The surprisingly low level of old crop stocks should be enough to bring the recent price slide to a halt.
Issued by Darrel Good, University of Illinois
USDA released the Sept. 1 Grain Stocks and Small Grains reports on Friday, Sept. 28. The Grain Stocks report contained estimates of the magnitude of old crop corn and soybean inventories at the end of the 2011-12 marketing year and the inventory of wheat at the end of the first quarter of the 2102-13 marketing year.
The Small Grains report contained the final estimate of the size of the 2012 U.S. wheat crop.
Listen to audio analysis with Good:
Following is a brief summary of the information contained in the reports.
Sept. 1, 2012 stocks of old crop corn were estimated at 988 million bushels, 139 million less than stocks on Sept. 1, 2011 and 138 million less than the average trade guess. The stocks estimate implies that 2.166 billion bushels of corn were consumed during the final quarter of the 2011-12 marketing year and that feed and residual use during the quarter was very small at 352 million bushels.
However, due to the availability of unusually large quantities of new crop corn before Sept. 1 this year, the level of old crop inventories on Sept. 1 provides substantially less information about the actual level of feed and residual use of corn during the final quarter of the previous marketing year than in most years.
The Sept. 1 stocks estimate for corn, as with all quarterly stocks reports, allows for the calculation of total consumption in the previous quarter. Since domestic processing use and exports during the previous quarter are already known before the release of the report, the stocks estimate provides for a calculation of feed and residual use during the previous quarter.
However, apparent feed and residual use during the final quarter of the year, and therefore during the first quarter of the next marketing year, is muddled by the availability of newly harvested corn in the last several weeks of the old crop marketing year. Since the Sept. 1 stocks estimate is an estimate of old crop corn inventories, only the consumption of old crop corn during the final quarter of the year is revealed by the stocks estimate.