Bottom Line: Today we’ll find out if USDA will be able to release its scheduled Winter Wheat Seedings report on January 11. Whenever the USDA finally does release its report it will likely be below the trade’s expectations. Eighty-nine percent of the time the industry’s average estimate for USDA’s January Winter Wheat Seedings Report has been too high. While this is a surprising phenomenon, it appears that wheat futures prices are NOT impacted when the trade estimates are wrong. Our analysis of crop insurance enrollment data suggests that 2019 winter wheat seedings will be 32.25 Mil Ac vs last year’s 32.535 Mil Ac.
The USDA’s January reports represent a pinnacle of sorts for the crop marketing year. At a single moment, USDA releases: (1) revised S&D projections for US and global crops; (2) the final production estimates for US crops; (3) the first quarterly stocks estimates for row crops and oilseeds (and the second quarterly stocks estimates for wheat); and lastly (4) an estimate of Winter Wheat Seedings for the next crop year.
Of all these reports, it is the Seedings report that has the greatest potential to fall short of industry expectations. Since 1983, the average of trade expectations has been below the USDA’s figure 89% of the time. In addition, 51% of the time, the trade’s average estimate has been BELOW the low end of the range of trade estimates. Of all the USDA reports that we have tracked over the last 37 years, we can’t find any other USDA report where the industry’s track record for accuracy has been so consistently wrong. The chart below plots the discrepancy between the USDA’s report and trade expectations in in percen.
Last year was unusual, in that the trade’s average guesstimate was a record 3.8% too low.
The chart below plots the discrepancy between the USDA’s report and trade expectations in Mil Ac. Last year, winter wheat seedings were 1.208 Mil Ac ABOVE the average of industry expectations.
Even though the Wheat Seedings Report has often “surprised” the market, history strongly suggests that wheat prices do not react to “surprises” in any logical or consistent manner. The chart below shows the percentage change in the KC wheat futures price a WEEK after the report was released vs the percent difference between the average trade estimate and the Winter Wheat Seedings Report’s figure. The plot suggest that changes in wheat futures are NOT correlated with “surprises” in the Seedings Report.
There could be many reasons why wheat futures show no logical response to “surprises” in the Seedings Report. For one thing, generally speaking, at this time of year, the market’s attention is usually focused on “old-crop” fundamentals. At this time of year, changes in wheat futures seem to be mostly a function of changes in outside markets (e.g. corn futures, soybean futures, the value of the US$, etc.). Lastly, increasingly over the last decade, the US wheat supply has carried less weight as a factor in determining world wheat prices.