USDA report indicates trends in market reaction to crop production data


The release of U.S. Department of Agriculture reports on crop production plays an increasingly large role in the movement of volatile commodity markets according to its own data.  In a report released earlier this month through the department’s National Agricultural Statistics Service titled “Price Reactions after USDA Crop Reports”, the impact of data on corn prices has magnified since 2006, with monthly and annual production data releases, and particularly with quarterly grain stocks reports, now resulting in market price changes of ten or more cents in a majority of cases.

“When examined, the data clearly demonstrates a marked increase in commodities market volatility,” said National Corn Growers Association Vice President of Production and Utilization Paul Bertels, an agricultural economist by training. “While many factors certainly impact cash markets on a given day, the correlation is too strong to ignore.  Evidence shows a trend toward significant, market reaction following the release of USDA production reports.”

The report, which looked at the price impacts in cash markets following the release of the department’s own monthly and annual crop production reports, detailed a changing trend in market reaction following this sort of data release.  From 1994 through 2006, the market price shifted by ten or more cents on only 18 percent of the days following report release.  From 2007 to present, the impact of data release has become significantly more dramatic with a ten or more cent price shift in 64 percent of these cases.

The report, which also measured the impact of the quarterly grain stocks report on prices, indicated a trend toward negative market shifts following report release.  Between 1994 and 2006, the market reacted by shifting up or down in a nearly equal number of instances.  Since 2007, the impact was almost two times as likely to be negative.

Source: NCGA