1. Agricultural Marketing
ECON 337:
Agricultural Marketing
Lee Schulz
Assistant Professor 1

2. Markets React to Report Expectations too
Before USDA releases a report, market analysts, traders and others anticipate the numbers that USDA will report.
Analysts use the relationship of inventories/stocks/etc. to other reported data series, and a general understanding of current market conditions to make estimates.
Prior reports, especially the most recent one and the year ago one, are a reference starting point.
News wire services gather and report pre-release estimates approximately one week before USDA releases a report.

3. Markets React to Report Expectations too
These pre-release estimates are important because they generally reflect the aggregate opinion, or forecast, of what data will be in the report.
More importantly, these general expectations are often “bid into” market prices before the report’s release.
Assuming markets are efficient, the market price reflects this pre-release information even before the report is available.
Therefore, much of the market reaction following the report often is relative to the market’s pre-release estimates, not necessarily the actual increases or decreases in supply (and demand for some reports) in the report.

4. Markets React to Report Expectations too
Due to other supply and demand factors, prices may not always move in the direction suggested by a report and pre-release estimates.
The phrase “everything else being equal” would need to be used so that estimates could be evaluated without simultaneously considering changes in other factors.
Other supply factors include, but are not limited to, input prices, technology that changes supply, changes in price and production risks, returns to competing products, unexpected disease outbreaks, weather, and institutional factors (i.e., government policies).
Demand factors also play a role in determining market prices. Some of these include incomes, tastes and preferences, population size and distribution, prices and availability of substitutes, and institutional factors.

5. Market Reaction to Reports
Averages:
5.4 $ $1.89
45% %

6. Market Reaction to Reports
Averages:
6.6 $ $1.89
55% %

7. Market Reaction to Reports
Sum: -$6.95 $6.81
Avg: -$0.58 $0.57

8. Market Reaction to Reports
Sum: -$6.95 $6.81
Avg: -$0.58 $0.57

9. Market Reaction to Reports
Averages:
1.9 $ $1.27
48% %

10. Market Reaction to Reports
Averages:
2.4 $ $0.84
60% %

11. Market Reaction to Reports
2016 Sum: -$ $2.88
Avg: -$ $0.72
2017 Sum: -$5.72 $3.19
Avg: -$ $0.80

12. Market Reaction to Reports
2016 Sum: -$ $2.88
Avg: -$ $0.72
2017 Sum: -$5.72 $3.19
Avg: -$ $0.80

13. Reports most likely to cause significant movements in crop market prices
Source: Mindy Mallory;

14. Reports most likely to cause significant movements in crop market prices
Grain stocks
Estimates only come out quarterly. Since the information about whether we have a scarcity or surplus is a primary driver of price, and since we only get this report four times per year, the stocks estimate can cause significant adjustments in price.
Prospective Planting and Planted Acres
Reports give a baseline expectation about production for the coming marketing year. Deviations from expectations or recent history will cause rapid adjustments in price.
WASDE
The reports in October and January are relatively more likely to cause rapid price adjustments than other months because in October the yield estimates tend to become more precise and can involve significant revisions from the previous month’s estimate. Similarly, January report contains finalized estimates of the crop production and in some cases will involve unexpected revisions from previous estimates.
Crop Progress
These reports generally only move markets when crop conditions are deteriorating rapidly due to drought or excess moisture. During years with more typical weather, this report does not affect markets much week-to-week.

15. Market Reaction to Reports

16. Market Reaction to Reports

21. Class web site:
Lab in Heady 68.