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We'll Know What We Know

Image by Dave Tonge

USDA’s set of January reports is set for Friday, Jan. 12. My usual comment on this particular set of numbers is that it’s the Super Bowl, Daytona 500 and Kentucky Derby all rolled into one. It has the hype of the Super Bowl and the noise of the Daytona 500, and has come and gone as quickly as the Kentucky Derby. Things get pretty quiet, reportwise, after that until the end of March.

This January cornucopia is filled with data from annual crop production, winter wheat seedings and quarterly grain stocks, just to name a few. It’s also home to the standard supply and demand whatnot that we are served every month.

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What we need to remember, and what I spend much time and effort reminding folks of, is we still won’t know what we still won’t know but will know things we know. Makes sense, doesn’t it?

FINAL WORD. Take the two cornerstones of the January report: Final crop production and supply and demand. The January report is best known for being the “final” word on crop production the previous year. And, for the most part, it is. The last time production numbers changed significantly from a January report was in 2016, when USDA made a 96-million-bushel reduction in 2014 production. Why? I don’t know. Or, if I did know, I don’t remember. The best answer is probably, “Because it can.”

Since changes normally don’t occur years down the road, we can generally assume that, as of the morning of Jan. 12, we will know what corn and soybean production was this past fall. Another set of numbers we can feel relatively confident in is 2017–2018 beginning stocks of corn and soybeans, because those will once again be pulled from the Sept. 30 “Quarterly Stocks” report. But, that’s it for what we’ll know. Beginning stocks and production? Out of the hundreds of numbers released that day, those will be the ones written in pen rather than pencil.

LITTLE CONFIDENCE. You might ask, “What about total supplies? Won’t we know total supplies if we have beginning stocks and production?” No. Not confidently, because imports for 2017–2018 are still an unknown. We can “assume” to know what imports will wind up being though next August; after all, we’re only talking about roughly 50 to 70 million bushels, but the original “Bad News Bears” movie taught us all what “assume” means.

What about ending stocks? I won’t even bother with soybeans except to say USDA tends to reduce its guess by about 57% over the 17-month report period from its original estimate through the final quarterly stocks figure. But, how can we know corn, or wheat, or ending stocks of anything at this point? We know little to nothing about what total demand might be for the balance of the marketing year.

As for world supply and demand estimates, let me put it this way: If USDA can’t come close on its U.S. guesses, why would we think it could do better with its numbers for the entire world?

Just remember, at the end of the day, we’ll know a little more than we did before. Not much, but a little.

Read Darin’s marketing comments each Friday at about.dtnpf.com/markets.

You may email Darin at darin.newsom@dtn.com.

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