USDA released its Quarterly Stocks report for U.S. grain stocks on hand as of September 1. And has been the case more often than not when it comes to corn, this report created more questions than answers. Recall that in its September Supply and Demand report, USDA guessed domestic ending stocks to be 2.445 bb. Also recall that export demand was abysmally low over the second half of 2018-2019, ethanol demand had slowed due to numerous waivers granted to large refiners, and feed demand was trimmed by smaller cattle on feed numbers and competition from wheat.
All these things actually happened. We could track them as they were occurring. Therefore, it was no surprise when a pre-report poll I saw had an average guess of 2.428 bb, with my estimate coming in closer to 2.6 bb. Remember, demand was not close to average over Q3 and Q4 of the 2018-2019 marketing year. I really need you to remember that.
When its envelope was unsealed and the number read aloud for the world to hear, USDA had pegged corn stocks on hand as of September 1 at 2.11 bb. Well below average guesses, well below the low end of the range at 2.298 bb, and well below any logical person’s estimate BASED ON WHAT USDA HAS BEEN TELLING US SINCE LAST JANUARY. But there is the problem. USDA was telling us one thing (too much corn on our hands) while the cash market was telling us something completely different (the corn wasn’t there).
USDA admitted its numbers didn’t add up in soybeans, so it went back and revised 2018 acres (planted and harvested), yield, and therefore production. However, it did no such thing in corn despite being off its own previous guesses by more than 300 mb, and by logical estimates by near 500 mb. No, it just released the number and closed the dropped the mic. It will be interesting to see how 2018-2019 supply and demand tables are “adjusted” in subsequent monthly reports.
As for the attached chart, you can see the 2.11 bb (green column) or the corresponding ending stocks-to-use of 14.6% are necessarily bullish or bearish. They are though, well below everything USDA had fed the masses over the course of the 2018-2019 marketing year. I’ll be talking more about all this in my next Weekly Column.