Traders are mostly expecting next week’s USDA quarterly Grain Stocks Report to be positive to the corn market. However, the numbers tend to be a bit more elusive in years with corn quality problems.
Last fall’s corn harvest is a good example of a problem year. Iowa, the number one corn-producing state in the nation had a two-fold issue. First, there was the drought in the western part of the state. It is typically the most productive corn area in Iowa. Then the winds blew in eastern Iowa. The derecho devastated a huge area. Consequently, Iowa has a corn quality issue and North Dakota State’s Frayne Olson explains that’s a problem for USDA when it counts grain stocks.
“So, USDA has a much more difficult time when we have a corn quality problem to make sure we have the right number. Of course, once you run it across the scale, if you have a test weight problem, most farmers report their inventories based off the bushels in a bin, and may not always adjust for an attribute like a test weight issue or a moisture adjustment.”
Here’s how that works in the real world when USDA surveys farmers about how much corn they have in storage says the NDSU Extension agricultural economist.
“You know, when you answer your survey you write it down as 12,000 but it might be less than that when you take it out and run it across the scale. And so, when we are talking five-plus billion bushels of corn going into the livestock sector and you start to take a couple of percentage points here and there for test weight adjustments and or moisture adjustments and that adds up to some big bushels.”
Now, USDA may have already made some adjustments for these issues. For instance, it reduced the national corn yield in January and Grain Stocks fell. It could be that traders, expecting corn disappearance in the last quarter to follow what appeared to be big livestock demand for feed, might be surprised by the March 31 figure.