My goodness, Darrel Good, the Dean of Corn Accounting in my book, anyway, waxes almost florid in his comments about the latest WTF report from NASS.
While it should be expected that the market will not always correctly anticipate USDA estimates, the recent pattern of large and seemingly alternating direction of the surprises in the quarterly corn stocks estimates is problematic. One of the results is a pattern of feed and residual use of corn that varies considerably from quarter to quarter and from year to year. That pattern can make it difficult to anticipate future feed and residual use and can result in wide swings in projections of feed and residual use for the marketing year or estimates for the previous year in the case of the September 1 stocks estimate. A number of examples can be cited, but consider the most recent experience. The smaller than expected estimate of stocks for September 1, 2012 resulted in the estimate of feed and residual use for the 2011-12 marketing year being increased by 162 million bushels. The smaller than expected estimate of December 1 stocks resulted in the forecast of 2012-13 marketing year feed and residual use being increased by 300 million bushels in the February 2013 WASDE report. That forecast was increased by another 100 million bushels in a rare change in the March 2013 WASDE report. Presumably, the projection will be reduced sharply in the report to be released on April 10.Problematic? For those of us who have been reading Darrel for several hundred years, this is flaming rhetoric - with which I agree. My uneducated guess is we are reaching the outer bounds of human ability to massage raw data, and would be better off if fewer cooks flavored the statistical stew. Moving to purely objective results (raw numbers assembled by computer algorithms) would at least allow others the ability to begin to analyze from consistent errors, instead of an ever-changing human input based on who was in the room and held sway. You can't apply a correction factor to an obscure, inconstant calculation. Just a guess on my part.
The difference between the USDA's March 2013 stocks estimate of 5.399 billion bushels released on March 28 and the average trade guess was about 370 million bushels, one of the largest differences in the past 30 years. Old crop corn futures declined by more than $0.80 per bushel in the initial reaction to the larger than expected estimate. The dilemma now, however, is what to expect for the June 1, 2013 stocks estimate. The implied rate of feed and residual use of corn in the first half, and particularly in the second quarter, of the 2012-13 marketing year is quite low. The slow rate of feed and residual use does not seem consistent with livestock numbers, a sharp reduction in the production of distiller's grains, and the implied negative feed and residual use of wheat during the same six month period. March 1 wheat stocks also exceeded market expectations by a large margin. Experiences over the past three years suggest that the June corn stocks estimate may "correct" for some of these apparent inconsistencies. If that turns out to be the case, the magnitude of the current price weakness may not be justified. Because the reasons for the sometimes large deviations between USDA estimates and market expectations are not obvious, the June estimate may or may not provide another surprise. [More exquisitely diplomatic prose worth reading] [My emphasis]
I don't want to beat a dead bureaucracy here, but my objections to NASS performance have been largely confined to speed (well, the lack thereof). I'm not close to being either objective or knowledgeable enough to opine about competence other than express my own astonishment at the confusing variance.
Speed may be the least of the problems, apparently.