Via a special arrangement with Informa Economics, Inc.
NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.
USDA officials pledge to do better on projections, defend the early access for reporters to USDA data.
Data users continue their focus on USDA estimates of Grain Stocks and projected carryover levels in confab with USDA officials. The issue of US corn stocks and carryover was one of the main areas of focus in the just-completed USDA data user's meeting held in Chicago Monday, and USDA officials pledged to do a better job of projecting carryover levels in relation to survey-based data.
At issue is an apparent divergence between projections of US corn carryover compiled by USDA's World Agricultural Outlook Board (WAOB) and the survey-based estimates of US grain stocks that are put together by the National Ag Statistics Service (NASS). The quarterly Grain Stocks reports have become a major focus for traders as they have not tracked with what the monthly updates on carryover that are generated by the Supply/Demand report.
"We want to do better," said WAOB chairman Jerry Bange. "We have no reason to have any kind of a disagreement with the NASS numbers." He further noted he was not satisfied with the carryover estimate as of Sept. 1 for corn.
Mixed signals on September stocks. The September Grain Stocks report issued Sept. 28 and the Supply/Demand report issued Sept. 12 held two different signals for markets on corn carryover. The S/D update indicated corn supplies on hand at the end of the 2011/12 marketing year (Aug. 31) would be 1.181 billion bushels while the Grain Stocks report issued Sept. 28 put the level at 988 million bushels.
The rapid growth in the US ethanol industry has been cited by USDA officials before as a factor in making it more difficult to estimate corn supplies. At this year's session, Bange indicated the early harvest of the 2012 corn crop was another factor complicating their task. In addition, there is not a reliable way of determining the exact level of corn used for livestock feed.
Reporter access to data early. Another issue addressed during the session was linked to the current process where reporters are given access to the USDA data early in "lock-up" where they have no contact with the outside world and are unable to release any information from the reports until the official release time of 7:30 am CT.
This issue was raised by Cargill Inc. earlier this year when USDA sought public comment on release times for key reports such as Grain Stocks, Crop Production and Supply/Demand in the wake of the grain futures trading day being expanded to 21 hours.
Bange said he and other USDA officials were confident that no news services have been able to release any of the data early. "To our knowledge, nobody is pre-releasing anything from lock-up," he stated. "It's a rigidly controlled process."
High speed trading a culprit? What has raised the issue to another level is indications that market action has suddenly jumped within a minute of the report being released, with October's Supply/Demand report seeing a major influx of trade action arising within a few seconds before the official release time.
But some contacts say this could well be a function of high-speed trading done by computers and a practice labeled "banging the beehive." The Wall Street Journal reported on the practice relative trading in natural gas futures where high-speed traders send a flood of orders in an effort to trigger huge price swings just before data is released.
Contacts signal this appears to be the type of action that unfolded ahead of the Oct. 12 USDA reports.
Comments: There are no clear answers yet to this vexing issue for USDA and the US grain and agriculture industry relative to the data published by USDA. The projections from the Supply/Demand report have more subjectivity to them given that there is not the statistical backing for some of the data such as a survey as signaled by Bange relative to animal feed use. But even those statistics have been questioned as the agency has struggled with early harvest of corn in particular and getting an accurate read on the situation relative to how much corn US elevators hold on Sept. 1 from both old- and new-crop supplies. As for the reporter access issue, the security measures deployed by USDA are substantial and have been assessed by other agencies in the government that release market-sensitive data. But even with the most stringent security measures, it appears the advent of electronic trading and the high-speed trading issue in particular is yet another factor that USDA officials will have to contend with.