NAPERVILLE, Illinois, Sept 28 (Reuters) - U.S. corn supplies have been below normal for the last of couple years due to a combination of disappointing crops and stronger demand, though that run is expected to end once this year’s near-record crop is harvested.
However, the starting corn inventory for the current 2023-24 season will not be settled until the U.S. Department of Agriculture issues its next set of reports on Friday, and the trade has had trouble anticipating this number in recent years.
On average, analysts expect Sept. 1 U.S. corn stocks at 1.429 billion bushels (bbu), a three-year high for the date but below the decade average. This survey-based figure becomes the ending stocks for the 2022-23 marketing year that concluded Aug. 31.
Sept. 1 corn stocks have fallen outside the pre-report range of trade estimates in five of the last six years (not 2021). Four of those five misses occurred when Sept. 1 stocks came in low, generating bullish outcomes.
Bullish Sept. 1 corn outcomes are more probable when supplies are already high and bearish ones tend to result during tighter supply years. This is likely based on the trade’s misjudgment of demand impacts when prices are unusually high or low.
That tendency may be less applicable this year since predicted Sept. 1 corn stocks are middle-of-the-road compared with the last couple of decades. Last year’s expectation of 1.5 bbu was similarly middle-ground, but Sept. 1 stocks came in 10% lower at 1.377 bbu.
This year’s average trade guess implies June-August 2023 corn use down 10% on the year to a nine-year low for the period, likely due to fourth-quarter exports coming in a third lighter this year versus last.
Ethanol production, which uses up to three times more U.S. corn than exports, was up about 2% on the year in the June-August time frame, and most-actively traded Chicago corn futures averaged about 19% lower through that period this year versus last.
Only three of 20 polled analysts think Sept. 1 corn stocks were lighter in 2023 than in 2022. But even if that happens, it should not prevent substantial growth of U.S. corn stocks into 2024 unless an unforeseen demand situation arises.
USDA estimated 2022-23 U.S. corn ending stocks at 1.452 bbu earlier this month.
SOYBEANS
Analysts see Sept. 1 U.S. soybean stocks at a seven-year low of 242 million bushels (mbu), slightly smaller than in the last two years. That is marginally lower than USDA’s latest 2022-23 ending stocks projection of 250 mbu.
Sept. 1 soybean stocks have landed outside the range of expectations in four of the last six years, including the last two, which featured strongly bearish results. Trade estimates imply fourth-quarter soybean use down 20% from the prior year, primarily due to lagging exports.
The outcome of Friday’s soybean number, especially if lighter than expected, could have a more persistent impact on the bean market versus that of corn. U.S. soybean stocks are already seen contracting through 2024 due to a shortfall in the crop.
When USDA’s statistics agency analyzes the Sept. 1 survey data, it may choose to adjust the prior year’s harvest as explanation for the resulting stocks. The trade expects very minor declines in the 2022 corn and soybean crops.
A misjudgment of the prior soybean harvest generally explains why the trade misses Sept. 1 soybean stocks, and this can be hard to gauge since the tendency has been mixed as to whether the soy crop rises or falls during the September review.
To align with the soybean review, USDA in 2020 moved the review of the prior year’s corn crop to September from January. But regardless of the review's timing, the final corn crop almost always ends up equal to or lower than the last projected volume. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
(Reporting by Karen Braun Editing by Matthew Lewis)
