Every year, the US Department of Ag releases a number of reports. And every year, analysts and farmers assume that each report will impact market prices, and spend time and energy making predictions and assumptions on what will happen in the near future. While the markets may move briefly with the release of each report, there are only four reports that generally drive the market most:
- Early November WASDE Report, which is the first look at worldwide supply and demand numbers.
- January Final Yield Report, which is a concrete number that removes the ambiguity that traders use to know and understand worldwide stocks, supply and demand.
- March 30 Planting Intentions Report, which creates a baseline scenario for worldwide traders to use with their projections before the planting season begins.
- June 30 Final Acreage Report, which is a concrete number that traders use to predict production numbers and supply versus demand correlations.
The remaining reports from USDA are all meaningful, but to a lesser degree, and typically impact trade briefly – unless, of course, there is a big shock in one of those reports. To develop these reports, USDA uses a combination of factors, including farmer surveys, crop condition scores and their own expert analysis. Although some reports are more subjective than others, late summer reports become more accurate as the crop year progresses, and therefore carry more weight by the traders. In other words, early crop condition reports rarely make an impact with traders worldwide.
There is often a lot of speculation and noise ahead of each USDA report, but honestly, trying to guess what the USDA will say is foolish at best. So many variables are used for these reports that even the best analysts often get it wrong. Traders also react differently to reports and attempting to gauge their reaction adds another layer of complexity.
Instead, it’s important to consider what the potential outcomes of a report may be, and how you are positioned for each one. For example, if you have grain left in the bin by mid-year, what are your opportunities to sell if an upcoming report leads to traders feeling bullish about supply and demand, and how quickly will you make a decision?
A strong advisory partner can help you sort through the pre-report noise and create a plan based on several different potential outcomes. For example, we help our customers come up with a plan ahead of the March 30 Planting Intentions Report. If we believe the report will be bearish, we may advise our customers to increase their percentage sold to 30%, because the report will hang over the market for the next 60 days and limit profit opportunities. When the report is released, we quickly reassess to see if any changes should be made to their plan.
There’s plenty to worry about throughout the year than trying to make an accurate guess on how every USDA report will impact prices. Keep the emotion out of the pre-report noise by planning ahead so that decisions feel less like a gamble and more like a strategic opportunity.
Our program, Cargill MarketGuide™, is offered by Cargill Commodity Services, Inc., a registered commodity trading advisor and wholly owned subsidiary of Cargill, Incorporated. This affiliation with Cargill provides Cargill MarketGuide™ clients with up-to-date access to market information from every major grain producing region of the world; we refer to this affiliation as the Cargill Connection. Our recommendations are driven by the desire to meet our customers’ business objectives and Cargill MarketGuide™ clients are never under any obligation to sell their grain to Cargill. Past results are not necessarily indicative of future results. The risk of loss in trading commodity interests can be substantial. Do not reproduce or distribute. © Cargill Commodity Services, Inc. 2018. All Rights Reserved.