A month ago, the U.S. Department of Agriculture released a grain stocks and acreage report that was a bearish shocker. The report was released during market hours at 11 a.m. Chicago time.
The first set of statistics to hit the wires was ending stocks. In the case of corn, the trade viewed the supply statistics as bullish and prices jumped 12 cents a bushel in the blink of an eye.
However, the USDA then released acreage statistics and prices dropped sharply. At settlement, corn prices were deep in the red and so were the other grains.
Few USDA grain reports over the past few years were such a shock to producers and traders. After I got up from the floor, having dropped backwards off my chair, I began calling around to see if the statistics from the USDA were correct.
After all, the previous month and a half it rained so continuously that the corn crop was the latest planted in the history of the United States with the soybean crop the second slowest.
The Midwest was soaking wet with flooding, and both crops appeared to be in dire straits and, in particular, corn. How could the report have been so bearish?
After calling around and having everyone tell me the USDA statistics on corn acres planted was correct, I picked my chair back up and quickly sat down.
Shortly, the USDA came out with a press release stating that a “recount” regarding planted acres would be undertaken with those results announced around August 12.
“Ha,” I said out loud. “The USDA does not even trust their own statistics. They are having a do-over!”
Be that as it may. Following the release of the late June report, grain prices did a nosedive with corn, wheat and soybean prices falling 40 to 53 cents a bushel, give or take a bit.
Essentially, the USDA statistics suggested that the record slow planting pace for corn and soybeans amid record rainfall and flooding did not take place.
That is what the statistics suggested. But then I remembered what is often said about statistics, especially by yours truly.
In 1993, when a similar weather pattern hit the Grain Belt, corn prices doubled in value over the next year with soybean and wheat prices moving sharply higher, as well.
However, and again, the statistics from the USDA report in late June suggested that 2019 was nothing like the record rainfall and flooding of 1993.
Here are opening comments from a chapter entitled “Lies, Damn Lies and Statistics” from my book, “Haunted by Markets,” that seem timely based.
Judge for yourself: “Mark Twain, once said, ‘figures don’t lie, but liars figure.’ Mr. Twain is also known for saying — although he attributed it to Benjamin Disraeli — ‘there are three kinds of lies; lies, damned lies, and statistics.’ And statistics, of course, are the lifeblood of finance and baseball.
“Filmmaker Ken Burns in his 1989 nine-volume documentary on America’s favorite sport, “Baseball,” said baseball ‘is a haunted game in which every player is measured against the ghosts of all who have gone before.’ The financial markets are also measured against what has happened in the past.
“But in finance and baseball, numbers fail to show everything. Or, as Toby Harrah, major league baseball player and manager said, ‘They both (bikinis and statistics) show a lot, but not everything.’
“For trivia buffs, Harrah and teammate Bump Wills hit back-to-back inside the park home runs on Aug. 27, 1977, the only time such a feat has ever occurred in a major league game.
“Monstrous corrections in the commodity markets are no surprise to Jim Rogers, legendary co-founder of the Quantum Fund. In Jim’s words, ‘We have had eight or nine periods of forced liquidation over the past 100 to 150 years wherein everything was liquidated without regard to fundamentals. This is such a period. Historically, the things which have come out best on the other side are things where the fundamentals have been unimpaired. Commodities are the only thing I know with unimpaired fundamentals.’”
The final paragraph from the chapter reads, “I could back up my argument with a wealth of impressive statistics. But if I did so, someone would surely quote Mark Twain or Benjamin Disraeli and say, ‘there are lies, damned lies and statistics.’ So, rather than slice and dice some dazzling numbers, take my word for it. And one final thought: markets do not lie. People do.”
I cannot wait to hear from the USDA Aug. 12 “do-over” regarding actual corn and soybean acres planted this season amid soaking wet fields and the slowest seeding pace in history.