Editors' Notebook

USDA Reports Post-Mortem

Greg D Horstmeier
By  Greg D Horstmeier , DTN Editor-in-Chief
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Soybean contracts on Aug. 10 hit peak trading at 11:00 a.m. Central Daylight Time. It's a similar reaction, likely driven by automated trading, as spikes seen prior to USDA changes in report release procedures. (DTN ProphetX Illustration)

With all the commotion DTN and other media outlets have raised around changes to how USDA rolls out its World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports (scroll down for a link to the "Locked Out" post for background on these reports), we have to report that the Aug. 10 report came off without much of a hitch.

The USDA website didn't crash.

DTN/PF and other media outlets adjusted their ability to digest, analyze and report the new commodity numbers.

Algorithmic trading -- the issue USDA used as its main reason for killing the lockups -- continued as before.

As shown in the DTN ProphetX chart accompanying this article, November soybean contracts dribbled along in the minutes prior to 11 a.m. CDT, then spiked as the hour struck.

DTN Grains Analyst Todd Hultman observed after the report dust settled, "I personally don't see a change in trading behavior from prior WASDEs, as the algos look as active as ever."

I will brag that DTN followers saw their first WASDE data tables at 11:03 a.m. CDT, with initial reporter analysis hitting around 11:10, followed by continued updates through 11:32. The final, cleaned-up and well-rounded article hit satellite, online and mobile devices at 11:58. We took our time with that last update as the critical numbers were public and the markets were already reacting. Soy contracts ended the day down 42.25 cents.

So the only difference between the August report and previous iterations was that you, dear reader, received your analysis 10 to 30 minutes later than normal, depending on how much analysis you were looking for to make a trading decision.

What if you didn't wait for us, but went straight to USDA's "level playing field," on its website?

This reporter did just that. I was sitting, finger poised on the "refresh" button at the right spot on the USDA website -- because I knew where to look. I was able to open the WASDE report file within the first minute after 11 a.m. and pull up ONE crop page -- soybeans -- and scroll down to ONE specific number -- in this case, I chose world ending stocks -- and I could have theoretically made a trade based on just that single number within 11:01:30 of its release. That's 80-odd seconds after the market began to fall.

If you look at the ProphetX chart, the November soy contract had dropped around 10 cents, and was beginning to climb a few cents before again dropping into the eventual down spiral, during the 60 to 90 seconds it would have taken a well-prepared human to respond to one single data point. If I and my pretend broker would have seen that uptick, we might have held off many more seconds before making a trade, confused by the seesaw action.

Just to be clear, the above comments are all theoretical. DTN's content/editorial employees, including myself and our commodities analysts, are forbidden from trading in commodities markets. We're not, contrary to some rumors we've seen out there, trading on "inside" USDA data.

If I had wanted to check additional August soybean numbers -- expected yield, some of the latest Brazilian estimates -- or wanted to look at corn data for a possible grain sale there, I would have spent more seconds and minutes scrolling to the correct spot in the USDA report in order to get my head around the number before deciding to pull the trading trigger. All the while, the algorithms had had their way with the markets and moved on.

So DTN calls this first WASDE report under new conditions "Algorithms 1, Farmers 0."

In a related note, a letter, signed by DTN/PF, Bloomberg News, Dow Jones/The Wall Street Journal, the National Press Club and the National Press Foundation was sent to USDA Secretary Sonny Perdue at the end of July, asking for a conversation around the new procedures. We were hoping to have a respectful chat ahead of the Aug. 10 WASDE release.

To date, we have had no reply. When DTN reporters emailed the USDA press office inquiring about the letter, they received the July 11 press release outlining the changes. In case we lost the original, I guess.

We'll see whether there's any post-mortem, public that is, on the new procedures on USDA's end. We'll keep asking for a discussion around the matter. And in the meantime, we'll be fine-tuning our own handling of the data to try to get information to you as quickly as possible.

Click on this link to read the background about USDA reports and the lockup: https://www.dtnpf.com/…

Greg D. Horstmeier can be reached at greg.horstmeier@dtn.com

Follow him on Twitter @greghorstmeier



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