I’ve done a lot of talking about last Monday’s Quarterly Stocks report; from this past Wednesday’s appearance on WIBW Radio (Topeka, Kansas) “Ag Issues” program, to my my latest Weekly Column “Breaking Wind of Change”, and participating in a somewhat heated panel discussion on IPTV’s Market to Market program Friday. My theme of the market tells us what we need to know isn’t as popular as those constantly barking about the importance of fabricated USDA numbers. So, I’m going to return to a chart I’ve posted on occasion, a look at what the cmdty National Corn Price Index (NCPI, weighted national average price) was telling us all through the 2018-2019 marketing year.
When you look at this chart, a correlation of the daily average price of the NCPI over the course of the marketing year with ending stocks-to-use (es/u) dating back to the 2005-2006 marketing year, recall that as recently as USDA’s September Supply and Demand report (released on Thursday, September 12) the official 2018-2019 ending stocks-to-use was calculated at 17.3%. If we look at what the cash price should be averaging with such a large es/u, we see the NCPI should’ve been averaging near $2.55. Instead, the marketing year daily average for the NCPI was running nearly $1 above that. When the final calculation was done on September 30, the average came in at $3.53 (yellow dot).
Note that the $3.53 fits comfortably within the familiar box from about $3.20 to $3.60, while es/u ranges from about 11% to 16%. Keep in mind how far outside that box USDA’s previous es/u numbers had been. When the envelope holding USDA’s Sept 1 stocks on hand number was opened, and the 2.11 bb figure was released (and given the latest total supply number of 16.585 bb), total demand/disappearance was calculated at 14.575 bb versus USDA’s most recent guess of 14.140 bb. This put es/u at 14.6%, back in the box with most of the rest of the marketing year’s.
I’ll make my point one last time. USDA’s numbers are irrelevant. All we need to do is watch what the market is showing us if we want to understand real supply and demand. And now I’ll move on.
