By Tom Polansek
CHICAGO Oct 22 The U.S. Department of
Agriculture on Monday defended its practice of giving
journalists early access to market-moving crop reports after
facing questions about the security of the data.
Officials said at an annual meeting for users of USDA data
that they were comfortable with the practice because reporters
cannot publish information from crop reports until they are
available to the general public.
Reporters, including those from Thomson Reuters and other
newswires, view sensitive monthly crop reports in a secure room
at USDA's headquarters in Washington, D.C. and pre-write
articles for distribution to readers as soon as the data is
Reporters surrender electronic devices before entering the
so-called "lock up" and do not have access to the Internet to
publish information until it is posted on the USDA's website.
Reporters "help us disseminate the information," said Gerald
Bange, chairman of USDA's World Agricultural Outlook Board, in
an interview on the sidelines of the meeting in Chicago.
"To our knowledge, nobody is pre-releasing anything from
lock-up," he said. "It's a rigidly controlled process."
The USDA is widely regarded as the world's best source of
information on U.S. and global crop supplies, offering an
unmatched wealth of public data.
Traders and analysts have grown concerned about the
department's long-time practice of allowing reporters early
access to data since the Chicago Board of Trade in May extended
grain trading hours to keep the markets open for the first time
when the USDA issues crop reports.
The Chicago Board of Trade, owned by CME Group Inc, extended
weekday grain trading hours to 21 hours a session from 17 hours
in response to a competitive threat from arch rival
IntercontinentalExchange, which launched look-alive corn, soy
and wheat contracts.
Agribusiness company Cargill said in a letter to the USDA
this summer, "in an environment in which markets are actively
trading while critical reports are being released, anyone with
early access will have an unfair advantage."
High-frequency traders, who use sophisticated trading tools
including high-speed data feeds, as part of their trading
strategies have been in focus with the change to live trading
during USDA reports.
Some traders have said high-frequency traders have gained an
extra advantage over other traders because they are able to
upload data more quickly and trade off the USDA reports as soon
as they are released.
Formerly markets were closed for two hours after the USDA
issued reports, allowing market participants to leisurely
analyze the data.
"There seem to be people reacting to the release of the crop
report 20, 30, 40 seconds before it hits the newswires," said
Rich Feltes, vice president of research for R.J. O'Brien.
Still, journalists "serve the trade a useful function by
having that data pre-entered" from the lock-up, he said. "Then
they hit the button and you have all the numbers."