Top USDA reports: Under-the-radar numbers that move markets
If you’re at all connected to the financial markets, you’re likely familiar with the monthly Employment Situation (aka, nonfarm payrolls) and Consumer Price Index (CPI) reports, even if you’re not sure which government body releases them (it’s the U.S. Department of Labor, by the way). Every month, in the moments before these economic bellwethers are released, everyone in the markets pretty much drops everything and waits for the “headline” numbers that regularly move prices for stocks, bonds, and other assets.
Farmers, grain traders, and food and energy companies have their own version of this routine, and the government entity in question is the U.S. Department of Agriculture (USDA). The USDA is responsible for gathering mountains of data on crops, livestock, weather, and other factors and distilling it all into hard numbers and summaries that also move markets—for grains in particular, as well as other commodities.
Key Points
- The World Agricultural Supply and Demand Estimates (WASDE) report is a monthly snapshot of global crop fundamentals.
- Reports on U.S. prospective plantings, acreage, grain stocks, and crop production help agribusiness forecast future supply.
- The USDA also tracks and publishes several reports covering the supply of livestock.
Why USDA crop reports matter
USDA reports may not get much attention from the talking heads on TV or social media, but they’re a big deal for the global grain trade and for publicly traded companies serving global agriculture and food production, including processors like Archer-Daniels-Midland (ADM), equipment manufacturers like Deere & Co. (DE), meatpackers like Tyson Foods (TSN), and chemical and fertilizer producers like CF Industries (CF).
USDA reports offer a window into the world of food production and what consumers can expect on their next trip to the supermarket. If you hold shares of these or any other agribusiness companies in your portfolio, USDA data can offer insight into how profitable or unprofitable your investments may be.
USDA reports “serve as the primary informers of the fundamentals underlying domestic and global agricultural futures markets,” according to the website of Chicago-based CME Group (CME). CME operates futures exchanges where corn, soybeans, wheat, cattle, hogs, and other agricultural commodities are traded.
USDA’s power to move markets
USDA reports serve as the official benchmark for agricultural market fundamentals. Their most immediate impact is typically seen in futures contracts based on corn, soybeans, and wheat. Once released, these reports often trigger sharp price movements in grain futures, and sometimes in agricultural stocks. For investors, these price swings can represent both risks and opportunities.
The reports provide authoritative data on planting intentions, crop conditions, yield forecasts, and inventory levels—information that directly affects supply and demand dynamics, and by extension, prices for an array of food items.
One might look at USDA as a sort of the Harry Truman for agriculture, meaning the buck stops with them. Much as government statisticians gather data to estimate job growth, retail sales, or consumer prices, the USDA looks to get a handle on the size of the corn harvest, which is imprecise and ever-changing—and largely at the mercy of unpredictable forces like the weather. The USDA updates its crop estimates multiple times every year, and not everyone agrees with their numbers, but ultimately, the corn or wheat or soybean harvest is what the USDA says it is. That’s it. The USDA has the final word.
You can find schedules of major USDA reports on the National Agricultural Statistics Service reports calendar and World Agricultural Supply and Demand Estimates (WASDE).
Top USDA reports
Among the many reports the USDA releases each year, a few stand out for their market-moving potential.
Prospective Plantings and Acreage
Prospective Plantings, released at the end of March, and the subsequent Acreage update at the end of June are two of the most impactful USDA reports of the year.
The March report reveals the USDA’s early expectations for how much land U.S. farmers may seed to corn, soybeans, wheat, and other crops. A lower-than-expected corn acreage figure, for example, may spark a rally in the corresponding futures market, as fewer acres could lead to fewer bushels and thus a smaller harvest later in the year. By the same logic, higher-than-expected soybean acreage could send futures linked to the oilseed tumbling.
Because Prospective Plantings is released before most farmers in the Midwest (the primary U.S. growing region for corn and soybeans) have started planting, the report’s figures are often revised later, sometimes by a sizable degree.
Weather is one big reason: A wet spring might delay fieldwork and alter farmers’ acreage mix. That’s why the follow-up Acreage report in June is so widely anticipated. By then, most farmers have completed the season’s planting, giving the USDA’s number crunchers better data to gauge how many acres were devoted to each crop.
World Agricultural Supply and Demand Estimates (WASDE)
Released monthly, the WASDE report is one of the most important USDA publications for assessing U.S. and global supply and demand fundamentals for corn, wheat, soybeans, and other major commodities. These numbers are closely followed by grain traders and processors to ascertain crop demand and yield potential, creating a baseline that markets reference throughout the year.
Key numbers worth watching in the monthly WASDE reports include corn and soybean production estimates for Argentina and Brazil, which over the past two decades have emerged as major competitors for the U.S. on the global markets for these crops. The May WASDE holds particular significance; it establishes the first comprehensive numbers for the upcoming crop year, called the new-crop year. (USDA numbers are typically based on crop years, not calendar years. In the case of corn and soybeans, the crop year begins September 1.)
Grain Stocks
These quarterly assessments, released in January, March, June, and September, provide essential inventory data that helps the industry understand available supplies. The January report stands out for including the first grain stocks data of the new crop year, a release that often moves markets when actual figures diverge from forecasts.
Crop Production
These reports are released monthly, but the most important ones to watch for corn and soybeans come out in September, October, and November, followed by the final report in January. The January report finalizes production figures for the previous growing season, helping to establish how much supply is available to carry the market through until the next harvest. It gives traders and analysts a clearer picture of whether grain stocks are likely to build, hold steady, or run short, all of which can drive price volatility in the months ahead.
Cattle on Feed; Hogs and Pigs
Both of these reports can be viewed as leading indicators for beef and pork prices at the supermarket. Why is the price of hamburger so high? Is there any relief in sight from high bacon prices? These reports typically influence only futures markets for cattle and hogs, as they offer indicators of future supply and/or contraction or expansion of the livestock herd.
In the monthly Cattle on Feed reports, the “placements” figure usually has the most impact in terms of market response. It’s an estimate of the number of young animals placed into feedlots to be fattened and eventually slaughtered several months later. A lower placements number indicates fewer animals destined for the slaughterhouse, and thus tighter beef supplies.
For the quarterly Hogs and Pigs report, the “kept for breeding” category is closely followed as a harbinger of future supply. If more female pigs are spared slaughter and held back to breed and birth more pigs, that may suggest pork supplies will expand.
The bottom line
By understanding and anticipating critical USDA reports, individual investors can gain valuable insights into agricultural market dynamics, potentially identifying investment opportunities before they become obvious to the broader market. USDA reports are worth following if your portfolio holds any publicly traded agribusiness stocks, because many of those companies depend on supply and demand of raw commodities like grain.
Whether you’re investing in commodity futures, agricultural exchange-traded funds, or stocks of companies throughout the agricultural value chain, these reports provide essential context for making informed decisions in this vital economic sector.