The impact of the USDA soybean crop condition reports on CBOT futures prices

Abstract

Soybean price formation in the Chicago Board of Trade (CBOT) is determined by many variables, with supply expectations being one of the most critical. The United States Department of Agriculture (USDA) publishes the Crop Progress report (CPR) weekly and, among other information, the public report contains an evaluation of current growing conditions in areas under soybean cultivation in the country. Agent awareness of crop conditions before harvest should affect their expectations of the soybean volume (supply) that will enter the market and should affect soybean futures contract prices, possibly in a predictable manner. This study is designed to examine this hypothesis by determining if the CPR’s weekly release has a predictable impact on the following day’s soybean futures contract price. Between 1995 and 2018, a 1% increase in soybean crop area evaluated as “good” and “excellent” (Condition variable) in the weekly CPR reduced soybean futures contract prices by 0.45% the day following the report’s release and vice versa, and that the price trend ramped notably upward in 2008.