Be Careful Predicting a Forecast

We’re only days away from April, and although it still feels a little winter-like in Chicago, planting season is upon us. Tomorrow, the USDA will release a crop report, forecasting how much Corn, Wheat, Soybeans, and so on will be planted in this fine country this time around.  And the analysts are already out with their predictions on the forecasts.  There’s a joke in there somewhere, ‘what do you call a prediction of a forecast…. wrong’. We’re not sure who these “analysts” are, but they’re predicting that the USDA will predict (you may have to read that twice) a larger planting season for one crop in particular… Soybeans.

“Analysts on average expect soybean acreage to rise 3% from last year to 85.9 million acres, while corn will fall 2% to 88.7 million acres, according to a survey by The Wall Street Journal.”

“Farmers are turning to soybeans for a few reasons: Prices have fallen less sharply than for corn, demand has been strong and producing the oilseeds costs less thanks to lower seed prices and less need for fertilizer.”

Farmers say the crop is better for business (at the moment), but there are downsides to these positions.

“But sowing more soybeans—used to make everything from animal feed to salad dressing—has its own downside. Many traders and investors are betting that further production increases will trigger steep declines in soybean futures, potentially pushing the $35 billion market to lows not seen since 2009.”

The question remains, that if more soybeans are in fact planted, could we see Soybean prices fall faster and deeper than what the markets experienced last year? Some analysts are predicting Soybeans to drop below $9 a bushel. Here’s the latest look at Soybeans by acres planted, front month contract prices, and net positions over the past 1.5 years.

Wall Street Journal Soybeans(Disclaimer: Past performance is not necessarily indicative of future results)

There’s also a little of a ‘chicken or the egg’ debate here, because what happens if the USDA does come out and forecast record breaking acres planted in Soybeans, forcing prices lower, which in turn causes farmer’s not to plant it, thereby invalidating the ‘forecast’.  Welcome to the exciting and often wrong world of predicting a forecast – we’ve touched before on how the USDA crop reports aren’t all that accurate (and here).  And in today’s age of twitter, live updates to your phone, and folks like this doing a Pro Farmer Midwest Crop Tour, the USDA has to come up with a better way to accurately report crop data.

Meanwhile, Alternatives folks (specifically those who ply their trade in such Agriculture markets) don’t care all that much if Soybeans drop to $5 a bushel. They just care that the move from $9 to $5 is consistent enough to lock in the downward trend. We’ll see what happens tomorrow.

Write a Comment

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

logo