More than once this year—and in 2009—USDA’s reports surprised the trade and drove prices for days afterward. Following the March Prospective Plantings and Grain Stocks reports, for instance, November soybeans rose for three weeks and corn for two weeks. When those reports were repeated in June, corn rallied 70¢ and soybeans 90¢.
Understanding what the reports represent, how they are generated and why the market reacts may help you weather such unanticipated volatility.
Survey Based. Most of the reports issued by USDA’s National Agricultural Statistics Service (NASS) are based on surveys. "Their job is to quantify and report the facts. They don’t do ‘what-ifs,’" says Jerry Gulke of the Gulke Group, who has met with top officials involved with reports in Washington, D.C.
It takes time to gather thousands of farmer responses and crunch the numbers. Sometimes planting intentions don’t happen because of weather, for example, or other events occur between the time the survey is done and the report date.
Quarterly acreage and grain stocks surveys have list samples of about 50,000 operations. A return of at least 80% is required on all surveys.
Prior to harvest, yield and production estimates are based on two types of crop forecast surveys: a grower-reported survey and an objective measurement survey, in which counts and measurements are made in random, standardized plots in the major producing states. NASS assumes normal weather for the remainder of the growing season.
Farmer opinion survey sample size on yield ranges from a minimum of 5,000 farmers in June to a maximum of 27,000 in August. The final January report is based on a December survey of 25,000 farmers and reflects actual harvest yields, says Joseph Prusacki, director of the statistics division of NASS. "That’s considered the yield."
For objective yield surveys, more than 2,000 samples are conducted in the producing states. "For corn, we have seen the number of ears per acre take a huge jump over time, while the weight per ear is about the same," Prusacki says. "So if you figure production is up 700 lb./acre, that’s more than 10 bu./acre just based on the number of ears.
"Based on history, before harvest, farmers tend to underestimate their yields compared with final estimates," he adds. "It makes sense that they would be conservative in their estimates."
Naturally, the closer to harvest, the more based in fact—and more accurate—these estimates are.
"We used the same procedures for corn and soybeans in both 2009 and 2010," Prusacki says. "Yet market players questioned the accuracy of the estimate of the 2009 corn crop and we heard no one questioning the soybean crop."
Categories of Use. In USDA’s supply–demand reports, differences between measured factors such as corn supply, exports and end stocks are reconciled in the feed category.
This summer, USDA’s Grain Stocks report implied more corn feed use than suggested by the number of animals. "As a result of smaller-than-expected corn stocks, USDA had no choice but to raise the estimate of feed and residual use for the year and to lower the resulting end stocks," explains Darrel Good, University of Illinois ag economist. Sometimes new information later resolves such issues; sometimes they remain unexplained.
- October 2010