How to make sense of an encyclopaedia of data in a
That is what grain traders will be doing later on Friday,
when they are presented with a heap of US Department of Agriculture crop data
during live Chicago trading hours.
On offer will not only be the monthly USDA Wasde world crop
supply and demand report, a main course in itself in the usual month, by data
on US grain stocks and winter wheat plantings.
"This is not the first crop report released during trading
hours," after Chicago extended the dealing day last year, Richard Feltes at RJ
"But it is the first crop report during trading hours that
incorporates stocks, production and new crop winter wheat area all in a single
report that will be released late morning when the entire world is ready to
"Buckle up for volatility."
Kneejerk reaction mistaken?
One trick for traders is to go to lunch early.
Forecasts for USDA US corn data, 2012-13 and (change on current figure)
Yield: 122.6 bushels per acre (+0.3 bushels per acre)
Area of crop harvested: 86.99m acres, (-707,000 acres)
Output: 10.665bn bushels, (-60m bushels)
December 1 2012 stocks: 8.28bn bushels, (+1.36bn bushels year on year)
Year end stocks: 667m bushels, (+20m bushels)
Sources: Reuters, USDA
"Beware of chasing the initial reaction to today's report,"
Mr Feltes said, with the experience of key data days so far that reversals are
For those unable to quit their desks, another trick
is to focus first on the data which are really likely to matter – and, for many
observers, these lie with corn.
In part, that is because of the history of corn futures of
moving the exchange limit in Chicago – five out of the last six years – on the
days the USDA releases its slew of January data.
And that hardly looks unlikely this year either, given the
huge disagreement between investors over corn data.
Estimates for the 2012 US harvest, for which today will see the
USDA unveil a final number, vary by nearly 500m bushels, compared with 100m
bushels, reflecting largely different estimates for the harvested acreage.
The USDA stands today, for the first time since October, to
update its estimate for the proportion of the US corn which made it to harvest,
amid some ideas that the current figure of 87.7m acres is too high given that
the crop braved the worst drought since 1956.
"We expect the USDA to lower harvest area to 85.0m acres as
they reflect the harvest area story," Chris Gadd at Macquarie said.
Not that all commentators agree, with Mr Feltes noting "mounting
sentiment that the idea that the USDA is overstating 2012 harvested corn area
may be flawed, in view of the early harvest, the prompt filing of crop
insurance claims and the ample time officials had to revise harvested
area" before now.
Most important number?
Still, even the corn harvest figure may pale in significance
against the estimate for US stocks of the grain, accurate as of December 1.
"This number will
combine the crop's final production level along with this freed grain's biggest
unknown demand source – US domestic feed usage – into one data point," Jerry
Gidel, feed grains analyst at Rice Dairy, said.
Forecasts for USDA US soy data, 2012-13 and (change on current figure)
Yield: 39.55 bushels per acre (+0.25 bushels per acre)
Area harvested: 75.548m acres, (-152,000 acres)
Output: 2.988bn bushels, (+17m bushels)
December 1 2012 stocks: 1.98bn bushels, (-390m bushels year on year)
Marketing year end stocks: 133m bushels, (+3m bushels)
Sources: Reuters, USDA
And this figure "will determine if price rationing of this
market has already occurred, or more is needed to bridge the transition to new
crop supplies next fall".
Indeed, if there is some disagreement over production, there
is more over the stocks number, whch factors in the great unknown of feed usage
Feed and residual use, as Don Roose, president US
Commodities, said represents the "fudge factor" in Friday's data, being derived
from the stocks number minus ethanol and export use, which are already known.
'The big fear'
And there are ideas that feed use may turn out to have been
larger than the USDA is factoring in, with Macquarie, for instance, banking on
a figure of 4.185bn bushels over 2012-13, 35m bushels above the USDA figure.
"The big fear is that December 1 stocks will show fairly
large corn feeding in the first quarter of the 2012-13 marketing year," which started
in September, said Dan Cekander, director of grain market analysis at broker
"That would be constructive for old crop corn futures."
Theory and evidence
The thinking that US feed use may have been bigger than
thought is based in part on theory, and calculations of the reduction of livestock
Forecasts for USDA wheat data, 2012-13 and (change on last year)
December 1 2012 stocks: 1.658bn bushels, (-5m bushels)
Marketing year end stocks: 741m bushels, (-13m bushels on current figure)
Hard red winter wheat plantings: 30.185m acres, (+322,000 acres)
Soft red winter wheat plantings: 9.039m acres, (+919,000 acres)
White winter wheat plantings: 3.458m acres, (+117,000 acres)
Total winter sowings: 42.687m acres, (+1.363m acres)
Sources: Reuters, USDA
"It might work if all sectors had cut their numbers as much
as cattle on feedlots," Rice Dairy's Jerry Gidel said.