CHICAGO, Jan 17 (Reuters) – The U.S. Agriculture Department should develop a survey of corn feed use to make its benchmark monthly and quarterly grain estimates more accurate for the grain industry, according to a University of Illinois study of U.S. grain and soybean forecasts issued on Friday.
Traders and analysts have been concerned in recent years about the accuracy of USDA’s estimates of production and consumption as traders’ forecasts have diverged greatly from the government’s reported data. USDA’s quarterly stocks report has generated the most controversy, since the start of the 2006 marketing year.
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The USDA projections, which do not include surveys on corn-feed use, are benchmarks in world markets because the United States is the single largest producer and exporter of corn, wheat and soybeans.
“We believe this is the single most important change that NASS should consider implementing in light of our report,” the study said.
The study, which analyzed 22 years of crop data, refers to the USDA’s projections for its World Agricultural Supply and Demand Estimates (WASDE) and the U.S.-only crop estimates by the National Agricultural Statistics Service (NASS).
USDA Chief Economist Joe Glauber said in a telephone interview he was reviewing the recommendations and the agency will institute some in the coming year now that Congress passed its budget this week and sent the bill to President Obama. He said language in that bill also gives NASS the authority to resurrect much sought oilseed reports, including the monthly fats and oils report dropped two years ago by the Commerce Department.
“The bigger issues on the lack of data,” Glauber said, adding that whether to start the survey of corn feed use recommended by the study “boils down to how much funds it will require and how feasible it is.”
The authors of the USDA-funded study, farm market economists Scott Irwin, Darrel Good and Dwight Sanders, said criticism of USDA estimates coincided with the rise of the U.S. biofuels industry, which has siphoned off a huge amount of corn and soybeans for production of ethanol and other fuels.
More than a third of the massive U.S. corn crop is now used to manufacture ethanol, for example, rather than for traditional purposes like livestock feed and starch.
With the big jump in ethanol production, it has been more challenging to track the movement, storage and use of such large amounts of corn.
“We recommend that the WAOB and NASS evaluate the potential costs and benefits of adding a survey of corn feed use that would allow a fuller accounting of corn usage similar to what has been historically possible for soybeans,” the authors said in the report.
“The need for a feed usage survey in corn has long been discussed, but never implemented due to the perceived expense and complexity of such a survey.”
Corn byproducts that USDA should estimate would include ethanol as well as distiller dried grains, or DDG, a protein supplement whose supplies have jumped sharply as a byproduct of the ethanol manufacturing process. DDGs, a rising export, are now a major competitor to soymeal and corn in animal feed.
“Compared to a feed survey, the cost of surveying ethanol plants to gather this data would be relatively low, given that only 211 ethanol plants are currently operating in the U.S,” the study said.
Aside from corn usage, the study also zeroed in on USDA’s yield estimates for corn and soybeans. It said that in recent years, USDA has consistently underestimated final U.S. soybean yields. It recommended USDA explain how it was weighing various factors like weather and historical yields.
“The downward bias in soybean yields has also led to market analysts consistently being surprised in the opposite direction. Consequently, soybean forecasts by market analysts have been more accurate than NASS forecasts at times, but market prices may have been nudged in the wrong direction given the benchmark status of NASS forecasts,” they said.
The study concluded that USDA needs to find the budget and resources to improve its reports in order to retain its traditional credibility.
