 "Forming an expectation for the magnitude of stocks on March 1
starts with the estimate of Dec. 1, 2012, stocks of 8.03 billion
bushels," said University of Illinois agricultural economist Darrel
Good. "To that is added the estimate of imports during the
December-February quarter. Imports have been unusually large so far
in the 2012-13 marketing year, with the Census Bureau estimating
imports in the first quarter of the marketing year at 29 million
bushels. Estimates for December and January totaled about 35 million
bushels. Imports for the entire second quarter may have been near 50
million bushels, bringing total available supplies to 8.08 billion
bushels," he said.Good explained that the estimate of corn
consumption during the quarter is subtracted from the estimate of
total supply in order to forecast March 1 stocks. Corn is consumed
in three categories: exports, domestic processing (mostly for
ethanol and byproducts), and feed and residual use. The USDA
reported that export inspections during the second quarter of the
marketing year totaled 155 million bushels. Census Bureau export
estimates for December and January exceeded export inspection
estimates by a total of 5 million bushels. Good said that if that
margin persisted through February, exports during the quarter
totaled about 160 million bushels, the smallest quarterly total in
42 years.
Based on weekly estimates from the U.S. Energy Information
Agency, domestic ethanol production during the second quarter of the
2012-13 corn marketing year was 15 percent less than during the same
quarter a year earlier.
"That level of production implies that about 1.11 billion bushels
of corn were used to produce ethanol and byproducts during the
quarter," Good said. "Other domestic processing uses of corn during
the quarter likely totaled about 325 million bushels. That estimate
is consistent with the pace of use during the first quarter of the
marketing year and with the USDA's forecast for the entire year.
Corn used for all domestic processing during the second quarter was
likely near 1.435 billion bushels," he said.
Good said that forming expectations about feed and residual use
of corn is more difficult than expectations for the other two
categories. "There are no ongoing measures of feed use of corn," he
said. "Consumption in this category is calculated as a residual,
starting with total use during the quarter as implied by
quarter-ending stocks, and then subtracting estimated use in the
other two categories. As a result, there is considerable variation
in quarterly estimates of feed and residual use of corn over time.
On an annual basis, the USDA suggests that there is a positive
correlation between crop size and residual consumption of corn,
which further complicates the formation of expectations. For any
particular quarter, forecasts of consumption prior to the release of
the stocks estimate is based on a combination of the implied rate of
consumption in the previous quarter, the level of livestock
production and inventories, and consideration of the use of other
feed ingredients," Good said.
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According to Good, for the 2012-13 marketing year, the estimate
of feed and residual use during the first quarter of the year may be
overstated because large quantities of 2012 corn were harvested and
presumably used before the start of the marketing year on Sept. 1.
"Conversely, the estimate of use during the fourth quarter of the
2011-12 marketing year was likely underestimated for the same
reason," Good said. "To gauge the pace of recent consumption, we
have looked at combined consumption in the last quarter of the
previous marketing year and the first quarter of the current
marketing year. Implied feed and residual use of corn during those
two quarters was nearly 5 percent larger than in the same two
quarters in the previous year. Looking broadly since November 2012,
dairy cow numbers have been about equal to those of a year ago,
broiler chick placements have been modestly larger than those of
last year, cattle-on-feed numbers have been down about 6 percent,
and hog numbers have been about equal those of a year ago.
"Feed and residual use of corn during the second quarter near the
level of the past two years would not be surprising," Good
concluded. "If use in that category was near 1.55 billion bushels,
total use would have been near 3.145 billion bushels, leaving March
1 stocks near 4.935 billion bushels. Stocks at that level would be
the smallest in 15 years. Market reaction to the stocks estimate
will hinge on the size of the deviation from average trade
expectations," Good said.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and
Environmental Sciences]
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