There's no doubt that USDA reports move the markets, but are they as relevant to farmers as they once were? On the day of two reports carrying important fundamental news, the question couldn't be any more salient.
There's no doubt that the market has evolved. There are more speculators of all stripes, including high frequency traders that rely on computer algorithms to trade faster than humans, increased volume and higher prices. The stakes are high, and the market moves fast. But what does this market evolution and the role USDA plays in it mean to the folks that sow, tend and harvest the crop? DTN asked a focus group of readers about their thoughts on USDA reports, and here are some of their responses. Please feel free to share yours in the comment section.
"The truth is with the USDA reports, I have to pay attention to them, because the markets pay attention to them. Even if it is only for a short time, and the markets correct over time, a person can make some money in that short window. As margins per acre are getting tighter and tighter, a small bump in the market, even only 20-30 min, can add to the bottom line. The USDA can pull some surprises also. Have to pay attention." -- Cory Ritter, Blue Mound, Ill.
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"I don't believe they are as relevant as they were in the past. So many of the marketing firms do their own research and by the time the report comes out most of the information is already in the market. Often if the numbers are way different; they are not believed. Our market advisor said we may not believe the numbers, but that is what the trade is trading." -- a farmer from Jefferson, Iowa
"Several years ago before all the speculators were involved in the markets, I would say the USDA reports were beneficial. Now they are very important to make moves in the market. Speculators make money as long as the market is moving up or down. The reports give them another reason to move it. I follow the reports, but usually I am already committed to my crop rotation beforehand, but it does create an incentive to forward contract some of my crops. This year I have everything possible locked in at profitable prices, just in case the acreage is high and we receive ideal weather." -- farmer in Idaho
"Yes, I care about USDA reports -- because they usually move our markets -- and it seems most often in the wrong direction. I secretly think USDA manipulates our markets and can "adjust" figures to move markets whatever way they chose to. I do think finally the USDA reports are discounted by market watchers in a day or less -- because they are so often way off the mark. After the report "damage" is done, the markets move quickly to weather worries or more important market fundamentals. I always read the reports and analysis of them by various sources and then try to make the best determination of what is actually the case (with the markets news)." -- Karen Johnson, Avoca, Iowa
"I guess they are a necessary evil. You have to! They can mess up a market real quickly. It seems at times they use the reports to move the market the way they think it needs to be, especially at crop insurance times. Yes, I think they use numbers in their best interest at times. In the age of computers and internet they should be able to come a lot closer with their figures. You do a good job. We need the numbers because that's what the trade uses until the next report." -- Bob Birdsell, Maryville, Mo.
"It's interesting to a point to see what is going on in USDA's mind, but I sometimes think they skew figures to achieve an overall goal of cheap food policy (in effect since the Eisenhower administration). I also believe the industry sometimes doesn't put a lot of faith in the numbers, DEPENDING on what they say. I feel overall your market analysts are pretty much right on. Take home message: depends on what you have at risk and please keep doing what you are doing and let the readership sort of the rest. Thanks for asking me." -- a farmer in New Era, Mich.
"Most years we don't care -- 10 days later it's like it never happened. But every 5th year or so it's a game changer. Weather is more of an issue for us up here." -- Lynell Hofer, Freeman, S.D.
"I believe world traders utilize the reports, but farmers only use them as a point in reference to what they gather from other sources and growers. I escorted a grain trader from England and a hedge fund manager from NY on a three day drive through the corn belt last August to actually walk corn fields and do yield checks so they had an understanding from the 'boots on the ground' point of view. They were amazed by the whole process and remarked that the numbers were subjective but the only source they had to work with. Our estimated average national yield came in at 125 at a time when the July USDA report was over 140 I believe. My point is that social media allows farmers access to current developments in crop production state by state from other farmers and analytical sources and real time information that is not "massaged" nor distorted by old model data carried forward by USDA analysts. Ours is a "real time" industry because a couple of 105 degree days with a 20 mph breeze can ruin a corn crop let alone several weeks as we experienced last year. The USDA will always be behind the curve in their analysis because they are so tied to historical yields and don't want to "make waves". They will get the 2012 crop yield right by January of 2014." -- a farmer in Michigan
(Editor's note: when we asked this question, we didn't know we were going to publish the responses. We received a lot of candid responses, and if we didn't get explicit permission to name the farmer, we identified them only by where they farm.)
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