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Pity the grain trader?

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Pity the grain trader?

As if there is not enough grousing over US Department of Agriculture data – with trend corn yield estimates seen by many as unduly high, harvested acres ditto, and so on – it is not as if forecasts for these statistics from brokers comes without question marks.

And that leaves the investor - dealing live when big USDA reports are released since Chicago extended trading hours earlier this year – with the task of not just comparing USDA estimates with expectations for the data, but the difficult task of assessing what weighting to give which sources.

"At least in the old days when the market was closed when reports came out, you could take a more considered view," Jerry Gidel, chief feed grains analyst at Rice Dairy, told Agrimoney.com.

"Now it is very tricky, getting it right, with the big swings when data first come out."

Consensus forecast

Friday looks likely to provide a case in point, when the USDA unveils its November Wasde crop report, a key event of the agricultural commodities calendar.

F

orecasts for Wasde US corn data, 2012-13 and (change on current figure)

Yield: 122.0 bushels per acre (unchanged)

Area of crop harvested: 87.14m acres, (-560,000 acres)

Output: 10.647bn bushels, (-59m bushels)

Year end stocks: 634m bushels, (+43m bushels)

Sources: Reuters, Bloomberg

But that is not because trade expects a cut to the yield estimate, of 122.0 bushels per acre.

It is because some are foreseeing a reduction in the USDA estimate of harvested corn area, by up to 3.8m acres from the current figure of 87.7m acres.

Not until January?

The idea of a downgrade is uncontroversial. There is a widespread belief that the worst drought in 56 years forced more abandonment that officials are currently letting on.

But the prospect of a downgrade in Friday's Wasde is questioned by many brokers, given USDA signals that it will wait until its January report, when it will have undertaken a farmer survey, to make any adjustments.

"Harvest area will be smaller than the USDA's current expectations, but they are unlikely to alter this until the January report now," Chris Gadd at Macquarie said.

Don Roose, president of US Commodities, said: "The USDA are pretty much on record as saying they are not going to refresh the acres number until January."

Mr Gidel said that the USDA "pretty much said" at a meeting with brokers last month that there would be no revision.

Different criteria

So have some brokers come up with forecasts in recent days that include an area reduction.

F

orecasts for Wasde US soy data, 2012-13 and (change on current figure)

Yield: 38.16 bushels per acre (+0.36 bushels per acre)

Area of crop harvested: 75.719m acres, (+19,000 acres)

Output: 2.892bn bushels, (+32m bushels)

Year end stocks: 133m bushels, (+3m bushels)

Sources: Reuters, Bloomberg

"But there are always those projecting forward, whose estimates are for what they believe the final USDA figure will be, rather than what will be released on Friday."

Some commentators, such as Informa Economics, go to the lengths of producing two sets of data – one attempting to second guess the next USDA report, and one with a final crop estimate.

But it is when the two sets of data – forecasts for the next Wasde and for the year end – get mixed up that the questions over consensus kick in.

One US investor told Agrimoney.com: "I try not to commit myself until I can see which what the market is trading, and you can make a more accurate judgement on what actual numbers market prices had already baked in."

'One of the big numbers'

For Friday, the headline appears, at least, to be a small increase in the forecast for corn stocks at the close of 2012-13, reflecting ideas of elevated prices rationing demand.

Meanwhile, the soybean yield is expected to an upgrade, as it was in the last Wasde, with upgrades in October reports tending to set the trend for the next briefing too.

Still, the return of wheat up the agenda, with Argentine and Australian harvests coming in well below initial hopes, and former Soviet Union export supplies running low, is also expected to be a key theme.

"Wheat has begun to get a little more interesting in the last couple of weeks as speculation around export restrictions in the former Soviet Union and strong demand for EU wheat internationally have bid up prices," Mr Gadd said.

US Commodities' Mr Roose said: "World wheat supply expectations are one of the big numbers this time."

By Agrimoney.com

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