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Honored Advisor

It's OK,,,,, We can talk about it..

here is what was said in the wall street journal today.....

 

Analysts had anticipated production and yield estimates for corn would decline after heavy rains early in the growing season drenched parts of the eastern Midwest, drawing off nutrients from the soil and enabling disease to spread. Analysts believed dryness in parts of the Farm Belt in August had further stressed crops, and that disappointing results from the early corn harvest in the southern and eastern Midwest also could spur the USDA to make sharp cuts in its projections. 

The 2015 corn crop still would rank as the third-largest in U.S. history, down 4% from last year’s record haul. Yields would be the second-largest ever. Bumper crops over the past few years have pushed corn prices down more than 50% from records during 2012’s severe U.S. drought. 

Some analysts said the USDA report gave some corn traders what they had been looking for since last month’s unexpectedly upbeat crop report: lower estimated yields and production, an acknowledgment of lingering damage from an overly wet spring. 

“This opens the doorway for further [USDA corn-estimate] reductions in October and November,” said Steve DeCook, president at Dallas-based Four Seasons Commodities Corp. He said the USDA could trim “another bushel or two” from its current corn yield estimate. 

Others said that the monthslong debate over the accuracy of the USDA’s corn-crop forecast was destined to continue as farmers begin this year’s harvest in earnest and the scope of the crop damage becomes clearer. Questions over the USDA’s projections, which have been criticized as overly optimistic by some analysts, likely won’t be settled “until the final number,” said Mike O’Dea, risk-management consultant for commodities brokerage INTL FCStone. 

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What we have watched  is obviously manipulating the value of commodities for the last 6 months

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36 Replies
Advisor

Re: It's OK,,,,, We can talk about it..

AANNNNDDDD, USDA should have exact planted acreage numbers by now. 95% or more participate in farm programs and crop insurance and have "certified"  their acreage long ago. This number should be available and non-adjustable. RMA knows the "prevented planting" acres by now.

 

It could be posible that the farmers complaining (last spring) about not being able to plant , fertilize and spray were just trying to fool us!

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Honored Advisor

Re: It's OK,,,,, We can talk about it..

I think that the general economy is in such tough shape that the last thing "they" would want now is a rise in food prices.  I don`t know the in`s and out`s of carryover impact on prices but the closer it gets to a corn carryover of 1 billion bushel and below, the panic sets in exponentially.  Look at how hogs, feeder and fat cattle were hammered.  

 

It`s like if you`re bidding on a tractor and the auctioneer is taking $50 bids and says "you can`t tell me within $50 what this tractor is worth!"  ..well with counting corn, they throw a rock against a few hollow bins and mark them down as "full", drive past prevent plant and crappy acres and only take their binders off to survey the ice cream acres.  It could be manipulated 500 million bushel, as the auctioneer would say "You can`t tell me within 500 million bushel of what this crop is!!!".   And 500 million bushel is the difference between the farmer balancing his books or burning more of his equity. 

 

Since the USDA "checks it`s own homework" and always has that phantom "300 million bushel" they always give themselves a "A" grade, meanwhile for the producer that monkeying around has real consequences.

 

Couple things "they" must expect the farmer to contribute the equity that his has built over the last 5 years to the general economy.  And yesterdays` report was as bearish as they dared go without being accused of being a "nudist Buddhist" and the green grain close, apparently the trade didn`t buy it.

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Advisor

Re: It's OK,,,,, We can talk about it..

BA, i know this has been beat to death, but we have nass surveying yield and we have usda doing exact verification of acres and rma paying losses on exact acres, why the heck couldn't we have an exact, indisputable acreage number? Heck, if the seed companies were required to send in seed sales totals (you know X acres per unit) , one could get pretty exact. Now that i think about it , all crop insurance is tied to acreage that has to be verified thru certification. Even non farm program participants have to verify acres thru certification!

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Veteran Advisor

Re: It's OK,,,,, We can talk about it..

So far, it appears everyone is making sense -- just add all the comments together.

 

I've been thinking for decades that the problems with the numbers repeats itself annually from the beginning, the very 1st estimate for the coming crop year.  They start with trend yields.  Trend yields don't trend down, and I have no problem with that itself.  They need some better qualifying limitations on the initial estimates, recognizing that we don't get perfect conditions every year.  I haven't done any extremely detailed budgeting for many years, yet in the days when many financial situations were tighter and we wanted realistic projections, I did not use "trend yields" in budgeting, I used something closer to 5-year "olympic average" for beginning yield numbers.  Even using a trended 5-year or 10-year olympic average makes sense to me.  I'm just saying that the "official" initial yield estimates should not be a think-tank "target", they should represent a readily defensible number that anyone can replicate from an established formula based on historical proof.  Acres are the other part of the mix, and easy to play with.  While initial acreage estimates could be about anything, I'm confident they are based on historical norms and economic considerations.  That said, the USDA needs to improve their systems to more timely recognize changes in both the production and market dynamics -- they gather information from many sources and thru different agency-arms and seem to have difficulty with timely reconcilement, summarization, usage and reporting of those statistics.  It sometimes (often) seems that they are not using the most recent information available, like perhaps they do not use any of the information until they have all the information, as opposed to incorporating the information they do have, when they have it.  We should not be wondering about the number of planted or prevented acres in mid-September, nor even mid-August, since those number were fairly accurately determined by mid-July.

 

The other problem is a perennial mindset -- upward influences on production projections seem to hit the estimates and the market immediately, while downward influencs on production projections seem to require verification before impacting the estimates and the market.  Bullish price movements seem to require continual bullish information, while any absence of bullish information seems to have a bearish price impact instead of a neutral impact. 

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Honored Advisor

Re: It's OK,,,,, We can talk about it..

Someday, the traders are gonna have to think for themselves and not rely on the USDA predictions.

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Honored Advisor

Re: It's OK,,,,, We can talk about it..

Ida, It is where my mind comes from.  As an fsa local board member for several years, I understand the data available.  And I know it basically gets ignored.  Usda chooses to ignore factual data in favor of the ficticously speculative projections that will and can be manipulated years into the future.... We just had a complaint on the board this week of usda still manipulating 2014 data.

They won't use their own accurate data, yet they will hand it out to a political action group..

 

 

On this thread i find it facination the article in the Wall Street paper compared to the usda report...... Almost seems like they are disconnected....  on different subjects..

 

BA the function of usda gets a lot less blurry with the renewable fuels legislation, and the green energy initiative...   With the wisdom of a world leader after WW2 the US maintained excess stocks and the function of usda was in fact "food supply" , safe and available...

Now we are trying to hold on to the image of a "food supply" and controling the cost through open market manipulation... 

When the usage of grains during high production years is still 92-96% of production, it takes an imaginary cloud of data to pretend that the kings new clothes are a bountiful supply......  The contradictory reports in this crop year on wheat production from the major areas of the world are more numerous than our actual surplus of wheat carry over.

Point is, it is tougher to hide the manipulation when there is not a large surplus to hide behind.

I am afraid we have left the idea of a food supply for the image of a food supply.... It is obvious a good % of the population doubts food safety.  How did we get there,  too much emphasis on image and political pandering...maybe?

 

Notice also the comment in the article that a "few" years of record crops have happened since the drought of 2012......that would be 2 crops.....And bumper crops did not push the price down 50%, usda did using ficticous supply from future crops.

 I am convinced top writers and their editors won't do math or impose thought...

I wont even go with the idea that trend is up...... Trend line yields are one of the worst manipulation of statistics imaginable...   Monsanto used it to lobby for what they needed from Congress and Usda uses it for a totally different purpose.  It is probably affected more by world population than farming practices.  Total "hocus pocus"

 

 

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Veteran Advisor

Re: It's OK,,,,, We can talk about it..

They (traders) apparently make and/or lose a lot of money trying to guess what USDA is going to report each time, relative to the then current market sentiments.  That's a weekly or monthly occurance.  For us farmers, we work with many factors (yield, price, costs, timing, weather, etc) while the largest single factor in our profitability is our yield, something for which we can plan but cannot control, and once we put the seed in the ground (and often earlier), we're pretty much committed to the plan for months at a time, very much unlike traders who are making/losing money entirely on price movements, sometimes within minutes at a time.

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Honored Advisor

Re: It's OK,,,,, We can talk about it..

Here is some local wisdom.....

 

We will get a 50% retracement in corn back into the $5.50 to $6 range because we are coming into an election year..

 

We will see if the reports reflect that "wisdom"....

Smiley Happy

 

Been hearing that since childhood... not from the surviving farmers, usually the ones who are gone....

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Honored Advisor

Re: It's OK,,,,, We can talk about it..

I wonder if the old adage about election year being good for grain still holds, the farmer is pretty low on the totem pole.  Nox will talk about "Bush bought the 2004 election with Ethanol", but I don`t know.  I will say that stint of $7 corn really revitalized some of these rural communities, but $3 corn will make that progress go away just as fast. 

 

There is a cheap food policy and it seems, as said on the other site that reports make the prices go down and only weather makes prices go up.  The acre count, 'they" have wiggle room in having to divine those that weren`t in the program or take crop insurance that`s where they can do a little shenanigans. 

 

It may very well be that the crops are perpetually "over guessed" by 200-300 million bushel...but who`d ever know?  and that little extra bollixs up whether we get even close to a profitable price.  If we ever get a bullish report, it must actually be a really really bullish situation since they will admit that much. 

 

There is a big crop coming in the NIA SMN garden spot, but some say that it`s shrinking everyday, the beans turned too early and the corn dented in too short of time compared to normal.  And those that`ve travelled absolutely do not believe these reports.

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