NAPERVILLE, Ill., Sept 29 (Reuters) – The often unpredictable nature of quarterly U.S. corn and soybean stocks has caused tremendous market volatility in recent years, but trading over the last fiscal year has been on an uncanny trail of the numbers’ tight binding .
Corn’s performance was particularly strong despite a large, perhaps overlooked, revision to the previous quarter’s number in the latest government stock report.
The market will hope to keep the streak alive on Friday when the US Department of Agriculture’s Statistics Division releases September 1 data at 12:00 pm EDT (1600 GMT). These numbers are effectively the US corn and soybean ending stocks for 2021-22.
Sign up now for FREE unlimited access to Reuters.com
On average, analysts value U.S. corn stocks at 1.512 billion bushels on Sept. 1, up 22% year-on-year but otherwise at an eight-year low. Soybeans are seen at 242 million bushels, down 6% year-on-year and the lowest Sept. 1 supply since 2016.
That compares to 2021-22 ending inventory estimates of 1.525 billion and 240 million bushels, respectively, for corn and soybeans provided earlier this month by the USDA’s World Board. The 1 September stock count under study rarely ends up so close to previous ending stock estimates that at least a slight surprise is possible.
Trading performed remarkably well, having anticipated corn and soybean stocks over the previous three quarters. Analysts’ estimates for those three quarters differed from actual figures by an average of just 0.3%, which was by far the best figure for the period since 2005-06 and well below the five-year average of 2%.
In soybeans, they’ve missed an average of 0.9% over the last three stock reports, the best in at least 17 years and better than the most recent 1.6% average for those reports. Trade has underestimated quarterly soybean inventories for the past four reports.
Analysts have nailed June 1st corn inventories this year, potentially resulting in an overlooked nearly 100 million bushel reduction in March 1st corn counts, the third-largest such adjustment in recent memory.
Previous adjustments to corn stocks have been large throughout 2020 after the USDA believed to have overestimated the 2019 crop, although changes in 2021 became nearly negligible again. Big moves in past corn stocks have caused big market outages so keep an eye out for them on Friday.
USDA reconciliation to previous quarterly corn inventories
PRICE INFLUENCE
Analyst bias on September 1st corn and soybean stocks has been mixed over the past decade. They grossly underestimated soybeans in 2021 and vastly outperformed corn forecasts for both 2019 and 2020 (and perhaps predicted the corrections to come).
But they are more likely to keep corn stocks low from 1st September when prices are high, ie when supplies to use are historically short. Analysts’ estimates as of Sept. 1 have underperformed four of the last five cycles when US corn supplies to be used were below 10%, with the only outlier being 2011-12.
The USDA also seems to have the same tendency to overestimate corn consumption when supplies are tight. September 1 corn supplies for the same four years referenced above were above the World Board September forecast for ending supplies, with 2011-12 again being the only outlier.
Although there has been greater volatility in recent years, US soybean inventories to be used have not changed enough over the longer term to link trade distortions to low inventories to be used. However, September 1 inventories were lower than expected in three of the four busiest years, as lower prices may have prompted more demand.
The World Board’s latest estimates suggest US inventories for corn and soybeans will be 10.3% and 5.4%, respectively, in 2021-22. For corn, that would be the second-lowest in eight years and for soybeans, the lowest in six years.
Quarterly US stock reports have been known to shake futures markets, although the September 1 issue is historically the least exciting of the four. This is likely due to the distractions of US mornings in March and June and final US production in January (when shares release on December 1st).
Price action was relatively calm in premarket trading on Thursday. Chicago-traded December corn and November soybean futures are both at 10-year highs for the date and second-best for the season after 2012.
Karen Braun is a market analyst at Reuters. The views expressed above are her own.
Sign up now for FREE unlimited access to Reuters.com
Edited by Matthew Lewis
Our standards: The Thomson Reuters Trust Principles.
The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias under the Trust Principles.
Karen Brown
Comments are closed.