“An efficient market uses all available information to determine price,” said Paul Samuelson, the Nobel Prize-winning economist.
“Knowledge is power,” added Francis Bacon, the 17th-century English statesman and philosopher.
A core business concept teaches that whoever gets the information first and uses it has the greatest odds of making a profit. Government (USDA) reports provide valuable information for the price determination process. However, while USDA reports are useful, they are not essential.
At this writing, wheat may be sold in Pond Creek, Okla., for $4.39. It may be forward contracted at $4.98 for 2026 harvest delivery. In Perryton, Texas, wheat sells for 25 cents less than in Pond Creek.
These prices were determined without the assistance of USDA reports.
Economic theory stipulates that supply and demand expectations are used by market buyers and sellers (players) to determine prices. Expectations are based on supply and demand information.
Big market players have their own sources of market information independent of the government, but some information is only available from USDA, and some USDA data is more accurate than the data from private sources. Examples may include grain stocks, export data and the World Agricultural Supply and Demand Estimates report.
To predict the WASDE numbers, independent agencies survey market analysts a week before the monthly reports are released. These analysts tend to provide a relatively wide range of estimates. USDA estimates tend to provide benchmarks for private estimates.
With the government shut down, some information is unavailable. Government reports provide useful information, and without the USDA reports, price risk may be increased. Increased price risk may result in lower prices.
Local wheat market prices are calculated by using Chicago Board of Trade futures contract prices. These futures contracts are bought and sold by market players from all over the world.
At this writing, hard red winter wheat prices are based on the CBOT KEZ25 (December hard red wheat contract) prices. A basis is used to convert the CBOT KEZ25 price to a local market price. On Oct. 27, the KEZ25 closed at $5.14. The cash wheat basis for Pond Creek was minus-70 cents. The cash wheat price in Pond Creek was $4.44 ($5.14 - $0.70).
On Sept. 16, before the government shut down, the cash wheat price in Pond Creek was $4.54 ($5.24 - $0.70). Between Sept. 16 and Oct. 27, there was no change in the basis (-$0.70), but the KEZ25 contract price declined 10 cents.
No new information has been released by USDA since Oct. 1. Thus, most farmers don’t know if the price decline is due to increased price risk or if the wheat supply and demand situation has changed. Big market players can get supply and demand estimates from private sources of information, which gives them more knowledge about price movements.