The U.S. Department of Agriculture is upending decades of custom and barring journalists from advance access to major market-moving crop and livestock reports, starting Aug. 1. Organizations including Bloomberg LP examine data in advance so they can relay accurate information as soon as USDA -- and other federal agencies that similarly allow early examination of reports -- releases it. Agriculture Secretary Sonny Perdue said on July 10 that because of technological changes, journalists can now get information to their readers faster than the USDA can put it on its website, creating an unfair advantage.
1. Why do these reports matter so much?
USDA reports are considered by many traders the gold standard of agricultural information, because government surveys provide the most comprehensive look at crop and livestock trends in the U.S. and worldwide. The monthly World Agricultural Supply and Demand Estimates report, and quarterly surveys of crop inventories, are among the publications closely watched by traders as key gauges of supply and demand. Markets can fluctuate wildly in the moments after their release, as trading houses try to exploit surprises in the data to buy and sell commodities.
2. How exactly does this work?
The USDA has allowed journalists to see reports up to 90 minutes in advance during highly secure “lockups” in the department’s Washington headquarters. The reporters who are allowed to take part are locked in a room with no internet capability, without their mobile phones or any transmission devices, and aren’t allowed to leave until after the information is released. For some of the most highly sensitive reports, the journalists go through metal detectors to ensure no one’s cheating. (This prevents, in addition to an unfair media advantage, any journalist profiting off not-yet-public information.) The department itself controls a master release switch that sends all the reporters’ stories at once, right as that day’s report is released to the public.
3. Will other agencies keep doing lockups?
Too soon to tell. The Labor and Commerce departments release market-moving economic data in press lockups, but there’s no indication that they’ll follow USDA’s decision. A USDA official on July 10 told reporters that, in deciding to change its procedures, there were consultations with Labor and Commerce that signaled those two agencies didn’t have similar technical difficulties that needed to be addressed.
4. How could the current system be considered unfair?
Until July 10, the USDA didn’t think that. In changing that long-held view, the department said that the high-speed fiber optic lines used by media organizations now deliver news to their subscribers faster than the 2 seconds it takes for the department to disseminate to the general public. And in high-speed trading, a fraction of a second can mean a lot of money. The USDA says cutting off early access for journalists will restore a level playing field.
5. Will it?
Not entirely. As subscribers to news organizations lose their advantage in transmission speed, traders with the best technology may now gain that edge -- especially given how the USDA transmits information. The agency’s website is powered by a data-transmission protocol known as TCP, which works like a queue system -- whomever gets to the website first gets the information first. (By contrast, Bloomberg and other media organizations send their data to their clients all at once.) So it’s possible, going forward, that a large grain-trader, a tech-savvy upstart or even an individual media organization will get a lightning-fast first look -- a millionth of a second, perhaps -- that they can turn to their advantage.
6. What will this mean for markets going forward?
Traders will rely on journalists less and more on themselves for information. News organizations with advance notice are under great pressure to get data right, and almost always do. Without them, victory will go to whomever can scrape and trade data fastest. Meanwhile, misinformation and misinterpretation has a higher chance of influencing markets, meaning longer periods of potential volatility as the market digests information on its own.
• An example of a story from a USDA lockup.
• The USDA’s Q&A about lockups as it appeared on July 10, explaining why news organizations had advance access.
• The USDA’s Q&A about lockups as it appeared on July 11, explaining why news organizations don’t have advance access.
• “Understanding USDA Crop Forecasts,” from the National Agricultural Statistics Service.
• The USDA’s statement ending advance press access.
• The difference between TCP and UDP transmission protocols.
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