Market analysts will never run out of work

How often do you pull into the field with your combine and end up being surprised, either positively or negatively, by the yield?

For me it happens all the time. I’d like to believe that I can estimate crop yield by plus or minus 10 percent, but the variance is often larger than that.

Part of this comes from not seeing the entire field before harvest. Unless there was a pre-harvest product applied, you only see what’s visible from the road or when you stop and walk into the field a short distance. Unless scouting for pests, you seldom know what all areas of the field look like and this has been magnified as fields have become ever larger.

Accurate yield estimates take a lot of time and effort, so unless there’s a reason such as a crop insurance claim, there isn’t much use. You’ll know soon enough when the combine starts rolling.

So when the person farming a chunk of land has trouble estimating the yield ahead of combining, it’s amazing that all the official yield predictions from Statistics Canada and provincial agriculture departments have much accuracy. Maybe the strength of those estimates comes from assembling so many guesses from individual producers.

Statistics Canada has added a new dimension to the yield-estimating game. Satellite imagery is being used to assemble production estimates for all the grains and some observers are putting more stock in this estimate than the ones that come from surveying farmers.

During the summer, ahead of the official estimates, there are high profile crop tours in both Western Canada and the U.S. This supposedly gives some early indications of yield potential but doesn’t usually add much more information than what is already contained in regular crop reports.

While production estimates are important for both buyers and sellers, it’s only one piece of the puzzle. Just look at what the recent wet weather has done to crop quality in many regions of the Prairies. The supply of top grade malting barley, lentils, wheat and durum has been greatly reduced.

Even if you have confidence in the durum production estimate that used an average yield of 34 bushels an acre, the supply-and-demand picture changes dramatically if a significant percentage of the crop ends up being sold for feed rather than for pasta and couscous.

And the wheat and durum destined for the feed market competes with feed barley changing that entire complex.

Meanwhile, buyers who want only No. 2 or better lentils now have a reduced production pool and that could support prices.

As well, keeping abreast of production estimates becomes an onerous task when you need to look at major export competitors as well as what importing nations produce domestically.

Market analysts will never run out of work. Besides supply and demand, all the geopolitical and world economic issues become part of the mix.

In the end, making a market prediction is a lot like pulling into a new field with the combine. You have an educated guess of how it’s going to turn out, but there are often surprises.

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