s comment that it was not yet a “dead issue” gives some hope to the idea that NASS/USDA could restart that survey effort, but nothing is solid at this point.

So given the questions arising on U.S. corn usage and U.S. corn stocks data, are there new procedures planned at NASS? “Procedurally, all I can say is we continue to work with what we have,” Prusacki said. “Are there new procedures on the horizon? Not really. But we continue to improve and hone what we do with the resources we have available.”

A similar response came from Norton relative to the corn usage questions. “We know the pattern has shifted but again it’s just not clear why because we lack the data,” he stated. “We may never be able to identify why the usage shift has happened.”

Private sector analysts agreed with their government counterparts – it’s hard to shift usage estimates or explain data issues without hard, survey-based information to back them up.  That could open the government up for more criticism than they already face.

Comments: Without hard data, it’s not easy for NASS statisticians or WAOB analysts to “rectify” the issues on stocks data or usage patterns. That will take more dollars put toward this area at USDA, an area which has a major impact on markets. But with budget outlays in decline across government, the task of trying to bolster funding for the work done by NASS or WAOB is a tough sell, especially in an environment where budget reductions – not increases – are the focus.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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