USDA faces worrisome questions over crop/stock estimates Fair play is a virtue Americans hold dear. Any person or institution dealing with people's livelihoods and millions of dollars had better be playing with an unmarked deck. Woe unto anyone caught doing otherwise.

The same holds true when dealing with the agriculture market. Unbiased, pristine numbers are a must. Farmers and marketers wait with keen anticipation for each USDA statistical report. Careers are made, farms are lost and markets fluctuate according to what the USDA-compiled digits say.

World Bank article In the summer of 1999, the World Bank released an article stating that some poorer nations risked starvation. This dire forecast was made because the world rice stocks-to-use ratio was the lowest since 1972-73. Prognosticators looked for Thailand prices to go for up to $400 per metric ton. If such prices were realized, the article said, the poorer nations would be unable to buy rice and hunger would ensue.

At the time, the world carryover was 43 million metric tons - the lowest since 1972-73.

Over the next year - July 1999 to July 2000 - USDA went back to 1994-95 on a monthly basis and adjusted ending stocks upward. It then announced that it had "found" 18 million metric tons.

That meant the world went from the tightest worldwide stocks-to-use ratio in nearly 30 years to the all-time record carryover stocks of 64 million metric tons, a 39 percent jump in a single year.

The jump also meant the market went from the most bullish situation to the most bearish in 30 years. Several commodity marketers Farm Press has spoken with claim a 5 percent swing in world stocks is huge, never mind a 39 percent jump.

Where did this found rice come from?

Thirteen million metric tons of the 18 million were found in China. This fact doesn't sit well with many U.S. farmers and marketers.

"China is a communist dictatorship. No one can dispute the numbers USDA says about it. Only the Chinese really know what the story is," says one market observer.

"Normal carryover for grains is about eight weeks. Any time USDA wants to adjust any commodity number big-time, it looks to China. Whether it's cotton, corn, soybeans, wheat, whatever. China produces big numbers and no one can dispute them," he says.

But China's numbers have proven faulty. Cotton farmers remember the millions of bales that China threatened to dump into the market several years ago. While cotton prices were held down, many of the bales never showed up.

The statisticians "What I want to know is this: how can I - operating out of this tiny Delta town with limited resources - come up with numbers more accurate than the USDA?"

The question is a good one and USDA's National Agricultural Statistics Service and Foreign Agricultural Service have recently been defending their data-gathering practices to increasingly irate U.S. farmers.

The marketer who posed the question above says there are three possible answers: "Either the people compiling the numbers are complete idiots and don't care; or someone inside the USDA is on the take for the rice mills; or the third possibility is that someone in higher levels of government is telling the statistics gatherers what numbers need to show."

Infamous 130,000 acres The rice farmers and marketers interviewed for this story also complain about USDA's January 1998 report. "In rice, our yields - acres and the like - showed little change until January 1998. We came out with the stocks report then - projected acres, projected yield, shipped for export, average domestic consumption," says a farmer.

When the January 1998 report came out USDA was within 21,000 certified rice acres in the United States (less than a 1 percent error).

"The stocks numbers came in right on line. Everything was lovely. Ten days later, USDA came out with the January supply and demand report. It found an extra 130,000 planted acres. The first report said we had 3.16 million acres and a few days later USDA jumped us to 3.29 million," says a marketer.

The January report is a year-ending report. The marketing year for rice starts Aug. 1 and ends on July 31. After January, USDA normally does not change yield or acreage in a supply and demand report.

"At that time, rice was $10.25 per hundredweight. The inflated numbers that came from the supply and demand report were equivalent to an increase in production of about 10 million hundredweight," says the observer.

Several farmers have told Farm Press that Extension employees in Louisiana were especially puzzled by the report because 80,000 of the 130,000 acres was supposedly found in their state.

"Never before had we seen such a change. Rice is finished harvesting in September. USDA said they found this 130,000 acres by looking at satellite images. In south Louisiana and Texas, they're through with rice by the first of September. If they were telling the truth, (USDA) had to have known about the acreage increase by Sept. 1. Why did they wait until January to report this acreage?" asks a farmer.

On Feb. 1, the next stock report came out. This report claimed that crop estimates were 10.5 million hundredweight too high. Farmers watched the price of rice plummet because carryover went up 25 percent. Rice went from $10.25 to $6 - farmers lost $4.25 per hundredweight.

Even more suspicious was USDA's summer news that the U.S. rice consumer had suddenly picked up a voracious appetite for the starch.

"When we got the year-end stocks report on July 31, USDA said, `By golly, we didn't have that 10 million hundredweight - we ate it!' They put it all in domestic consumption," says a marketer.

By that time, farmers had traded seven months with a seemingly fictitious 37.9 million hundredweight carryover. After the marketing year was completely over, USDA made the domestic consumption claim and reduced the carryover back to 22.9 million hundredweight.

What's the normal domestic consumption? "The norm is a 3 percent annual increase in domestic rice consumption for the last 25 years. When you start talking about 10 million hundredweight, that would mean double the normal domestic consumption increase.

"That just didn't happen. But they'll never admit the 130,000 acres just weren't there. The acres were put in, the desired marketing effect took place and they later adjusted the numbers back down," says a market observer.

Farmers came back in 1999-2000 and jumped acreage (largely due to AmAg's ill-fated CRCPlus revenue assurance program) to 3.53 million acres. At the same time, USDA announced a mega-record rice yield was coming coupled with an ending number of 27.5 million hundredweight. The first carryover put up on March 31 was 59.8 million hundredweight.

In January 2000, USDA said 11 million hundredweight couldn't be accounted for. In March, stocks were 12 million short.

"We went through the whole marketing year. In September, the stocks were at 27.5 million hundredweight. They said, `Hey, guess what? We ate a bunch more rice than we thought again!'" says a marketer.

USDA was fine on the acres, says a Delta farmer. The yield they projected, though, was record - 59.08 hundredweight - and was way off.

"We figure the actual yield was about 57.5, according to what the stocks were. We traded the whole year with these flawed numbers. Rice went down to $4.76 per hundredweight - the lowest it's been in 20 years. Most of the year we traded around $5.50."

At the end of the year, USDA dropped ending carryover from 59 million hundredweight to 27.5 million hundredweight. The United States was out of rice again.

"We kept whittling at the crop through exports and they kept raising the export projections. We sold more than anticipated, but they were still off over 10 million hundredweight all year.

"In both 1998 and 1999, you're talking about a minimum of $2 more per hundredweight - maybe up to $4 per hundredweight if the numbers were lower. You're talking about anywhere from $1 to $1.5 more per bushel - millions of dollars lost.

"How can you be off 30 percent on the carryover two years in a row? We all make big mistakes in our lives. But do you make a mistake on this scale two years in a row?" asks a farmer.

LDP, FSA and the like In 2000, total certified rice acreage in the United States is 3 million acres. USDA statisticians put the number at 3.11 million planted acres as of March 12. Why the discrepancy?

"I've called the statistics people in Washington, D.C., and the state statistical people as well. They all say up to 2 percent of farmers don't certify their acres," says a Delta farmer.

Questioning USDA's numbers, several farmers took the initiative and began calling FSA state offices in all the rice states. The FSA offices gladly provided the certified acreage from their states, say the farmers.

"I also asked (FSA personnel) if the USDA statistics services call and find out what the certified acres are. To a man, they all said no. These certified acres are out in August and the statistics service doesn't get them until December?"

His agitation high, one farmer says he flat-out asked a state statistician why his agency doesn't use the certified numbers from FSA.

"He said they don't get them because their computers don't work well. I said, `Well, you can do the same thing I did. Just call each of the state FSA offices and get the certified acres. You do have a secretary there, don't you?' He hem-hawed, `Well, we've gotta do something to improve our system.'

Another market observer says he called an official in the Arkansas statistics office.

"I was talking to him and asked if they looked at the certified acre numbers. He said, `Yeah, we look at the certified acres, but we don't use them. We prefer surveys.' He told me 60,000 acres of rice in Arkansas - 2 percent of the Arkansas acreage - wasn't in the program.

"I asked him about yield numbers. How do they come up with yield numbers? Surveys! But no one wants to answer surveys because every time USDA comes out with a report, it kills the price. So they just quit answering surveys. How can USDA claim they're getting accurate numbers?

"I asked this official if, after harvest, they survey Producers Rice Mill or Riceland Foods. The co-ops and commercial elevators can tell you where the rice is. He said they didn't call these co-ops, strictly farmers."

The current year "We know, realistically, that USDA has to reduce the current acreage of 3.11 million planted acres an additional 50,000 acres. 3.06 million is the most we could have - and that's with a 2 percent margin of error and with a dry year like this last one.

"Okay, so we stayed dirt cheap all year long in 1999 because of bogus numbers. Then, at the end of the year they adjusted 10 million hundredweight yet again. That's a cut of over 30 percent in two years.

"We knew due to price we were going to cut acres dramatically. Farmers knew. On March 1, projected acres came out for all crops," says a marketer.

A trend-line yield is a five-year average. Almost without exception, on the March 31 projected supply and demand report USDA will come in with a trend-line yield. U.S. farmers haven't planted the crop, so an average must be used. The five-year average of soybeans is 38 bushels, corn is at 126 bushels.

"The first number they put up for rice was 6,146 pounds - a new record yield. Then on March 31, they jumped the yield up to 6,186 pounds. This is before the first acre of rice was planted. Our yield today is 6,236 pounds. The yield nationwide is probably 5,800. Their numbers are 400 pounds out of whack. They may actually be 500 pounds wrong."

Last year, the crop nationwide actually averaged 5,750 pounds.

All the acres that have come off are long-grain rice. All the yield to come off has been in long-grain. Farmers Farm Press has spoken with are frightened: if USDA statisticians do the same thing they've done in the last couple of years, they'll start cutting the wrong things.

"We know the stocks, we know what's been exported, we know where the crop should be. What they'll do is come in and say the stocks are under where they should be. Once they admit that, the reduction has to be pulled from somewhere. If they don't change the numbers, it screws up everything. They can make the changes several ways - acres, yield, exports, domestic consumption, whatever.

"The ending numbers are where the trouble will be. USDA's numbers say we're going to eat 23 percent more medium grain and 9.2 percent less long grain. They want to keep as much inventory in long grain carryout as possible.

"We've got two major groceries in this town - medium grain isn't even on the shelf. But the statistics folks are going to claim we're gonna have a 32 percent swing in our domestic consumption. It looks like they make the market as bearish as they can for as long as they can," says a market observer.

The shake-out "Looking at the numbers and where the crop is, we'll probably run out of high-quality, long grain rice and the rice mills will shut down in June 2001. We'll be completely out. We've run out of high-quality long grain the last two Julys, but the new crop coming out of south Louisiana and Texas shielded that fact," says a Delta seed dealer.

In 1999, farmers weren't terribly vocal about this, says a farmer. "But we've really gotten vocal. When the stocks report came out in December 1999, they were 11 million hundredweight short. On that same day, they said there were 30 million fewer bushels of soybeans than were suspected, there was 15 million bushels more wheat than there was supposed to be, and there were 45 million bushels less corn than there were supposed to be. Ten days later, when the supply and demand report came out, they had corrected every grain - just like they were supposed to - but left rice untouched. They did not do one thing with rice.

"In March, they did the same thing. They adjusted the wheat, corn and soybeans accordingly and didn't bother with rice."

Change must come, say many farmers. Too much money is being lost.

"Because the numbers weren't right, I lost $400,000. The government came back with loan payments of $80,000 - that's not even close to what I should have made. That doesn't close the gap," says a farmer.

World market prices must also be questioned thoroughly, say farmers. Several claim that when they asked USDA personnel how the world market price is calculated they were pointed to "a secret formula with secret technical factors."

The secret formula for world market is termed the "black box." One farmer says he called USDA about this during the first couple weeks of September.

"Asian prices were going straight up at the time. A supply and demand report had just come out that knocked 260,000 acres off and rice went up 50 cents the same day. The next day, a Tuesday, the statistics group dropped the world market price 38 cents per hundred. That killed the price bump.

"I called a USDA official because I was quite upset. I told him who I was and what I did. I said I had a request for him - a copy of the law that says the world market formula is a secret."

The official said he wasn't sure if that was a law - it may be a regulation or amendment, says the farmer.

"I said I didn't care what it was, I just wanted to see what written proof there is that this is legitimately secret. I waited a week and called him back because there'd been no response. In the meantime, they dropped the world market again. He was very nice and said he was still researching it for me."

Another week went by and the marketer called yet again.

"He said then - and this is a quote - `It seems this isn't a law, regulation, amendment or anything. The secrecy is an executive decision by the administration that this be kept secret.' Administration meaning USDA - at least that's how I took it.

"I asked him if it wasn't true that under the FOIA (Freedom Of Information Act), anything that isn't of national security, I as a citizen and taxpayer, am entitled to. He told me I needed to take that up with the FOIA people."

The reason the formula is a secret, insists every farmer Farm Press spoke to regarding this story, is so USDA can manipulate the world market price any way it wants.

"It's a secret because what they're fostering goes against economic laws. You can't have prices going up around the world and yet have the world market price go down. That is an impossibility without this so-called black box. They can plug any numbers in they want," says a farmer.

Case for signing up USDA statisticians claim some 2 percent of farmers don't certify their acres through FSA. Thus the reason for USDA estimating total U.S. rice acreage at 3.11 million versus FSA's acreage count of just under 3 million.

That claim, say farmers Farm Press has spoken with, is absurd and further erodes their confidence in USDA's rice numbers.

Why? Look at a scenario involving a man farming 250 acres of rice.

The farmer is allowed around $23,000 in a government transition payment. That means his 250 acres of rice will max out the transition payment.

If he doesn't sign up with FSA, he gets no payment at all. But the last two years, farmers have gotten not one, but two payments. The average total per farmer/entity for the last two years has been $45,000 annually.

The LDP on rice currently is about $1.40 per bushel. If the farmer produces 250 acres of rice and comes up with a conservative yield of 120 bushels, he'll end up with 30,000 bushels. Multiply that times $1.40 and the farmer is due $42,000.

Add the $45,000 to that and the farmer potentially leaves $87,000 on the table if he doesn't certify his acres.

"You find me one farmer who hasn't signed up. How insane is that? We've been trading for the last two years under loan," says a market observer.

"The Arkansas Statistical Service called me the week before last and asked how many acres of rice I planted. I said, `Why are you asking me? All you have to do is get the numbers from FSA,'" says a farmer from east central Arkansas.