Congratulations Canada, you’ve given the world a crop conundrum

A month ago I got to tour the lockup facilities of the USDA in Washington, the locked and secure floors of the USDA building in which both USDA analysts and agriculture reporters are cloistered as important reports are formulated by officials and parsed by professional journalists.

That building contains people who have to make Big Calls on U.S. and world crop production, months before those crops been produced, while they are in the field and are hard to assess, and while it is being chewed up by a million and one users. These Big Calls are necessary, often trashed, sometimes treated with skepticism by journalists and analysts, but they always become the official baseline for everyone’s projections.

Friday USDA released the first World Agricultural Supply and Demand Estimates that project both U.S. and world 2014-15 production and demand, and as always it contained numbers that the markets immediately leapt upon and ran in 18 directions with. USDA spooked the markets with an expectation of bigger world ending stocks for corn, bearish new crop soybean ending stock predictions, bullish old crop U.S. soybean ending stocks numbers, and neutral wheat numbers overall.

The report contains its guesses for Canadian production this summer, and that’s not a simple series of guesses to make.

The main one that affects the world outlook is the wheat prediction, and USDA is predicting Canada will produce 28.5 million tonnes of wheat this year. That’s a whopping nine million tonnes less than last year’s 37.5 million. But it’s a million tonnes more than the 27.21 million produced two years ago.

USDA is basing its prediction on things going back to normal this year:

“Lower area and return to trend yields also reduce production in Canada from last year’s record high,” the report says.

So is that a safe call? Does the old trend still apply? I mean, we’ve had a wacky few years on the Prairies, with wild weather aberrations dominating our short, short, short growing season, from mid-summer droughts to widespread spring flooding to cold, late springs to warm and wide open falls. What is our “normal” weather these days, and what kind of a trend will normal weather now produce if we ever get a normal year again? What is the real trend of recent years? Do we turf 2013 but rely on 2012 and 2011? That’s something the entire grain industry discusses constantly as it makes its preparations and investments, and it’s something we can only wait to find out the answer for.

This year doesn’t have “normal” weather so far, so I’m not sure we’ll discover those answers this year either. This has been a cold spring following a friggin cold winter. This isn’t really an optimal basis on which to judge what our average potential and prospects are.

But who knows? Weather is unpredictable and maybe we’ll be given the gift of normal weather from here on out and we’ll get to see what today’s new and improved crop varieties can do with average conditions. Then we’ll be able to feel a bit more comfortable forecasting our production, knowing it’s not just a great big guess.

At this point I doff my cap to the folks at USDA and Agriculture Canada who have the duty of making those sorts of predictions now, in an era of weather and production instability, and wish you well in making your prospects. I’m in the comfortable position of having no one listening to what my guesses are. For you, millions are listening, rely on them, and then go back and trash them if they’re a bit or a bunch off.

Ag statisticians probably get to live on the edge a bit more than they imagined they would when they were going to numbers school.



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