Those of you who have followed me over the years are familiar with my belief that data collection, organization, and dissemination should be privatized. This is based on the age-old business proverb, “You get what you pay for”, meaning “the quality of goods and services increases as the prices increase.” I used this line often back when I was working for an agriculture media company, where our farm show presence was always met with a chorus of, “Why should we pay for your service when we can get information on the internet for free?” You get what you pay for.
Think about the information many hold so near and dear to their hearts in our industry: USDA’s monthly Supply and Demand reports and NASS’ weekly Crop Condition (and Progress) updates. I have railed against both for decades, though nothing makes me shake my head more than when I hear another analyst, who is supposed to be taken seriously, say on television, “I’m a big fan of NASS’ weekly numbers”. You folks are familiar with my charts showing The Browning Effect (NASS’ ratings go down as the crop turns brown, or matures), the little to no correlation between these ratings and USDA’s “final” yield numbers, and my story of sitting in a meeting with NASS officials when I showed them my studies with their response something to the effect “We never said these things were important.” Lastly, there is the famous tweet from a NASS users’ meeting where reportedly a spokesman said, “We are aware of the problems with these reports”, (Gee, I wonder how they became aware?), “yet we are going to continue to release them because they are popular.”
This is public information in a nutshell: Popularity is more important than any semblance of accuracy. Remember, then, you get what you pay for, something free and popular. Take a moment to think about it, and ask yourself, “Is knowing the wrong score better than not knowing the score at all?” I took a slight detour folks, again fascinated by our constant need to know a score, whether it pertains to us or not. Everything in life is about keeping score.
Back on track with the Private Tours discussion now. We all know the Pro Farmer Midwest Tour took place this past week, an annual event that finds loads of cars crisscrossing across the U.S. Midwest (hence the name), filled with scouts who jump out to measure and calculate various fields every day. When the tour concludes, a final national average yield for both corn and soybeans is calculated and released to the world. Now, it’s no secret I’ve not spent much time pondering the tour results over the years, but then 2020 came along and with everything that has happened, a thought finally struck me like Al Capone infamously did to his associates at dinner one evening: The Pro Farmer Midwest Tour, and others like it (I know of at least one other media company who does a virtual, electronic croup tour each summer), are the embodiment of privatizing the collection of data with the idea a more reliable result.
Furthermore, as I look back at previous years’ Tour results I see a similar pattern to my analysis of real ending stocks-to-use by using the marketing year daily average of the cmdty National Corn Price Index (NCPI, weighted national average cash price), a tool I use to track the intrinsic value of the market. Since the 2016-2017 marketing year, ending in August 2017, my analysis has shown a far more bullish es/u situation than USDA, with the divergence between the two growing by percentage points every year. Over this same timeframe, if my research is correct, the Tour’s national average yield and production numbers have generally come in below USDA’s guesses as well. From this we can infer that private data and analysis, collected and analyzed independently, is in agreement and indicates the public USDA information is systematically flawed.
Let’s now look at daily and or weekly crop condition updates. I’ve already stated my opinion about NASS, adding these two items: 1) After a radio interview a number of years ago, I was contacted by someone who used to work for the agency, and they told me I was “spot-on” with my assessment, and 2) a friend who knows someone currently in the agency contacted me and passed along information from the other individual that the situation is worse now because of budget cuts the last few years.
To me, this is likely a growing problem at USDA in general. We are all familiar with the history of what this administration has done to USDA, again evident in the fact public numbers have strayed further from private analysis since 2017.
Despite this evidence, there are still a number of companies in our industry whose final measuring stick is how it does in the game of pin-the-tail-on-the-donkey with USDA’s monthly and final yield numbers. Over the years I’ve had the opportunity to visit with many different companies about this fatal flaw, with some of them telling me they override what their systems show just to get back in line with USDA. On the other hand, the evolution of commodity markets, including the grain and oilseed complex, has moved into the 21st Century with algorithms at the wheel of the self-driving electric car. I’ve had discussions with many of these folks as well, and the general theme is they favor data from private sources who aren’t afraid of being independent from the official public numbers.
Though I know this won’t change the minds of hardcore USDA followers, I still see the promise of a better industry down the road when attempted governmental control over markets has become a thing of the past, replaced by private entrepreneurs pushing the envelope to create better systems. Yes, it will cost more, but all most of us will need to do is apply Newsom’s Market Rule #5 (It’s the what, not the why) and we’ll be just fine. Everyone else will get what they pay for.
Until next time,