Is there a problem with USDA grain stocks estimates in corn?
Newswires report the expected stocks estimates of various market analysts from which an average analyst estimate is computed. Using the average analyst estimates reported by the Dow Jones Newswire (or their predecessor, Oster Dow Jones and Knight Ridder), the difference from NASS stocks estimates was calculated for each quarter for the 1990 through 2012 marketing years. Since analysts' estimates of stocks are really estimates of usage or implied usage during the quarter that ends with the reference date of the NASS Grain Stocks report, we compute the differences as a percentage of quarterly usage. This difference is commonly referred to as the "market surprise."
Figure 1 presents the history of surprises for NASS implied usage estimates for corn over the 1990-2012 marketing years in chronological order. Note that a positive surprise implies that market analysts under-estimated usage (over-estimated stocks) and a negative surprise implies analysts over-estimated usage (under-estimated stocks). This figure highlights the sharp increase in the volatility of market surprises for implied corn usage that occurred since 2006. There were only 7 instances out of 64 over 1990-2005 where the surprise exceeded 5 percent. In contrast, over 2006-2012, there were 12 instances out of 28 where the surprise exceeded 5 percent. Furthermore, double-digit usage surprises occurred three times during 2006-2012 (-11.55 percent: June-August 2009; -12.13 percent: March-May 2010; -14.66 percent: December-February 2012), and each substantially exceeded the largest surprise observed over 1990-2005 (+7.78 percent: March-May 1995).
As a point of comparison, Figure 2 presents the history of surprises for NASS implied usage estimates for soybeans over the 1990-2012 marketing years in chronological order. The contrast in the pattern of implied usage surprises for soybeans across all quarters in Figure 2 with that of corn in Figure 1 is striking. There is little evidence that recent surprises in soybeans have been outside of historical ranges, whereas the evidence is overwhelming that surprises have been outside the historical range in corn.
Further insight into the pattern of market surprises in NASS implied usage estimates for corn is provided by Figure 3, which shows the surprises by marketing year for each year between 2007 and 2012. It is readily apparent from this figure that the most problematic surprises occurred in the 2009, 2010, and 2012 marketing years. Surprises for the other three marketing years were generally within the normal range of plus or minus 5 percent. Within the three problematic years of 2009, 2010, and 2012, there is also a clear tendency toward reversal of the surprises from quarter-to-quarter. The pattern was especially strong in 2009 and 2012 when the surprises swung back and forth from positive to negative each quarter.
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