I'm inclined to think that the 9/1 stocks number is "right" or as close to it as you'll get, It just seems more likely that there would be more accuracy in measuring it than at any other time of the year. Also, the state by state breakout seems to argue agains the variance being a matter of new crop corn in the pipeline.
There are really 3 controversial reports to argue about here- bearish January, bullish June, bearish Sep.
I'm probably talking my book but the one that looks suspect at this point is the June report- obviously it was a big adjustment to previous numbers that was later reversed.
As I noted previously, I've been there and done that as far as fully embracing a USDA number I liked and dismissing one I didn't and am aware that once I came to that opinion was pretty slow to give it up.
If you want a farily benign explanation of what might have happened I'll throw this out. The 6/1 report shows 2 bb in on farm storage. Now if a guy had filled out the survey for 6/1 and had a large amount of off-grade cron in storage, would he be inclined to report that on a 56 lbs= a bushel, regardless, basis?
Got no more insight than anyone else.
Re: The report
Over nights look better than anyone was thinking....to this moment anyway . I know I wouldn`t even mention it if a report came out my way, but if these reports are only this accurate aren`t they just excuses for the moves rather than the reasons for the market moves? If the gubbermint is looking to cut spending maybe they could start with the US`BS`DA?
Re: The report
I imagine that you're well bought and paid for re: USDA.
Re: The report
This probably doesn't belong here in the marketing section, but I'm going to ask it anyway. You've said a few times that high food prices and high energy prices actually are deflationary which I totally agree with. It appears that the gov't wants to inflate our way out of our debt mess. With oil shooting up and food commodities shooting up, this doesn't seem to flow well with their plan. How or what can the gov't do to put pressure on energy and food commodities to get their inflationary setting to occur? If you go back in history, times where we saw the largest growth in this country came at a time when we had cheap food and cheap energy. I have an idea of how they get food prices cheaper, but it's not real clear how they get a handle on cheaper energy.
Re: The report
Yes, I could speculate on all sorts of things but as often or not it just tends to run me up a cul-de-sac and not really be constructive to objective analysis.
There are almost limited scearios that I could come up with. One is that on June 30th it still looked like a record crop coming and USDA wanted to make sure that they erred on the conservative side as far as stocks were concerned and potential ACRE and crop insurance payouts.
90 days later the crop had been clipped and the global situation has tightened and the risk is $6 corn, food inflation and ethanol and livestock getting killed. Time to back away from that although that scenario makes one wonder if they're not concerned about the upcoming production number or they wouldn't be in such a hurry to back numbers out. As I noted in the original gov numbers post- I've seen them reverse bullish revisoins in the past they tended to just come incrementally over the following year or so.
All speculation and needs to be put on the shelf. We'll see.
As we were discussing before the report, though, the conspicuous reports of large carryover stocks in commercial storage made me unsurprised- I'm inclined to think that the numbers are more or less correct- or (be nice to me) even a bit more to come?
PS. We're playing the "better or worse than last year" game. I'd submit that last year I saw a lot of 180 and above reports on pretty mediocre ground coming from all over and of course a lot of 220s and up off of top ground. It is never possible to make sense of the US crop vs. individual yields but if anything I'd say that 2009 was every bit of 165.
Re: The report
I have no idea where your assumptions come from. I can't find a basis for your starting points.
The government wants to inflate their way out of the debt issue? That may happen in time, but It seems obvious that avoiding deflation has been the big worry. Inflation is a problem the Fed has tools to deal with - ala Volcker. Deflation, starting at near '0' interest rates, could easily become a death spiral.
Food is shooting up? Since when? I'll guess we have the cheapest food supply on the planet, and cheaper than at any time in our history in real terms. The numbers do not support food inflation.
In real value I don't think $80 oil is that big a deal either.
In fact, I'll guess that our huge growth spurt after WWII was during equal or higher costs for food, fuel, and certainly with much higher taxes than today - in real terms. And wages were very much higher. I think I ran the UAW wages of the 50's through the government inflation calculator and they were equivelant to more than $200/hr in todays money. And that was the 'golden age'.
Re: The report
My initial comment on the matter and probably the only absolutely true thing that has been posted on the subject was that 1) I've noted past occasions when a bullish treatment of numbers by USDA has slowly turned to a bearish one as stocks just crept back in over time and 2) that as a producer, I was absolutely sure that the bullish report was finally "right" and the bearish ones were wrong.
I did get on thinner ice by saying that 2 of those events that I marked to remember were election years- I can't make anything of that for certain one way or the other but it is true of 2000 and 2004.
As to possible agenda- and I've made it clear that this is 100% speculation- if USDA had an agenda it would seem to me to be to avoid huge ACRE and crop insurance payments by being too prematurely bearish on June 30th. I;m not sayng that is the case, just saying that is the only thing that makes any sense to me. I'd further note that the risk of such action blowing up in their faces would be abundantly clear since US and world conditions changed substantially subsequent to that.
On the "inflation is deflationary" case- here is the point. Bernanke got a rude awakeing last time out when he tried to reinflate the economy with low rates and a cheaper dollar. The bond vigilantes who used to rebel on such things are long since dead but he didn't reckon on the commodity vigilantes. Make no mistake about it, $150 oil and $8 corn will change consumer behavior and general social mood far beyond their relatively small (but at the margin not insignificant) drain on consumer disposable income.
If the US consumer stops buying things other than food and energy then the race is on- either hyperinflate quickly or watch liquidity lock up and everything collapse.
Re: The report
$8 corn and $150 oil would certainly cause unbelievable havoc. On the other hand I can't make a case for how this would come about, unless one wants to argue 'black swans' which, by definition, isn't a rational approach.
But, as an exercise, I can do it. $8 corn is more likely that $150 oil, for the 'deflationary' reasons you refer to. We never really know what corn production might be, and since it is concentraterd in N & S America it's concievable that either could be hit by wide spread drought, etc. We know the supplies and production of oil, so the issue isn't supply, it's demand. Under the present econmomic situation it is in no one's interest to cut supply and collapse demand - by making it go over the edge and ending civilization as we know it. From here on out we have a situation where consumer demand is the key, and consumer demand isn't going anywhere. They are tapped out. Banks and corps and the small but unbelievably wealthy high economic class are sitting on mountains of cash. They would all like to see higher inflation. Ain't going to happen no how, no way. It's a stand off.
That's one reason why tax cuts are being demanded. Can't make money at low levels of consumerism, and low interest rates. You have to be making a lot of money to worry much about the tax rate changes that are being talked about, but it would be equivelant of a significant interest rate hike to those sitting on cash. It would make little difference to the vast majority of individual consumers. They aren't in the high tax brackets, don't dare increase credit overhang and their jobs are at risk. Meanwhile their homes are worth less, and banks aren't going to loan much anyway. The credit thing is OVER.
The big question is getting the economy going. It won't be consumerism in the short to medium term. And it won't be tax cuts. What are you left with? In short, I'm definitely not worried about inflation - at all. Not even a consideration for some time - if ever.