 "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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