The USDA will release several agricultural reports this Friday that have the power to sway commodity prices around the world, though no one knows for sure whether those prices will get a nudge up or poke down.
NDSU economist Dr. Frayne Olson will be among the many professionals in the agriculture sector waiting and watching for those reports around the world, and helping determine what all the new numbers mean from a market perspective. That in turn is the kind of information that producers often use to help them settle on their final cropping decisions, so it is all coming at a critical time.
“There will be four big reports on Friday that are going to have an impact,” Olson said. “it will be kind of like hitting the reset button on what do we think will happen next. We’ll get some official numbers on what happened last year, and some updates on what the USDA thinks will happen moving forward.”
These numbers are often a starting point for management decisions for a variety of businesses in the agriculture sector, including farmers themselves.
“People will use the information as a starting point,” Olson said. “They’ll say I think the number is too high or I think it is too low. And it also impacts prices, because not only do people domestically look at it, but people globally are looking at it too. There are a lot of international buyers who use the information to make decisions about how much to buy and when, and whether to buy from us or not. In today’s world it really does have global implications.”
Among the reports to watch for will be the export sales report. This report has been required since the 1970s. Old-timers may recall there was a big wheat purchase across numerous elevators by Russia, but no one knew about it for months and months. As a result, a law was passed requiring any international sale of more than 100,000 tons to be reported within 24 hours. Smaller commodity sales are reported weekly.
“Those export sales reports stopped because of the furlough,” Olson said. “So now we are finally finding out that China did buy some more soybeans during the furlough, and other countries have bought some wheat and corn that we didn’t know about.”
Any time there are big sales like that, it can influence the markets, Olson added. And so the export sales report will be one to watch. Even though the information is a month old, it will help grain elevators and analysts figure out what has been sold, and refine the sector’s sense of where various commodities are at value-wise.
Another important report released by USDA is the World Agricultural Supply Demand Estimate. This is a forecast of supply and demand for various commodities.
The report on Friday, Feb. 8 will be a first look at what USDA thinks is going to happen in 2019.
And there is also the winter wheat seeding report, which is based on a survey of farmers who plant winter wheat.
“That will impact not only the wheat market, but also corn and soybeans,” Olson said.
Many industry experts think there weren’t as many wheat acres planted last fall as usual, due to wet conditions. This report will be the first estimate of how far below normal wheat acres are, or whether they are below normal at all.
“if we don’t plant winter wheat, it means more acres went into corn and soybeans,” Olson said. “So that’s a big debate. How many acres in each? That report is the first step in figuring out how many acres are available. It will have a direct impact on wheat futures and an indirect impact on corn and soybeans.”
The quarterly grain report is also being released. That one asks farmers and major grain handlers how big their stored inventory is for various grains. The trend line helps show whether our inventory trend is rising or falling. It’s commonly used as well as an indicator of how much corn is getting used for feed.
The amount of corn used for feed plays an indirect role in setting wheat prices. Wheat, of course, can be a feed as well, but its higher value is for use in bread and pasta products. The market has to pay a premium for quality wheat for those purposes, or it will get used for feed. S,o where corn lands as far as feed prices go, will set the floor for wheat prices.
The final report to watch for is the annual production report, in which the USDA compares survey information from farmers about what they planted to data farmers have reported for crop insurance.
“We usually don’t see a big adjustment there, but sometimes there are little tweaks, and in today’s world, little tweaks can make a big difference,” Olson said. “It’s important to know when the report comes out, and that it will have an impact on grain and livestock prices.”
Olson said he is encouraging producers to be ready on Friday to take advantage in case there are any favorable price rallies for their stored commodities.
“We have been working blind for a while,” Olson said. “But on Friday, there will be some excitement. I don’t know if the market will be up or if it will be down. But it will be exciting, because we will have this new information, and it’s something we have been waiting on for quite some time.”