1. USDA really dropped a bullish stocks bomb on the corn market this morning. The 255 million bushel bullish stocks/usage surprise was the second largest in my records going back to 1983. Only rivalled by last year's 314 million bushel bullish surprise.
2. The bushel surprise number going back to the 1980s is not really a fair comparison since the size of usage has increases so much since then. Here are the stocks/usage surprises in % terms
3. Even in % terms the stocks/usage surprise was extremely bullish by historical standards. The surprise was 7.9%. Still second largest and on record and comparable only to last year and 2011. Dwarfs everything else.
4. So now my earlier thread before the report was released is very relevant. What to do with this new ending stock number for 2019/20 of 1,995 million bushels? We only have one choice, increase feed and residual use for the just ended marketing year by around 250 million bu.
5. Do I really believe feed and residual use last year, in the middle of a huge pandemic, should now be boosted by a quarter of a billion bushels? Personally, I don't think feed use was really that high. Instead, the 2019 corn crop was likely over-estimated by that much.
6. A 250 mil bu overestimate of the 2019 corn crop is actually a very small error and should not be cause for alarm. We have been dealing with unresolved corn production sampling errors like that forever. Call it residual and be done with it.
7. What I don't think the USDA should do come next January is go back and revise the just printed Sep 1 stocks estimate because feed and residual for 2019/20 now looks too big. NASS says they did not do that last year, but how else did they arrive at the change to stocks?
8. My last point in this thread. Should we be worried about the accuracy of the USDA quarterly grain stocks report because the surprise was so big? I don't think so. This is % surprises for all quarters going back to 1983.
9. Notice that usage surprises have gone through extended periods the last 20 years of bullishness and bearishness. Generally bearish over 2014-2018 (I never thought this was going to end!) and tending bullish since. I have no idea why this happens. It just does.
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