Fundamentally Speaking

Accuracy of USDA Initial Ending Stocks Estimates

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst

Next month the USDA will release its first balance sheets for the 2015/16 marketing year including their initial projections of ending stocks for U.S. corn and soybeans.

For reference, the USDA issues 18 WASDE reports for each marketing year starting in May and finishing in November a year later.

The first WASDE balance sheet estimates are issued when the corn and soybean crops are just getting planted so any production estimates are subject to large revisions as even planted and harvested acreage let alone yield calculations are still up in the air.

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Similarly the demand projections are also estimates and even the beginning stocks figure is subject to change.

Nonetheless we were curious about how accurate the USDA forecasts are 18 months out so this graphic shows the change in U.S. corn and soybean ending stocks in million bushels from the first estimate in May to the final one 18 months later.

Soybeans are on the left hand axis and corn is on the right hand axis with this marketing year taking the difference between the May 2014 figures and the April 2015 numbers.

It appears that the USDA has a greater tendency to overstate soybean than corn stocks and often that is based on demand projections that are lower than the final consumption figures turn out to be.

Not including this year the USDA has overestimated final soybean stocks in seven of eight years and in a 16 year stretch from 1995/96 to 2010/11 The USDA overestimated stocks 14 of those seasons including nine years in a row.

Their track record in corn is more balanced for over the past 16 seasons the USDA ending stocks estimate has been too high eight times and too low in eight instances.

One reasons for higher percent of overestimation in soybean stocks is that demand especially to China has been far more robust than many in the trade and government had expected.

This may change given the Chinese economy is now expanding at the slowest pace in a generation and a third year in a row of record South American soybean production may cap our exports that have increased by an average of 85 million bushels per year over the past ten seasons.

(KA)

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