UPDATE 3-USDA rejects R.J. O'Brien petition to delay report

Mon Nov 7, 2011 5:01pm EST

Related Topics

* R.J. O'Brien sought delay of USDA crop report

* R.J. O'Brien says delay would reduce price volatility

* CME denies rumors of seeking to delay USDA report

* USDA monthly report scheduled for Wednesday

By K.T. Arasu and Christopher Doering

CHICAGO/WASHINGTON, Nov 7 (Reuters) - The U.S. government brushed aside on Monday a petition by broker R.J. O'Brien to delay its monthly crop report, saying the agriculture department would stick to its schedule for the data monitored not only in the United States but around the world.

R.J. O'Brien wanted the report updating U.S. crop production and stocks to be delayed to Monday to reduce price volatility at a time when accounts from bankrupt MF Global were being moved to new brokerages including to R.J. O'Brien.

"It makes sense," said grains analyst Dan Basse of AgResource Co. in Chicago about the USDA's decision to keep to its schedule. "There is a lot of interest from outside the country. We need to understand that this report is important to just more than the CME," he said of the Chicago exchange.

R.J. O'Brien Chief Executive Gerald Corcoran asked Agriculture Secretary Tom Vilsack in a letter to delay the report until Monday, saying price gyrations on days USDA reports were released were "well documented."

"This recommendation is intended to reduce price volatility until MF Global client transfers to their designated FCMs are fully operation and thus better equipped to manage risk triggered by changes in the USDA's supply/demand updates," Corcoran said in the letter made available to Reuters.

There had been widespread rumors earlier in the day that the Chicago Mercantile Exchange had sought the delay.

But CME spokesman Chris Grams denied the rumors.

"I can confirm that at this stage, CME group has not asked the USDA to move the crop report," he told Reuters.

He declined to say if the CME supported the R.J. O'Brien petition.

RUMORS TIED TO MF GLOBAL

The rumors were tied to the MF Global meltdown at a time when about 50,000 commodity accounts from the bankrupt broker were being transferred to a handful of brokerages.

The process of shifting the accounts has been advancing without any major hitches, but there have been some anecdotes of customers being expected to liquidate some of their positions as they were unable to pay additional margins.

The USDA report on Wednesday will update the department's estimate of corn and soybean production and ending stocks in the United States.

Corcoran said there had been precedent for the USDA delaying its crop reports, citing blizzards shutting down U.S. government operations.

He said the delay would allow farmers, end-users, commodity trading advisers and other market participants more time to properly fund MF Global accounts transferred to new brokers.

"The situation is exacerbated by the limited funds that the MFG bankruptcy trustee has released to each client's designated FCM (Futures Commission Merchant)," Corcoran said.

About 40 percent of the collateral in MF Global accounts have been retained, causing many account holders moving to new brokers to come up with additional margins.

Corcoran said the delay would also allow thousands of transferred MF Global customers to adapt to new order entry platforms as well as access to option orders executed in the CME trading pits.

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
Tilted wrote:
Imagine this from R.J.O’Brien, who required new accounts just transferred from MF Global to be funded with 100% initial margin on all positions by Close of business Monday Nov 7, or face complete liquidation of their position. Trying to get through RJO for customer service proved impossible. This is must be considered common ethical business practice these days.

Nov 07, 2011 10:44pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.