The U.S. government will begin issuing major agricultural reports at midday, when Chicago trading is in full swing, abandoning the early morning release of the world’s most important crop data after almost two decades.
After a months-long debate following the adoption of nearly around-the-clock futures trading, the U.S. Agriculture Department said Wednesday that from January it would release its market-moving U.S. crop forecasts and five other major reports at noon ET (11 a.m. CT).
Major farm groups and agribusinesses generally supported the move, although some major market players including Cargill had advocated either maintaining the same time or releasing the data when markets are shut. But many Chicago traders were pleased the reports would no longer roil the market during the sluggish, illiquid early morning hours of the CME Group’s extended day.
"We’re elated, the whole trading floor is just elated with this decision. The early release time just wasn’t working," said Joe Bedore of trading house INTL-FC Stone.
Since 1994, the agency’s biggest reports have been released at 8:30 a.m. ET, prior to the opening of Chicago floor trade and early enough to accommodate European and Asian players. The reports are finalized in a "lockup" of USDA experts that begins several hours beforehand under the watch of armed guards.
But in May, CME extended the trading time of its hallmark Chicago Board of Trade (CBOT) grain and oilseed contracts to nearly 24 hours, responding both to pressure from investors who wanted a longer day and to competition from the IntercontinentalExchange (ICE), which has just launched look-alike contracts in a bid to take business.
As a result, USDA’s most significant reports were being released when markets were open but trading volume was low, frustrating many players and threatening to exaggerate price moves.
"The shift to a noon release allows for the greatest liquidity in the markets, provides the greatest access to the reports during working hours in the United States, and continues equal access to data among all parties," said USDA chief economist Joe Glauber.
CME said after the USDA’s announcement that it would no longer start open-outcry grain trading early on days the U.S. government issues major agricultural reports. In June it had switched to starting trading at 8:20 a.m. ET instead of the usual 10:30 a.m. ET on days when a USDA report was released.
ICE said it had "no change in hours to announce" for its grain markets.
With reports to be released while markets are open, a key issue is assuring speedy and equal access to the data. USDA posts its reports on the internet at the time of release as well as issuing them in print. A spokesman said USDA would maintain the practice of allowing media organizations, including Reuters, early access to the data under a strict embargo.
Some traders said there is too little time to digest USDA data if the reports are issued during trading hours. Traders in Paris and other European markets may feel especially pinched — USDA reports will be issued 30 minutes before they close.
Others fear that ultra-fast algorithmic traders or tech-savvy speculators may be able to benefit by programming split-second trades based on the USDA’s numbers, while farmers and other retail players take more time to parse the figures.
A trade group for U.S. grain merchants, shippers and processors, the National Grain and Feed Association, said trading should pause long enough on report days "for a rational analysis of the data. We look forward to continuing that discussion with the futures exchanges, regulators and other stakeholders."
A CME spokesman said on Wednesday, "We are willing to consider a pause provided all exchanges agree to co-ordinate to set trading hours to facilitate this halt." In July CME had suggested a halt of no more than 30 minutes around the release of key USDA reports.
The new release time applies to the monthly crop report and its companion report on crops around the globe, the World Agricultural Supply and Demand Estimates; the quarterly Grain Stocks report, issued in March, June, September and January; the Prospective Plantings report in March, the Acreage report in June and the Small Grains Summary in September.
USDA decided to continue to release three major livestock reports — the monthly Cattle on Feed report, quarterly Hogs and Pigs report and periodic Cattle Inventory report — in mid-afternoon.
When USDA asked farm groups and agribusinesses for their views in July, most major players favoured midday release. It was backed by the CME, the Commodity Markets Council which speaks for commodity exchanges and corporate counterparts, and major U.S. farm groups.
Some major companies disagreed. Cargill, Con-Agra and trader Gavilon preferred morning release while foodmakers General Mills and Perdue Farms suggested afternoon release. Out of 147 comments to USDA, one-third supported midday release of reports, one-third preferred morning and 44 supported afternoon release.
– Charles Abbott writes for Reuters from Washington, D.C.