August 13, 2006 - Crop Reports are Important

At last, we have the first, what I call, “real crop report of the season”. Prior to August, we get projections based on planted acreage and historical crop yields and production, but the August crop report gives us the first look at actual conditions.

As always happens, the numbers are being challenged. Already, we are hearing some people say, “Well, the soybean estimate is too low because the August rains we have been getting are certainly increasing the size of the crop.” They forget the fields were checked August 1st before the rain fell in dry areas of the soybean belt and it will take the September report to show the benefit, if any, of the rain. Or “Increasing the per-acre corn yield by 4 bushels is just too much this early in the season. My corn just doesn’t look that good.” Crop reports do make good coffee shop debate.

Just as agriculture has changed, crop reports have changed over the years, primarily because of the improvement in communication technology. Some of you may not recall, but until the early 90's crop reports were issued at 2:00 P.M. Chicago time. One of the reasons they were issued after grain futures trading closed for the day at the Board of Trade was because of the time it took to assemble the report.

Before computers and the internet, crop reporters in each state compiled their crop estimates and then shipped them in locked mail bags to Washington, D.C. On crop report day the USDA statistical staff would go into the Crop Report Lockup where they were literally locked in with window curtains closed and sealed and phone lines disconnected (there were no cell phones then), so the new numbers could not be “leaked” to anyone ahead of the official release time.

As a reporter, I have been invited to observe the work inside the lockup half a dozen times and I can attest to how seriously they take the counting and the secrecy. When they are finished, the Secretary of Agriculture comes into the lockup for a short briefing, signs the report, the doors are opened precisely on the hour and the reports are handed to reporters waiting outside the door to share with the world.

Today of course, all of the numbers are submitted and compiled electronically in a much shorter time. So the decision was made to change the release to 7:30 A.M. Board of Trade time to give traders the opportunity to trade the numbers within 2 hours of their release rather than waiting overnight and giving foreign markets the opportunity to trade the numbers first.

The numbers in those monthly crop reports from now through November will always be challenged and debated, but remember this...never judge them on the basis of what you see on your farm and, like it or not, understand they will guide market direction around the world until the next report. And, they are importatnt!

My thoughts on Samuelson Sez.