Researching the USDA Crop Progress Reports
The USDA releases weekly crop progress reports during the growing season on the current status of crops in the U.S. These reports reveal vital information for commodity investors as they get an unbiased view of how well crops are developing during the growing season. Commodity investors tend to focus mainly on corn, soybeans, wheat and cotton when they analyze the USDA weekly crop reports, which are released every Monday.
The weekly reports coincide with the growing cycles of crops. They begin with information on the pace of planting progress to the percent of crops emerging from the ground all the way to the percent of crops harvested.
The heart of the data usually revolves around the quality of the crops during the season. The USDA gathers data from thousands of crop reporters around the country to put together a fairly reliable measure of overall crop conditions. The scale includes ratings of very poor (VP), poor (P), fair (F), good (G) and excellent (EX). Commodity investors typically concentrate on the number of crops rated good and excellent condition.
The USDA also provides the ratings and status for the previous year for the same week and the five-year average of the ratings, this is useful information you can use for a frame of reference on how the crops look compared to previous years.
Crops planted ahead of the five-year average typically get off to a good start, and that tends to put pressure on that particular market.
Crops that are also progressing ahead of the five-year average also tend to pressure prices. Conversely, poor or deteriorating crop ratings tend to cause a rally in prices. These reports are monitored very closely during periods of adverse weather, so traders see how much the weather has impacted crops.
The USDA weekly crop progress reports can be found at this website: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1048. You can choose the particular format in which to view the reports, and you can also find historical data here.
The WASDE Report Moves Grain Prices
While the weekly U.S. Department of Agriculture crop reports is helpful in understanding crop progress during planting, growing and harvest seasons, it is the WASDE report that comes out each month that tends to move markets. The World Agricultural Supply and Demand Estimates report is a comprehensive account of the production, consumption, and inventories for all the primary agricultural commodities on a global basis. The report comes out during the second week of each month throughout the year.
Grain markets are highly sensitive to the weather as Mother Nature is always the ultimate arbiter of the path of least resistance for prices each year. A sudden change in the weather can change the entire fundamental picture for grain markets and can send prices soaring or plunging in the blink of an eye. While it is an imperative to pay attention to all data put out by the USDA when trading grains, find a reputable weather source as well.
The USDA reports tend to tell you what happened after it occurred while an expert meteorologist can often predict weather patterns that are coming shortly. The biggest and most aggressive traders in grain markets have meteorologists on staff for this very reason.
Another thing to watch for is moves in the dollar. The dollar is the reserve currency of the world, and it is the benchmark pricing mechanism for commodities. Grains are particularly sensitive to moves in the dollar because the U.S. is the world’s number one producer and exporter of corn and soybeans and the largest exporter of wheat. A strong dollar means U.S. exports are less competitive on the world markets; therefore, it is bearish for agricultural commodity prices. A weak dollar tends to be bullish -- it means U.S. exports are more competitive on global markets than local crops.
There are so many factors that influence the price of grains during growing season. It is important to keep up on all the data available when trading or investing in the agricultural markets.