USDA Data: Transparency and Integrity?
Oct 20, 2011
Transparency and integrity are words that politicians toss about freely when pushing for new legislation and regulations. They are the words their constituents strive to hear and were the cornerstones of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law last July. Dodd-Frank is the basis for a reform voted on this week by the CFTC, which will limit the positions of speculators during delivery months to a percentage of available stocks. It will affect less than 100 traders of agricultural products according to the CFTC and will be implemented to reduce volatility and level the playing field. Transparency and integrity for the marketplace.
Less than 24 hours prior to the headline grabbing 3 to 2 vote by the CFTC to implement position limits, the USDA convened its annual Data Users Meeting in Chicago with much less fanfare but certainly much more importance in my opinion. The agenda at such meetings is pretty straightforward; explain the numbers and how they are derived for a whole myriad of reports including WASDE’s and Quarterly Stocks. Transparency and integrity for the data.
This year’s meeting focused on the Quarterly Stocks numbers that have recently added more volatility to agriculture markets than WASDE’s. When questioned, the USDA was at a loss to explain the corn stocks increased in the last report but offered their view in the form of "better quality", "lower exports", and "more on-farm and ethanol storage capacity". They went on to say that any of these reasons individually cannot fully explain the 200 million bushels in additional stocks but could possibly explain it when used together. No transparency.
When asked about the dramatic drop in Feed usage, one USDA official implied that any correlation between the number of grain consuming animals and feed use is purely coincidental. Zero integrity.
In a year when corn stocks are at some of the lowest levels in history and input prices are at the highest, end users and producers both need transparency and integrity from government reporting agencies that have recently created volatility with their conflicting reports. The departure of seasoned statisticians from the USDA and its agencies could not have happened at a worse time nor has it ever been more evident. The lack of intra-agency communication is clearly evident in these reports, muddying the waters even further.
Restricting positions in certain months by speculators is not a bad thing but who’s watching the reporting agency with the largest impact on the markets that every US citizen relies on? Grains and oilseeds are not investment vehicles like gold and silver but staples of everyday life. US consumers, never mind the markets, are being held hostage by the innuendo and speculation of the same government officials charged with providing transparent data with integrity. It’s time to overhaul the USDA data compiling process and bring back the transparency and integrity we all deserve.