The News & What it Means – Are Grain Futures Really Wandering Aimlessly?

By John DePutter & Dave Milne – January 22, 2019


The news:

“The partial US government shutdown and the resulting lack of weekly and monthly USDA reports is taking a toll on Chicago grain futures.”

– Syngenta website article, Jan. 16, 2019


What it means:

The lack of information may be having a short-term impact, but the government shutdown isn’t dramatically altering crop prices.

Government reports might be important to people who like to chew on government data. But they’re not really as influential in market direction as they’re cracked up to be.

Admittedly, markets like as much information as possible to do their job of setting prices. And with no USDA reports or export numbers to go off, the default position for many traders and speculators may simply be to stand aside and wait for more information – lest they be caught on the wrong side of any unexpectedly bearish or bullish data once the information flow is restored.

But are we really going to be surprised when the USDA is finally back in business?

Not likely.

Ahead of USDA reports originally scheduled to be released Jan. 11, most traders and analysts were expecting updated supply-demand estimates to show a decline in 2018 US corn and soybean yield estimates compared to December.

That supply-demand update has now been delayed indefinitely, but the message when it is released isn’t going to be any different than it was originally; the 2018 corn and soybean crops are still likely to be smaller. And even if they aren’t smaller, the market will just be getting the information a little later than it was expecting – the reaction won’t change.

South America information still easily available

Similarly, are we really in the dark about the size of the South America corn and soybean crops?

In the absence of “official” USDA estimates, we’ve still had a large number of government and private production guesses from Brazil and Argentina that suggest the dry weather in Brazil is trimming that country’s potential, while overly wet weather is taking a little off the top in Argentina. Indeed, it is important to note those estimates come from sources a lot closer to the situation than the USDA, meaning their forecasts may in fact be more accurate.

We can live without weekly export sales reports from the USDA too

Thegovernment shutdown has scuttled the USDA’s weekly export sales reports, but the weekly export inspections report continues to be published regardless. And if China suddenly swooped in and purchased a large volume of American soybeans, we can all rest assured that we’d hear about it somehow, without the help of the bureaucratic number crunchers.

Markets up, down regardless of shutdown

It’s a fact that when markets are down, people look for reasons why. Markets were down and quiet for a while so it was natural to associate it with the government closure. But the past few days we’ve seen some strength in the markets – even while the government remains closed.

Our services don’t rely heavily on USDA data for advising sales

The DePutter service tries not to get caught up in the noise of the media and the never-ending media search for a reason the market is up or down.

We concentrate more on the subtle messages from the markets, such as the vigor or lack thereof after the release of bullish news. We monitor various indicators such bullish opinion, seasonal tendencies, cycles and price relationships – which don’t require government stats.

And of course, we look for strategies to manage risk and seize pricing opportunities. Strategies are more important than outlooks. This is of more value to farmers making difficult decisions than picking apart the latest US government numbers.

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