Fundamentally Speaking

Wildly Bullish Sep 1 Corn Stocks Figure

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst
Chart by DTN Contributing Analyst Joel Karlin

Once again, a shocker of a USDA report has sent grain and oilseed futures sharply higher with corn and SBM making new highs and beans close to theirs.

Just when it looked like prices may continue to falter on reports of better than expected yields and forecasts of some Brazilian rains to perhaps start next week, USDA reported 9/1 corn stocks at 1.995 billion bushels (bb) vs. the average trade estimate at 2.250 bb, the last WASDE estimate, and 9/1 bean stocks at 523 million bushesl (mb) vs trade estimate and last WASDE estimate at 575 mb.

The corn number was due to an apparently unprecedented downward revision of the June 1 stocks figure which at the time was 275 mb higher than trade expected, so those extra bushels are now gone but perhaps they will show in 12/1 report.

This is also the second year in a row of a very bullish September 1 corn stocks figure and no doubt will tighten up this year's and last year's ending stocks linked to an upward adjustment in the feed/residual category.

This graphic shows the change in the estimated corn stocks from the September WASDE estimate to the September 1 stocks figures that are usually released three weeks later in million bushels on the left-hand axis and as a percentage change on the right-hand axis.

We also show the change in the USDA ending corn stocks estimate from that September WASDE projection to the October one in million bushels also on the left-hand axis.

This year's 258 mb decline in the estimated corn carryout from the September WASDE to the 9/1 stocks figure is the greatest ever, topping the year ago 224 mb decline which had been the largest up to this point.

The only other year that comes close is the 193 mb decline seen from the September 2012 WASDE to the 9/30/2012 quarterly stocks report.

That year is the largest percent decline of 16.3% vs. this year's 11.4% drop and the year ago 9.2% decline.

Obviously next week's WASDE report will reflect this loss of bushels and like the 2011/12 and 2018/19 seasons the downward adjustment in U.S. ending corn stocks estimate from the September to the October WASDE projection wil be large with USDA indicating around 280 mb of greater disappearance in the June-August quarter than had been projected.

We will have more to say about the stocks report in future posts but hypothesizing as to why for two years in a row we have had a bullish Septeber 1 corn stocks report would include the fact that the USDA does not have a comprehensive feed model, so feed/residual usage figures continue to be implied from stock figures.

Grain in transit due to exports or to storage facilities, which is more important for 12/1 stocks figures given just completed harvest, can also create accounting errors.

Finally, one must ask about the accuracy of survey respondents?


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