OPINION: Who needs gov’t planting data when there are more accurate numbers?

One of the most interesting dynamics of the 2019 crop year has been the unusual spring weather conditions which limited planting both in terms of timing and the number of acres actually sown. There’s also been widespread speculation over both crop acreage and yield potential for both corn and soybeans in the current production year.

With crop supply being a core pillar in the supply and demand marketplace, prices have been swift to react and since mid-May, we’ve experienced significant changes in North American grain prices. Not lost amongst the news on crop supplies and potential seeded acres has been a certain degree of frustration in the farming community over government crop reports, and whether or not the public information is in fact accurate.

Both the United States Department of Agriculture and Statistics Canada released their estimates of the 2019 final seeded acres for major crop on June 28. The USDA received a great deal of attention for its suggestion that 91.7 million of an originally intended 92.8-million acres of corn were planted during the unusually wet and late spring. Similarly, StatCan reported that 2.2-million of an originally intended 2.3-million acre corn crop were planted in Ontario. Intuitively, it was widely believed that these estimates couldn’t be correct. (The USDA even included a caveat in its publication release which said that about 15.7-million acres in several of the key heartland states needed to be resurveyed and they would re-issue planted acreage figures in mid-August).

Commodity futures markets tried rather half-heartedly to trade corn prices lower to a production figure that would have aligned with the government’s official acreage estimates for a few market sessions, but by the second week of July, prices were back to the pre-report levels.

The bottom line is that the big players in the commodities markets don’t trade multi-billion dollar positions based on public numbers created by civil servants. In order to earn the confidence of investors, and the permission to take significant financial exposure in the marketplace, the large commodity funds and major commercial grain trading firms all have their own research departments and they take getting their figures correct very seriously. Those groups have so many dollars riding on getting it right that it would simply be naïve to believe that their analysts did not make enormous efforts to get the figures right. Once in a while, farmers and the general public get a chance to peek at portions of that market information, and when we do, we should make exceptional efforts not to miss it.

Prior to the release of the USDA final-seeded-acreage report on June 28, the range of the estimates from the private analysts were mostly between 86-million and 88-million acres (a full range from 82.9 to 89.8), and the range of estimated soybean acres was mainly between 82-million and 84-million acres (with the full range between 81 and 86.5). When the USDA came out with 91.7-million acres of corn and 80-million acres of soybeans, it didn’t generate any lasting traction in the price because essentially no one in the marketplace believed them. The USDA’s official corn acreage was too high, its official soybean acreage was too low, and the world price of both crops was unaffected by the data.

It’s similar to Aesop’s fable about the Little Boy Who Cried Wolf. When the marketplace isn’t consistently receiving accurate information, they quit paying attention to it, and move on to alternative sources that better match their business needs.

The challenge for farmers is to focus on finding better sources of market intelligence. Agri-business professionals have already done this in other areas of our operations, such as getting satellite weather images instead of making decisions based on our local radio weatherman. Sourcing accurate and independent market information, ideally from a source heavily invested in the market, is key to making good decisions. Archer Daniels Midland, (ADM), operates grain elevators, flour mills, and oilseed crushing facilities around the world. They also own Informa, which is a market research firm and frequently releases data on grains and oilseed production.

The agricultural risk management firm FCStone has a substantial market intelligence unit which release analysis and insight daily. It’s not about finding numbers that you like. It’s about finding numbers that are right. Sometimes the best decisions are made amidst some hard realities, but the key root word in “realities” is “real.”