It’s a fact - government agricultural reports can affect the market. Those who follow the crop and livestock markets have experienced the often dramatic reaction that prices can have after the release of a government report.
“The information in these reports is an example of the fundamental, or supply and demand, factors affecting market prices,” says Neil Blue, market specialist, Alberta Agriculture and Forestry, Vermilion. “The reports are usually the result of a survey of inventory, or of estimated inventory and estimated use of crops or livestock, or may be an estimate of acreage or production. Most government reports are preceded by estimates from private firms. Reaction from the release of the government numbers often depends on how those numbers compare to the range and average of the private estimates.”
Regardless of the eventual accuracy of these government reports, they are widely respected and therefore heavily weighted in the marketplace. Pre-report trading can push a market opposite the recent price trend and market reaction to the report can reset the trend for several days or even longer.
Because these reports can be market-moving events, says Blue, even if a producer currently has no saleable inventory, it is a good idea to keep track of when these reports are released.
“Depending on the market circumstances and a producer’s situation (i.e., inventory to sell, projected need for cash flow, current market prices compared to target prices in their marketing plan), it may be prudent to make some marketing decisions prior to the release of a report rather than be fully exposed to a market move resulting from the report. That market move could be favorable or unfavorable for a producer, so part of the marketing decision is assessing whether, as a producer, you are financially able to take the risk of some action or not going into a report release.”
Source : Agriculture and Forestry