This question looked like a good topic to dive into on a snowy November day:
“I've always wondered how it works when the USDA announces X million metric tons of grains sold to this or that country. I've never sold any of my grain to the USDA, so where/how does the USDA get involved? Is the USDA buying the grain from ADM, Gavilon, etc... or are they just assisting in grain company sales to a foreign country?”
That’s from Jason Westergaard, in Albert Lea, MN
Grain exporters are required to report weekly sales and destinations of grains, and any daily sale over 100,000 metric tons to the FAS – Foreign Agriculture Service, a USDA agency. The USDA is not involved in these sales financially, it’s just just counting the bushels flowing out of the country. These are contracts that have been agreed, not actual shipments, however. This is important because these numbers are subject to revision due to cancellations or shipping problems.
The actual shipments are reported to the USDA Agricultural Marketing Service (AMS) and these are the numbers you need to watch in my opinions. This is a typical chart tracking the monthly shipments. Unlike trade deals and contracts, these numbers reflect goods put on a boat, not a promise to buy. There can be considerable slippage between sales announced and ships loaded, in my experience.
But even that data is not without problems. While it appears to be a weekly update, it can actually be information somewhat older, simply due to reporting and processing times. There are private firms that provide near real-time shipment information, which as you can imagine could be valuable information to know and worth paying for.
The recent turmoil in trade has made this formerly mundane data more valuable. This would also be a good time to make sure we comprehend the mechanics of trade reporting. Next week I’ll try to shed some light on what it means and doesn’t mean when headlines use a seemingly straightforward statement like “China promises to buy more pork”. It turns out that while we know who sold the commodity here, we may not really know who the foreign buyer is.