Questionable government numbers, incredibly bad grain markets, too

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Fall harvest, 2018
Fall harvest, 2018.

The best part about Aug. 12 for this market observer was my company conference call came just hours before the latest government number dump. This gave me expert insight into what we could expect from the report and what the view in our company actually was.

The worst part about Aug. 12 was the company view that the report was not going to reflect actual growing conditions may have been borne out. The U.S. Department of Agriculture still thinks we have a much larger corn crop growing than farmers and marketing advisors do.

Sets of numbers

So, Aug. 12 at 8:30 a.m., Russell associates got the latest internal review of what advisors across the country were seeing in actual fields and the latest review from the number-crunchers at the top. At noon we got the government view, which was expected to be divergent from reality.

It must be emphasized that the market is forced to trade the government numbers. This is why we get a report, the market reacts, and then the market slowly comes back as traders jawbone their own numbers.

Analysts are forced to put out two numbers. They publish what they think the government will come up with, then they publish what they believe.

It is hard to take the wrap-up sheet from any trade group and understand the numbers. When you see an “average” guess, is it the government number guess, or the reality guess?

This is how hard the advice business has become.

It was reported Aug. 9 one major advisory group wanted farmers to sell corn. One wanted them to buy corn. One wanted them to do nothing. So, you literally pay your money and take your choice.

Report adjustments

Looking at the numbers, the USDA lowered planted acres of the corn crop significantly, as is consistent with their methodology of making small changes leading to the correct final January numbers. They have also raised the yield numbers.

The USDA now says we planted 90 million acres of corn, down from the 91.7 million reported in July. They raised the yield from 166 to 169.5 bushels per acre. The result is a crop of 13.9 billion bushels.

Traders are looking for a corn crop of closer to 13 billion bushels, with guesses as low as 12.7 billion. Traders think the USDA final harvested acres are way too high, predicting 80 million instead of 82 million. Most traders think the yields will be more like 165 bushels per acre, and actual private guesses are as low as 157 bushels per acre.

There is a huge difference of opinion here, and we don’t have the luxury of waiting until January to make decisions.

The USDA dropped soybean planting from 80 million acres in the July report to 76.7 million. This has helped soybean prices jump a dime, while Aug. 12 corn futures were down the 25-cent daily limit, with almost seven cents follow-through in the morning Aug. 13.

Futures

In the process, December corn futures broke through another “decade,” trading a new recent low of 3.86. Two weeks ago, we were holding above 4.20. The last time we were this low was in the middle of May, when we still thought the crop would get planted.

Much of the dubious nature of current private analysis centers on the agronomy of late-planted corn and late-planted beans.

Corn was still being planted in late June, more than was originally expected when the calendar got so late. Soybeans were still being planted in early July. Yes, the short beans could put on heavy pods with perfect weather, but we are not getting perfect weather.

I am still seeing a lot of beans that are podding, and the plants are 12 to 16 inches tall. I have seen bean fields that are still 6 inches tall. The miracle of the 48.5 bushels per acre soybean yield the USDA is reporting is an opium den fantasy.

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