USDA Reports Affect Markets, But Pinpointing Direction Difficult

By Betsy Jensen
bjensen@nctc.mnscu.edu

As a crop marketer, there are several reports released by the U.S. Department of Agriculture that you should try to watch throughout the year. While the reports all originate from USDA, they may come from one of the various agencies under USDA such as the Economic Research Service, National Ag Statistics Service or World Agricultural Outlook Board. 

Around the 10th of every month, USDA releases the World Agricultural Supply and Demand report, usually just referred to as the Supply/Demand report.  This report estimates U.S. acreage and yields, U.S. exports, total demand, ending stocks and average price throughout the marketing year. This is also a world report, with similar numbers listed for all major producing, or importing foreign countries.  From this report, market analysts are able to calculate the stocks/use ratios for the U.S. and world for all major commodities, from corn to cotton.

During the spring, summer and fall, the National Ag Statistics Service releases weekly crop conditions and progress reports every Monday afternoon. This report estimates planting and harvest progress, crop development and crop conditions. If dry weather is affecting the crop, you can witness the changing conditions by watching the percentage of the crop rated very poor, poor, fair, good or excellent.  If wet weather is causing planting, or harvest progress, those numbers will be evident in this report.

The Quarterly Stocks and Acreage report is released quarterly, in January, March, June and September. The acreage numbers are very important in March and June, when USDA makes estimates of spring plantings. The stocks numbers show how much grain is left in the U.S., both in elevators and on the farm.

Every Monday, the export inspection numbers are released, and the export sales number comes out on Thursday.  The export inspection number shows how much grain has left U.S. ports, while the export sales number shows how much wheat has been bought, but not necessarily shipped. Both of these numbers are used to determine the export sales estimate that USDA uses in the Supply/Demand report.

It’s difficult to know exactly how a USDA report will affect the market. It’s not the actual numbers from USDA that move the market, it’s the numbers in relation to what traders have expected. If there are bullish numbers from USDA, the market might not rally if those numbers were anticipated.  There have been some very bearish numbers released, and the market will close up sharply.  Trying to predict market movement on the day of a USDA report is a little like trying to forecast the weather.  Just when you think you have it figured out, the market will surprise you.

Contrary to popular belief, USDA reports don’t always make the market go down. In April 2000, USDA released a study that showed commodity price movements after major reports. There was no pattern of prices going up or down the day of major reports. In the wheat market after Supply/Demand reports, it went up 31 times for an average $.057 and down 43 times for an average $.05. In soybeans, prices rallied 37 times for an average $.087 and dropped 35 times for an average $.114.  There just isn’t any pattern to price movements after USDA reports.

Still, USDA reports cannot be ignored in your market plan, because they do cause volatility in the markets, and that can mean some sales opportunities. We may not always like the numbers from USDA, but they are important to understand. 

Jensen farms with her husband Brian near Stephen, Minn., and is an ag commodity instructor with Northland Community and Technical College, Thief River Falls, Minn.