Stats on Corn Called Flaky

Farmers and analysts are expressing fresh skepticism about Agriculture Department data on the corn market in the wake of the latest figures, which stunned traders and sent prices on another wild ride.

A high-ranking USDA official last week faced sharp questions at an agriculture forum in Chicago over government estimates of how much corn is stockpiled around the U.S. and how much is being grown in the fields.

Farmers and traders rely on USDA data to help determine the price of corn, the nation's largest crop and a vital driver of the rural economy. The figures are also closely watched world-wide, because the U.S. is by far the largest corn exporter, growing about 36% of the world's corn last year. Unexpected changes in the data can also add to market volatility, making it harder for farmers to hedge their production and plan for the future.

"The level of frustration with the government reports is very high," said Dan Cekander, director of grain research at futures broker NewEdge USA LLC, who sat on a panel at the forum with the official, Joseph Prusacki.

The panel came three weeks after the latest USDA figures indicated there was more corn available than traders expected, sending futures prices plummeting by the maximum daily amount allowed by the Chicago Board of Trade. But subsequent price moves hint at skepticism in the markets. Days after the January report, futures prices started bouncing back and now sit at nearly the same level as before. In one sign of the skepticism, Illinois farmer Aaron Phipps asked panelists at last week's forum whether people who buy and sell corn might eventually start ignoring the USDA's conclusions.

"I just wonder how much longer the market's going to believe them," Mr. Phipps, who grows corn and soybeans on about 2,100 acres in Chrisman, Ill., said in an interview. "The surprise factor after every report, that's going to wear thin."

In an interview, Mr. Prusacki stood by the government data and described the critics' views as "just difference of opinion." Asked whether the USDA figures might become less relevant, he said, "I hope not."

The Wall Street Journal reported in December that monthly USDA forecasts of how much corn the nation would produce were off the mark in 2009 and 2010 to a greater degree than in any other two consecutive years since the 1990s. The production forecasts released in the heart of the 2011 growing season also appear to have been off-base.

Periodic stockpile reports have also sparked controversy. On Sept. 30, Mr. Prusacki's arm of the USDA, the National Agricultural Statistics Service, where he heads the statistics division, said a quarterly survey showed corn stockpiles were 23% higher than another USDA wing had estimated earlier that month.

USDA officials say unpredictable weather has significantly altered crop prospects in recent years, driving changes in estimated production. They also say the data are subject to change based on fresh information.

The estimates are under particular scrutiny now because supplies have recently hovered near the lowest levels in years, in terms of days of use. That has helped fuel a long rally that has seen prices roughly double since early 2010, settling Friday at $6.445 a bushel.

Last year, corn hit an all-time high of nearly $8 a bushel. Despite the doubts, USDA figures are still considered the most accurate domestic data. The rapid rise of the ethanol industry in the past decade has also changed the market in ways that still aren't fully understood, observers say. And investors have piled into commodities in recent years, adding another new variable.

Friday's panel, titled "USDA Reports—What's Going On Here," was meant to address the controversy. The forum was organized by Farm Journal Media, which publishes agriculture magazines and newsletters, and more than 800 farmers were registered to attend.

To compile data on corn stockpiles and expected production, Mr. Prusacki's service surveys thousands of farmers and corn consumers and sends counters into fields around the country at pivotal points in the growing season. Another USDA agency, the World Agricultural Outlook Board, also plays a central role in the estimates. A spokeswoman for the board declined comment.

The reliance on information that market participants themselves provide fuels questions about its reliability. "Joe will tell you the elevator numbers are accurate," said Peter Meyer, a former Wall Street analyst and frequent critic of USDA data, who also joined Mr. Prusacki on the panel. He was referring to figures on how much corn is stored at grain elevators.

But elevator operators can't always distinguish between corn left over from the prior year and corn that's just been harvested, Mr. Meyer said—a distinction that is important in forecasting supplies.

Gathering accurate data is "an impossible job," Mr. Meyer said.

Mr. Prusacki told the audience USDA staff examine the data they receive, looking for "deviations from what's expected" in figures that farmers and others report. "We'll call them back and say what's going on here," he said.

In an interview afterward, he said it was important to hear what the doubters say. "I have to understand," he said. "I can learn from them."

Steve Pitstick, who grows corn and soybeans in Maple Park, Ill., said in an interview that local prices for corn in his area suggest supplies are tighter than the USDA indicated. "At the end of the day, are they right or are they wrong?" said Mr. Pitstick, who attended the forum. "We'll find out." 

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