Editors' Notebook

Are USDA Crop Progress Reports Necessary?

Cheri Zagurski
By  Cheri Zagurski , DTN Managing Editor
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In a recent letter to the editor of DTN, Mark Friesen of Aurora, Nebraska, made an interesting proposal.

He suggested USDA should stop reporting crop progress once harvest has begun. Crop Progress reports are released weekly on Monday afternoons, through the end of November.

Friesen's reasoning was that once harvest has begun in the Southern states, 100% percent of the crop is no longer standing, so the reporting should be ended.

Friesen's letter has been posted on DTN services in the Town Hall segment and it prompted me to ask a group of readers I keep in contact with what they thought of this proposal.

Clayton Kline of Edina, Missouri, thinks this kind of reporting should be stopped altogether. "It has always seemed to me that all reports, regardless of whether they pertain to crops, livestock, land ownership, usage or whatever else, are taken and sometimes required by the government, then are used to beat the reportees over the head. Whatever happened to: None of your ---- business?"

David Kjelstrup of Underwood, North Dakota, agrees. "My thoughts are the same," he wrote DTN in an email. "I'm tired of government -- even the crop insurance program."

Keith Landis of Sterling, Illinois, said this idea might actually be a movement. "A local farm reporter is saying the same thing here in Illinois on the radio," Landis wrote. "He said something to the effect of: Stop all crop reporting; in fact, stop reporting livestock inventories also. We agree!"

Well, if you're gonna have a movement to change the USDA crop progress status quo, you couldn't find a more outspoken leader than DTN's Senior Analyst Darin Newsom. He's been pretty up front in his Friday column, Newsom on the Market, about his distaste for many USDA reports and estimations. I asked him about Mark's proposal and here's what he had to say:

"Why is there any value knowing a possible percent of an unknown number? These estimates are nowhere near accurate, and are more often than not misleading.

"Given the instantaneous and electronic availability of news, the playing field is already level. If anything, these reports unlevel the field when Watson (computerized bulk trading) reacts to the imaginary numbers.

"As for condition ratings, they are a complete farce. But, the computers do react almost every Monday night into Tuesday morning.

"The only purpose of USDA reports now, and it has been this way since at least 2005, is to generate trade volume for the CME," Newsom said.

Crawford McFetridge, from the Finger Lakes area of New York, thinks the idea of ditching the USDA weekly Crop Progress reports will never work and here's why:

"It is not going to work. Ever hear of satellites? Private groups like Informa?" McFetridge said, understandably, farmers want the price of grain to go up, but that's entirely within their control. "If you guys out there want $6.00 corn instead of $2.00 corn, then don't plant hedgerow to hedgerow. You guys have to short grow the market."

McFetridge then suggests the U.S. stop exporting ag commodities -- except to good, historical customers. That does not include China, he said.

Sadly, though, McFetridge said farmers will "... get busy and get that 94 million acres in the ground."

Doug Zillinger of Logan, Kansas, doesn't want the crop progress reports to stop. He wrote: "Interesting position for this gentleman to take. Personally, I have just the opposite thought. The board of trade and the large companies have a better 'reach' and have access to more information than I do as a farmer; therefore, I feel there is value in all the reports that are created.

"As for stopping the reports once harvest starts, I can understand what his position is because as the harvest works from south to north, it appears that when they get to our general area, the harvest information tends to drive prices down right when we start harvest.

"While that is what happens most of the time, I don't necessarily believe the two events are related. I can think of a couple of years where just the opposite happened and if I hadn't had access to the reports, I would have forward contracted and lost the gain in the market as harvest got to us. The farmers to the south had a terrible year going and it caused the markets to bubble just when we started cutting ... Interestingly, that bubble only lasted for about 30 days because we had a good crop and the crop north of us was even better.

"The crop is not complete until you get it in the bin. Just last year, I saw 100-plus-bushel corn and milo beat into the ground in our area in late August. Harvest was under way to the south of us and this statewide storm would not have gotten factored into the closing bushels, so the market could adjust as it currently does. And let's not forget all the milo that fell down and shorted the crop right at harvest, another point that would have surprised the market."

DTN Analyst Todd Hultman sees things along the same lines as Zillinger. "Not surprisingly, our readers seem to have a wide variety of views on USDA's Crop Progress reports with some wanting them to stop.

"In general, I tend to agree with Doug Zillinger's point that making the information public helps to level the playing field and there is some value in knowing the percent of crops planted and harvested. However, there are plenty of reasons not to like USDA's crop ratings. If it helps, the market does not weigh USDA's crop ratings very heavily as they show a very low correlation to the 'final' yield estimates that USDA provides in January and even less correlation to grain prices in general."

Lance Honig, chief of the National Ag Statistics Service Crops' Branch, sent me the following explanation as to the "why" of the Crop Progress reports:

"Knowledge of the progress of major row crops is important for several industries with ties to agriculture. Users can include farmers, commodity traders, insurance agents, grain transporters, government agencies, education institutions, and agricultural economists.

"For example, railroads use this information to allocate grain cars across the nation and throughout the harvest season to efficiently meet transportation demands. Others use condition estimates to stay abreast of potential changes in crop yields between official forecasts during the growing season."

As to why the reports stop when they do, Honig replied:

"The last week that condition estimates for a particular crop are required is the week that harvest reaches 45% to 50% complete. The reason for this cut-off is that condition can only be estimated on the portion of the crop that is still in the ground. Once half of the crop has been harvested, condition estimates would be based on a minority of the crop, and therefore would no longer be representative of the total crop."

I'd be interested to hear what you all think of the weekly report. Do you like it? Do you think it's useful? Or unnecessary? Send me an email at cheri.zagurski@dtn.com and tell me what you think.

Honig provided the following links for readers seeking more information:

Please use this link for an overview of the Crop Progress Survey:

https://www.nass.usda.gov/…

Crop Progress and Condition terms and definitions can be found at:

https://www.nass.usda.gov/…

(AG)

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BDukowitz1375121425
4/27/2016 | 8:11 AM CDT
Perhaps two purposes, trade volume as Mr. Newsom refers and job creation - security for government employees!