“As a starting point, we estimate use based on the USDA’s projection of use for the year of 4.6 billion bushels and an estimate of ‘normal’ seasonal consumption patterns,” said Good. “But what is normal? Over the past four years, the proportion of annual feed and residual use occurring in the first half of the year has been very inconsistent, ranging from 65.5 to 75.8 percent, and generally very high, averaging 70 percent. In the five years prior to that, use in the first half of the year ranged from 61.7 to 66.3 percent and averaged 63.9 percent.”

Good explained, “If the USDA’s projection of feed and residual use for the year is correct, and 64 percent was consumed in the first half of the year, consumption in the December-February quarter would have been only 1.11 billion bushels, the lowest level in 23 years. Total consumption during the quarter would have been near 3.18 billion bushels, and March 1 stocks would have been near 6.466 billion bushels. If 70 percent of projected feed and residual use occurred in the first half of the year, March 1 stocks would be projected at 6.195 billion bushels.” The range is unusually large. Estimates at either extreme might bring the USDA projection of feed and residual use for the year into question.

Recent and ongoing corn price behavior has led some observers to expect a relatively small estimate of March 1 stocks. The ongoing strong basis and recent inversion in futures prices implies a combination of slow movement of corn to the market, relatively small supplies, and a higher consumption rate than forecast, most likely in the feed sector, because use in other categories is transparent. The current price structure underscores the importance of the March 1 stocks estimate and the amount of supply rationing, if any, needed during the remainder of the marketing year.

The magnitude of corn planting intentions for 2012 has obvious price implications, but there seems to be more agreement on intentions. Expectations center on the USDA benchmark of 94 million acres, about two million more than was planted in 2011. The big unknown is the 2012 average corn yield. The USDA has started with a projection of 164 bushels, well above the trend calculation for the year.