The USDA Quandary

Jul 19, 2023

Traders in the grain trade industry are raising concerns and challenging the reliability of the U.S. Department of Agriculture (USDA) reports. These dissenting voices are deviating from the market consensus, expressing doubts about the accuracy of USDA data.

In recent times, it has been customary to avoid trading against USDA reports, as they reflect the collective market opinion. However, a growing number of traders are questioning the credibility of USDA's findings. Some suggest that the agency may be manipulating numbers or reaching predetermined conclusions. In the world of commodities trading, uncertainties persist, and traders bear the risks associated with their positions.

One area of contention is the soybean market. Traders cast doubt on USDA's projection of a 300-million-bushel carryout by year-end, arguing that the actual figure may be closer to 200 million bushels. This skepticism arises from concerns about USDA's yield estimate for this year's crop, given early development challenges and the ongoing drought. While recent rainfall has provided some relief, traders remain ready to bet on reduced yields.

In a surprising departure from their usual approach, USDA revised down the yield estimate in their July report to 177.5 bushels per acre, a record high. This adjustment caught many traders off guard, as USDA rarely changes yield projections in July. The discrepancy between USDA's estimate and the trade average of 176.1 bushels per acre further highlights the divide between market sentiment and official reports.

Amidst this uncertainty, the corn market faces its own challenges. Conversations with Midwest producers reveal mixed sentiments, as they acknowledge the positive impact of recent rainfall on crop conditions but express doubts about achieving trend-line yields due to previous drought and hail damage. Estimating crop size becomes increasingly complex due to various weather-related factors.

While USDA encounters criticism, particularly from skeptical farmers, their role in providing market information is a complex and demanding task. The market, however, continues to analyze the situation independently, seeking to navigate the discrepancies between USDA reports and traders' perceptions.

Video: USDA Feb Crop Report a WIN for Soybeans + 1 Year Trade Truce Extension

USDA took Trumps comments that China would buy more U.S. soybeans seriously and headline news that the U.S./China trade truce would be extended when Trump/Xi meet in the first week of April was a BIG WIN for soybeans this week! 2026 “Mini” U.S. ethanol boom thanks to 45Z + China’s ban of phosphates from Feb. – August of 2026 will not help lower fertilizer prices anytime soon! 30 mmt of Chinese corn harvest is of poor quality and maybe a technical breakout in wheat futures.

*Apologies! Where we talk about the latest CFTC update as of 10th Feb 2026, managed money funds covered their net short position in canola to the tune of +42,746 week-on-week to flip to net long 145 contracts and not (as we mistakenly said) +90,009 wk/wk to 47,408.