On Market to Market last night, Darin Newsom said...

( http://www.iptv.org/mtom/story/32808/market-analysis-darin-newsom )

" Delany Howell: Okay, I want to talk about beans because you had an interesting thought in your newsletter this week. You said, you don't think we're going to hit 1 billion bushels of soybeans in carryover. Why do you see that happening or not happening I should say?

Newsom: Well, because I hate to speak ill of the dead, but the USDA is crazy. They never know what we have. Their last estimate was 955 million bushels of ending stocks. And let's say that's the high. Well the last 10 years USDA has averaged overestimating ending stocks by the time we get to the September quarterly stocks number by 41% and that's just an average. So if we take 41% off of 955 we're down in the 560, 570 million bushel range. And that seems to fit in better where the cash price is right now. If we look at comparing ending stocks to use and trendline for cash price, national average cash price, saying that we drop down to only, "only" 560 million bushel, which is still too many and still ending stocks that are too large, but that would explain why cash is holding in right here. So what it's saying is the market is smarter, it knows that we don't have 955 million bushels, we never did have 955 million bushels leftover. It was an imaginary number, kept the market down for a little while but it has rallied, now it has stabilized about where the cash market probably should be.

Howell: Why then do we see the markets still trading with this in mind, that we're going to hit a billion bushel carryover, analysts continuing to say we have this huge carryover number?

Newsom: If we were going to hit a billion bushels, number one the spreads would be beyond 100% full commercial carry and we would see the cash market in the $5 range like I talked about I think it was last summer when it still looked like we could get there. But it just doesn't exist right now. And theI market is what is telling us because it's not acting that way, analysts like myself we could talk all we want about 955 to a billion bushels, the market doesn't believe it. The market seems to be in that 500 to 600 million bushel range.

As you may know.. Newsom is no USDA report fan...

Howell: Darin, I know you're not a government's report guy.

Newsom: Really?

Howell: Yes. But we have a question here, a social media question I'm going to give you a shot to answer. (NAT's own..) Ben in Jesup, Iowa said, what is Watson trading on the absence of the USDA/NASS information and reports? What alternate sources of information are available? With so much new data analytics, what's an Algo to do?

Newsom: Okay, Watson goes back to something that I've written about a lot for the years. That was just my name covering, I borrowed it from IBM with the IBM Watson computer and I applied that to algorithm computer trade as a whole and over the years Watson has gotten, he has changed what he looks at as far as when it comes time for markets. And the idea here is that not so very long ago one of the key drivers of algorithmic trade was USDA. But that's just, I don't think it's the case anymore. And I think we get to prove that now with government shutdown, lack of reports and so on. So what are the algorithms looking at now? Well, each one of these trading firms use private research, data and information. And I think what we're going to see is a move away from the public, from the government, USDA, EIA and all of these things, and we're going to go back towards or we're going to move towards the private sector where you've got different companies, you've got all kinds of research companies doing all kinds of things using the latest in technology, something USDA simply doesn't do. And that is where they're going to get the information and that's going to be the data that they plug into these programs and that is what is going to drive trade, drive markets is the actual data, actual information that is alive in the markets at this time.

FWIW some private companies lowered their Carry out Guestimates.. 

GRO Intellegince cut US 2018 soybean yields by almost 2 bushels to the acre...

( https://www.dtnpf.com/agriculture/web/ag/news/article/2019/01/11/missing-data-dump-worries-price-fill )

 Gro Intelligence, a data and analytics company that integrates numerous government and satellite data sources into advanced yield models. Regular DTN readers will remember Gro from the 2018 Digital Yield Tour, in which DTN reporters used Gro's real-time models to give updates on crop conditions in 10 states.

Gro released its supply and demand estimates at 11:00 a.m. CST Friday.

The company's 2018-19 projection for U.S. corn uses a 177.4 bushel-per-acre yield estimate based on Gro Intelligence's U.S. corn yield model, compared to USDA's December WASDE estimate of 178.9 bushels per acre.

Its 2018-19 U.S. corn ending stocks are reduced by 86 million bushels (mb) to 1.695 billion bushels. World 2018-19 corn production is projected lowered by 2.8 million metric tons (mmt) to 1,092.5 mmt. Global corn ending stocks for 2018-19 are lowered by 5.8 mmt.

DTN's Hultman said ending corn stocks and other projections seemed in line with what markets expected from USDA.

In soybeans, Gro Intelligence's models predicted U.S. soybean yields at 50.6 bpa, compared to the USDA December WASDE estimate of 52.1 bpa. The firm's January projections reduced U.S. soybean ending stocks by 138 million bushels to 817 million bushels, on the lower yield estimate.

Hultman said those lower ending soybean stocks appear based on USDA's (December) export projections of 1.9 billion bushels. He notes that U.S. soy exports are down some 30% from 2018, and even if soybean sales to China and elsewhere continue to improve, it would be difficult to make up for that drop during the coming trade year. So he would expect actual ending stocks to be significantly higher than the current Gro projection.

You can find more information on the Gro's models here: https://www.dtn.com/…

Jim Heneghan, Gro Intelligence's senior vice president of agribusiness, said the company is offering free subscriptions while the shutdown is ongoing. It's also generating supply-and-demand reports for several crops worldwide to help fill the void left by the government shutdown.

Gro will use its yield forecasting models for U.S corn and soybeans, Argentine soybeans and Indian wheat to populate the supply side of those balance sheets. For other countries, it will estimate supply by using a linear regression of historical production combined with satellite data, or it will use individual government forecasts, especially if those numbers were likely to be adopted by USDA.

..

To access a free subscription and Gro's estimates, which will be released at 11 a.m. CST, visit: www.gro-intelligence.com/USGovShutdown

"We felt we were in a good position to replicate pieces, if not the whole report, in some fashion," Heneghan said. He added that Gro isn't trying to replace USDA, but it hopes members of the marketplace find its data useful.

University of Illinois's Irwin said there's a lot of talk, especially on social media platforms like Twitter, that USDA could be replaced by big data sources and modern satellite companies, but he thinks the shutdown highlights how important the agency's data is to the marketplace.

"Do the USDA reports move the markets? And if they're moving the markets, their information is not redundant and replaceable by big data firms. We wouldn't be having this conversation today if the USDA data was not important and people were noting its absence," Irwin said.

Needless to say.. For those who hate USDA reports.. the gov't shutdown would (??) have given them their plea to just stop issuing.. so are we better off?