U. S . A g r i c u l t u r e Department officials faced criticism over recent forecasts that have roiled the grains market, saying that the explosive growth of the ethanol sector had upended traditional patterns.
The robust growth of the ethanol sector in the last few years has altered the structure of the U.S. corn market and is complicating the government s efforts to gauge feed use, the U.S. Agriculture Department said.
That was one explanation offered Oct. 17 as top officials from USDA s statistical agencies met with analysts and commercial grain representatives at USDA s annual data users meeting in Chicago, the hub of U.S. agricultural trade.
USDA is widely regarded as the world s best source of information on U.S. and global crop supplies, offering an unmatched wealth of public data. But over the last two years, several of the agency s quarterly figures for U.S. corn stocks have fallen well outside trade expectations, causing volatile swings in futures on the Chicago Board of Trade.
CBOT corn prices plunged 6.3 per cent on Sept. 30, their second-biggest drop of the year, after USDA reported U.S. Sept. 1 corn stocks at more than 1.1 billion bushels, topping the range of trade estimates as well as the average trade forecast of 964 million.
Three months earlier, the June figure for corn stocks also came in above the range of trade expectations, triggering an even bigger sell-off in CBOT corn. The government s estimates of U.S. crop yield, production and ending stocks have also at times come under fire from traders hit by whipsawing markets.
If you look at the numbers this year, the bottom line is, the feed disappearance in the second half of the year just fell out of bed, said Gerald Bange, head of USDA s World Agricultural Outlook Board. The board produces USDA s monthly estimates of U.S. and global grain supplies.
It may be related to the fact we are using 40 per cent of the (U. S. corn) crop now for ethanol. A lot of the usage there is different than it has been in the past, Bange said.
The threat of budget cuts was an undercurrent at the meeting. USDA said separately that it would eliminate or reduce the frequency of 14 reports to save money.
Already this year, budget cuts have prompted the U.S. Census Bureau, part of the Commerce Department, to eliminate several reports, including a closely watched monthly report on the U.S. soybean crush.
There is a concern about the loss of this data, said Keith Menzies, an oilseed analyst with USDA s WAOB, referring to the loss of the crush report. Especially in times of price volatility, the loss of information certainly does not help the situation, Menzies said.
Corn use questions
USDA s Sept. 1 stocks figures implied lower feeding rates for corn during the summer quarter compared to a year earlier, despite higher numbers of livestock on feed. Some analysts have said the figures strained credulity.
USDA stood by its figures, but its top statisticians admitted they could not explain exactly how or why corn usage patterns appear to have changed with the rise in ethanol production in the last five years, with feed use rising in the first half of the marketing year for corn, and falling in the second half.
I don t know that anyone in this room knows (why), Bange said.
The ethanol boom has created a surge in the output of an ethanol byproduct, dried distillers grains (DDGs), which are increasingly common in livestock feed, replacing some corn.
DDGs, of course, are are on the scene, Bange said. (But) by any reasonable calculation of what DDG use for feed use was … it still does not explain what happened, he added.
USDA s officials dismissed the idea of changing their standard conversion rate of 2.7 gallons of ethanol from a bushel of corn. Some analysts have said ethanol producers are becoming more efficient and producing more from less corn, a factor that could result in lower corn use and higher stocks.
We don t have any anticipation of changing that rate until we have a reliable data source, said Jerry Norton, also with USDA s World Agricultural Outlook Board.
Several analysts said an increase in on-farm grain storage in recent years meant that USDA s quarterly stocks reports were relying more on survey responses from individual farmers, who might not be as reliable as commercial grain warehouses that face strict legal requirements in accurately reporting how much grain they store.
Joe Prusacki, with USDA s National Agricultural Statistics service, said the agency was working with available resources.
Given where we are today, Prusacki said, we are relying on the farmer to give us the best estimate of what the bushels are at a particular date in time.
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If you look at the numbers this year, the bottom line is, the feed disappearance in the second half of the year just fell out of bed.
Wheat price changes on days
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So ybeans price changes on days
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