August 11, 2022
Friday’s USDA WASDE report is already spreading angst within the agricultural industry as the clash between potentially lower yield due to hot weather meets the long-term demand story, amidst the backdrop of uncertain global supplies.
Last week I wrote about items that trade will be watching heading into the report. And more recently, Jacqueline Holland wrote a very thoughtful article regarding overall yield potential going forward.
Ongoing yield debate
My hunch says that whatever the USDA prints for yield on Friday will be met with mixed emotion from all sides of the industry. I can already imagine social media lighting up with dramatic debate once the information is released on Friday.
Remember though, on this report, the USDA gathers their yield information with farmer survey, satellite imagery and their own fancy statistical formulas; no one is actually stepping into a field to measure anything.
Back in 2019, the USDA switched their method of weighing ears as part of their approach to estimate corn yield. USDA now waits until the September report to include data from the field.
Trying to further gain insight on what this report might say, I went back fifteen years and looked at differences in new crop ending stocks from the July USDA report to the August report.
Mixed results for ending stocks
For soybeans, six out of the past fifteen years, the USDA has increased carryout from the July report to the August USDA report. Seven out of the past fifteen years, the USDA has decreased carryout from the July report to the August USDA report leaving two years, where new crop ending stocks were left unchanged.
For corn, nine out of the past fifteen years, new crop carryout was increased on the August report, while six out of the past fifteen years saw carryout decrease. Again, no clear trend is offered.
I did then look to see how new crop corn and soybean prices traded post report over the past fifteen years, and finally something a bit more consistent popped up.
A pattern for new crop prices?
For both new crop corn and soybean prices, ten out of the past fifteen years, prices had a tendency to trade lower after the August report and into the last business day of the month.
Bottom line, the August USDA WASDE report offers plenty of information for the industry to dissect, with a slight historic tendency for lower new crop price action for corn and soybean futures after the report. Unfortunately for this report, there is no smoking gun you can rely on. You can’t outguess these USDA reports, nor how the market will react, so be ready for anything by incorporating strategic marketing on your priced and unpriced bushels.
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The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
About the Author(s)
senior market adviser, Total Farm Marketing by Stewart Peterson
Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.
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