By Tom Polansek
CHICAGO, Oct 22 (Reuters) - 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 publicly available.
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.”