Understanding USDA's Surprising Corn Stocks Estimate

The forecast of the Brazilian crop was unchanged at 2.4 billion bushels. The USDA now expects U.S. corn exports to reach 1.65 billion bushels during the current marketing year, he said.

"Nineteen weeks into the year, export inspections have averaged 32.7 million bushels per week (adjusted for Census export estimates through November). Inspections need to average 30.9 million per week from now through August in order for the total to reach the projection," he said.

A further reduction in the size of the South American crop, as occurred in the drought of 2008-09, could boost U.S. exports above the current projection, particularly if China continues the current pattern of small weekly purchases, he noted.

"Beyond the South American crop, corn prices will be influenced by 2012 U.S production prospects. In general, analysts are anticipating more acres, higher yields, and a much larger crop than in 2011," Good said.

According to Good, such a large crop has not yet been priced into the market. Potential crop size will be gradually reflected from spring through harvest, beginning with the USDA's February baseline projections and including the March 30 Prospective Plantings report.

"Oh, and don't forget the March Grain Stocks report to be released on the same day," he said.