Investors Worry About Accuracy of USDA Reports

In Friday’s Wall Street Journal, there is a front page article in the Money and Investing Section regarding the worry of various investors about how accurate the USDA has been with the latest US corn crop.  As most farmers know there has been whipsaws in the reports issued this year.

In June, the USDA reported that stockpiles were lower than expected and prices jumped 9%.  In September, the USDA reported a more than expected increase in carry-over by 300 million bushels and then a few weeks later reported the actual 2010 corn crop was going to be substantially lower than expected which resulted in much lower carry-over than the trade expected.  This resulted in a dramatic increase in prices.

The USDA’s reporting problems will probably be a topic of conversation when agency officials gather for their annual data user’s meeting in Chicago on Monday.  I would like to be an invisible participant in that meeting!

The USDA indicated they had a hard time estimating the average weight of the corn kernel, which led to the USDA reducing their estimate twice since indicating a record crop in August.

Some analysts cut the USDA some slack by stating this year’s crop was a unique set of circumstances related to weather and unlikely to see again  (however, that is what they always seem to say about 100 year floods that happen every 10 years or so).

As we stated in a previous post, volatile times are here and USDA reports may make it even more volatile.