Traders’ forecasts for U.S. corn stockpiles are missing official estimates by an amount equal to China’s annual imports, driving swings in futures markets to exchange-imposed limits.
The average gap in the past 12 quarters was 5.28 million metric tons, twice the error rate in the previous five years, data compiled by Bloomberg show. The U.S. Department of Agriculture updates its estimates tomorrow.
Reserves are getting tougher to predict because of an expansion of storage capacity on farms that isn’t tracked by government inspectors and increased use of alternatives to corn in animal feed. The widening gaps spurred the USDA in September to commission a one-year review of its methodology. Limits on price moves set by the Chicago Board of Trade were reached after nine of 12 reports since March 2010, with an average swing of 5.6%, data compiled by Bloomberg show.
“USDA, traders and consumers are all frustrated by the volatility of the numbers,” said Diana Klemme, a director at Grain Service Corp., an industry consultant in Atlanta, Georgia. “Everyone is going to fasten their seat belts and react to the numbers. I don’t think anyone feels confident.”
Inventories were 2.862 billion bushels (72.7 million tons) on June 1, the smallest for the date since 1997, according to the average of 30 analyst estimates compiled by Bloomberg. The USDA’s last estimate for March 1 was 8.1% above expectations and drove a drop in prices that erased $4.9 billion from the value of stockpiles in two days.
Futures for delivery in December, after the harvest, fell 4.5% to $5.4175 a bushel this month. The USDA is forecasting a record crop as output rebounds from last year’s drought, the worst since the 1930s. Goldman Sachs Group Inc. expects corn to drop as low as $4.25 this year while Deutsche Bank AG is forecasting $4.30.
The Standard & Poor’s GSCI Agriculture Index of eight commodities fell 7.8% this month, and the MSCI All- Country World Index of equities dropped 3.5%. Treasuries lost 1.6%, a Bank of America Corp. index shows. Declining crop prices are helping to keep a check on global food costs, which the United Nations estimates rose 2% this year.
U.S. farmers earned more than $112 billion in each of the past two years, with a record $128.2 billion expected in 2013. That compares with $67.7 billion on average in the previous decade, government data show. Some of the cash was used to expand storage, with on-farm capacity of 12.98 billion bushels by Dec. 1, the most since at least 1989, the USDA estimates. The 12% expansion since 2006 compares with a 17% advance in commercial storage to 10.25 billion bushels.