Grain and the City: Ukrainian Mice Invading USDA
I guess congratulations are in order on the year of the Arctic fox(Symbolizes here a highly unfavourable state of affairs. In Rus. it is used as 'писец'.). This beast is ferocious. Its habitat is in the wild, we all know that but something went wrong with Darwinism, and its population multiplies exponentially in 2020. They say it eats people and snacks on the stock market quotes. You can think of a colour for it. I like yellow. Ed Catmull(Edwin Earl "Ed" Catmull is co-founder of Pixar Animation Studios and president of Pixar and Walt Disney Animation Studios, and Disneytoon Studios.) said that "a new thing is hard to define; it's not attractive, and it requires protection", whereas ordinary things don't. The system is set up in a way that gives preference to what's already in place, while whatever is trying to replace any of the elements, needs support to stand its ground. So, here is my point: I am strongly against supporting this new civilization. My shoes call for a walk. The cat doesn't understand why I've been living in his house for so long. Bring the old world back! I am part of the system.
Without further delay, I'd like to note that on a corresponding date last year Ukraine already harvested more than 400 thou. t of grain, yet at present, the figures barely exceeded 100 thou. t. Either because of the delay in harvesting, or because of low yields, or both factors combined — I do not know this, or there are no statistics. No ministry — no operative information. The law of trichotomy, which provides that each number can be either positive, negative or zero, does not work. Every number can be everything depending on the side you choose.
While the weather is confronted in the fields, the battle for the harvest is also taking place in the offices. As of July 1, the official forecast for wheat production, which is currently of the most interest in the cash market, is absent in Ukraine. And, therefore, there is no understanding of the export potential. The USDA in the latest published "field" report succumbed to the panic of the Ukrainian Hydrometeorological Center and to the procedure managed from above, having put the figures far from the expectations of all associations, analysts and other competent experts. Here is how far they are: 24.7 MMT including Crimea (310 thou. ha of winter wheat only, even with an average yield of 3 t/ha, this is close to 1 MMT), and 15.4 MMT of export potential. I personally demonstrate persistence in everything. If I want shoes, nothing will prevent me from buying a pair of them. According to my calculations, it is 25.7 MMT of wheat in the Ukrainian government-controlled territory and I'm not backing on my words.
Whatever. Anyway, the Memorandum of (mis)Understanding is signed without numbers: there is still time to finally realize how to count correctly. After all, "it does not matter how people vote, it matters how votes are counted". And nothing prevents you from shipping more than it is indicated in the document, if it is not life-threatening. After all, it is currency earnings, a lot of interest in GDP and a constantly developing industry. And in neighbouring Russia, on the contrary, quota opportunities were opened with the approaching of the new marketing year more and more often. The essence of the quota in this form remained unclear, but who can possibly grasp this mysterious soul. They also complained about selective access to the quota distribution scheme, and to the laundry, but in fact, Russia may enter the new year without it. If this was announced at a meeting of the Ministry of Agriculture, then it will be so, or not.
The quality of harvested grain is not an issue yet: it is not enough to extrapolate, and the weather conditions are rather varied. But, in general, wheat will be better than we are trying to see. And the whole Black Sea region would probably prefer to see low wheat, a poor quality so that the buyers would be terrified even more and agreed to a high price. And then let it turn out to be enough, of good quality and sufficient to trade. The bias associated with the confirmation of facts is a person's inclination to choose from the whole stream of information only the facts supporting one's theory, but not refuting it. Therefore, I always say that a trader and an analyst are completely different people. So far, in key Russian regions, wheat yields are 21% (Rostov region) to 36% (Stavropol region) lower from last year. Although Stavropol has completed harvesting on almost twice as many areas as the previous year, only 3% of wheat has been harvested, thus it is too early to draw conclusions.
If the Black Sea and the EU are now more concerned about wheat and less concerned about barley, the US has its own reasons to be upset. Since last night, China is temporarily out of touch. Even interracial riots have eased off, and COVID-19 has lost its grip.
Another USDA report was released. Just so happens to be no longer a Dawkins' meme(Richard Dawkins is an English ethologist, evolutionary biologist, and author. He introduced the term meme.). Now it's more of a demonstration of the theory about the power of weak bonds. While some are making excuses like "I have warned you that someone is selling out in Chicago, and technically the bottom is not infinite", the others are blue in the face about ethanol most certainly alive, the quarterly crop and stock report surprised even the most versed.
Well, I did understand that there are mice that feed exclusively on Ukrainian state reserve grain. What I did not suspect was that there are mice consuming American statistics. If the initial expectations of 97 mln ac. of corn seemed overstated (not to me, but to the concerned citizens there in America), they did not. Before publication, expectations were if not at 97 mln, then at 95 mln. And then they posted 92, of which just over 2 mln were still in process at the date of the report. Clearly, corn was rushing. And how about "nobody needs ethanol", "no meat" you might ask. Nothing's changed. The bubble's gonna go back down, one just needs to sell on time.
Speaking of ethanol. Airbus says air traffic will fully recover no sooner than 2025. Barley in the States has also been planted less than expected. It's unclear if China is getting any. Let us hope we will have enough. Soybean has been reseeded. Rice, oats, sugar beet and some of the legumes were sown a bit higher than planned. But it's not critical. Actually, the quest "where are the missing acres?" is bugging me. By way of exception, I could even fly searching for them. I would be reporting live on the WASDE conformity with that report on lost acres. Now is everyone looking forward to seeing them on July 10 under "US corn production"?
The variability of the USDA projections to the final figures is comparable to Nate Silver's attempt to analyze the projections voiced on the McLaughlin Group's political show. In short, it's a talk show featuring smart people answering a variety of McLaughlin questions, and at the end, they are asked to make a prediction on an issue relevant at the time of broadcast. One week before the Obama election, all but one of the show's participants bet on McCain(John Sidney McCain III (August 29, 1936 – August 25, 2018) was an American politician and military officer, who served as a United States Senator for Arizona from 1987 until his death in 2018.). For all kinds of reasons. A week after Obama's victory, McLaughlin gathered them again and nobody mentioned the wrong forecast: only the post factum vision of John McCain's loss was explained. Anyway, it caught Silver's eye and he made it look tabular. It turned out that 39% of forecasts were "absolutely true" and 37% — "absolutely wrong". You might as well flip a coin. Why coin? Here I'm going to bother you with more theory: the more analysts will provide specifics and adjustments to their forecasts, the higher is the chance that one of them will hit the bull's-eye, isn't it?
A "player's mistake" consists in misinterpretation of the law of large numbers (LLN) by many people. Coins, roulette wheel and dice have no memory of the past. Their performance is not affected by yesterday's events. Does the market have a memory? And the second, no less important question: where does one buy tangerines for champagne? Happy new MY!