USDA’s corn stock shock to put greater weight on October yield

1 Oct 2019 | Tim Worledge

On Monday, the USDA proved it still has the capacity to surprise markets that have become increasingly inured to headline and data driven shocks with the release of its corn stock figures in the September 30 Grain Stocks report.

Old crop corn ending stocks were revised to 2.11 billion bu (53.6 million mt) versus the Wasde’s current position of 2.45 billion bu (62.1 million mt), scratching 8.5 million mt off the 2019/20 carry in stocks.

The move is likely to once again place greater scrutiny on next week’s October Wasde update, as traders and analysts continue to second guess the outlook for the world’s largest corn producer after this year’s planting was severely delayed by heavy rain.

Market sources cited several possible causes for the revision – most focusing on an expected over-statement of the 2018/19 corn crop, currently estimated at 14.4 billion bu (366 million mt), or an underestimate of feed and residual demand.

“The popular theory is they missed the residual/feed or overestimated the crop size last year. But it seems odd they would have missed it in all the other quarterly reports,” Kelly Herrick of Advance Trading told Agricensus.

“If they overestimated last year’s bean crop by 116 million bushels, the talk is that it is likely they overestimated the corn as well,” ED&F Man’s Charlie Sernatinger said.

Other sources pointed the finger at improved data fine-tuning flood-related losses, or a sampling error, while others suggested it could be late harvesting.

Whatever the cause, the net result is to elevate the significance of next week’s October 10 monthly update to the Wasde, with the trade likely to focus once again on the 2019/20 yield.

“The elements that makes this quite interesting are that you make this adjustment to your carry in to 2019/20. It is usually in the October yield estimates that the crop gets locked down and all of a sudden you cut carry in supplies,” Seth Meyer of the University of Missouri told Agricensus.

Meyer, the former chair of the USDA’s World Agricultural Outlook Board and now a research professor at the university’s Food and Agricultural Policy Research Institute, argues that the data reflects a difficult year for everyone involved in US agriculture.

“You have this uncertainty about the size of the 2019/20 corn and soybean crop, and this puts just a little bit more weight on the October estimate for corn yields,” Meyer said.

US corn has been on a rollercoaster since late March, when the USDA’s first planting intentions report – based on farmer surveys – highlighted a huge swing towards corn planting over soybeans as the US-China trade war bit into soybean export prospects.

Futures prices crashed on the report’s release, only for rain to settle in through the key planting months and prompt fears of a once-in-a-generation weather event slashing the outlook for the US corn crop and sending corn futures surging.

With some estimating that up to 45% of corn was planted outside the optimal window, fears have slowly been steadied by a stream of data that has fostered an expectation that the US could be on course for another big corn crop despite the horror start.

Each new dataset has sparked fresh movements in prices, with the latest announcement sparking a relatively modest response on the day – but potentially teeing up a major move next week.

“Folks need to be at least cognizant of the fact that yields could go up (in October). It continues to put that uncertainty out there,” Meyer said.