Why is anticipating feed and residual use of corn so difficult?
A second reason for the difficulty in anticipating the magnitude of quarterly feed and residual use of corn is that apparent use during any particular quarter has varied substantially more in recent years. This variation has been most notable in the first and last quarters of the marketing year when estimated use is influenced by the amount of "new crop" corn that is harvested before Sept. 1. However, there has also been considerable variation in the estimates of use in the second and third quarters of the marketing year. From the 2006-07 marketing year through the 2012-13 marketing year, the estimate of feed and residual use varied by more than 500 million bushels for each quarter of the year. In contrast, the range in the seven marketing years from 1999-00 through 2005-06 did not exceed 275 million bushels for any quarter.
A third factor that makes anticipating and projecting quarterly feed and residual use of corn difficult is the shift in the quarterly pattern of consumption in that category since the 2006-07 marketing year. With minimal variation, the quarterly distribution of marketing year feed and residual use was very consistent from 1990-91 through 2005-06. Use was largest in the first quarter (as a percentage of the marketing year total) and smallest in the fourth quarter, but that distribution did not vary much from year to year. Since then, there has been substantially more variation in the quarterly distribution of use and a general shift to a larger percentage of consumption in the first quarter and a smaller percentage in the fourth quarter of the year.
The increased difficulty in anticipating the magnitude of quarterly feed and residual use of corn makes it difficult for the market to anticipate the USDA's quarterly corn stocks estimates. That difficulty is compounded for the December 1 report since that estimate also includes any change in the production estimate not anticipated by the market. As a result, the USDA's quarterly stocks estimates have provided some surprises in recent years, resulting in sharp price reactions. Some of that price reaction may indicate that the market has not recognized the changing pattern and increased variation in quarterly feed and residual use and is over-reacting to perceived surprises. The next opportunity for a surprise will be with the estimate of December 1, 2013 corn stocks to be released in the second week of January.
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