The corn market was surprised by the USDA’s final 2011 corn production estimate and the estimate of December 1, 2011 corn stocks. The March 2012 futures price declined by $0.52 per bushel in the two sessions following the release of the reports.
At 9.642 billion bushels, December 1 corn stocks were 425 million bushels smaller than those of a year ago and the smallest in 5 years, but were about 240 million bushels larger than the average of the reported trade guesses. Those guesses were in an extremely wide range of 500 million bushels. Three of the 15 analyst guesses reported by Dow Jones were 9.55 billion bushels or larger, so not everyone was surprised by the USDA estimate.
Part of the surprise in the magnitude of December 1 stocks came as a result of the average expectation of a smaller 2011 crop estimate. With the absence of any supporting evidence, it is not clear why, on average, analysts expected a 30 million bushel reduction in the estimated size of the crop. The USDA estimate was a very modest 48 million bushels (0.4 percent) larger than the November 2011 forecast. The 78 million bushel difference between expected and actual production accounts for about one third of the surprise in the stocks estimate. The remainder of the surprise is the result of incorrect expectations about the level of feed and residual use of corn during the first quarter of the 2011-12 marketing year. <Read More>
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