Ag Agency Claims Media Access Created Advantage to Some Traders
OMAHA (DTN)– In a surprise move that caught media outlets flatfooted, USDA announced Tuesday that the agency would end its more than a century-old practice of “lockup” events ahead of the release of USDA reports, such as the World Agricultural Supply and Demand Estimates (WASDE) and crop and livestock production reports.
Agency officials told reporters the decision was mainly due to an inherent “latency advantage” that some news outlets were providing to trading customers, which allowed those traders to make high volumes of trades within the first one to two seconds following the report’s release.
That creates an unfair advantage to those traders versus the public at large, said Robert Johansson, USDA chief economist.
Providing media access at the same time as the general public “levels the playing field and makes the issuance of the reports fair to everyone involved,” Agriculture Secretary Sonny Perdue said in a news release sent after the call with reporters and media representatives. Perdue was not part of the media call.
Media outlets on the call voiced concern that rather than leveling the playing field, the change would make it even more difficult for farmers and other users to digest and act on the pages of raw data USDA releases.
Officials also said the cost of maintaining the pressroom, which facilitated the lockup system, was a consideration in ending the practice. When asked, they provided no details on that cost or any official need to trim such costs.
The next WASDE report, which will be released at 12:00 p.m. EDT on July 12, will still be conducted under the long-existing system. As has been the case for a decade, DTN will have a team of reporters and data analysts in the lockup, with results appearing shortly after 12:00 p.m. EDT.
The first crop report under the new rules will be the Aug. 10 WASDE report and the Crop Production report from the National Agricultural Statistics Service (NASS).
Historically, the USDA “lockups,” as they were called, were conducted in a controlled release manner. In the early days, reporters were given printed reports at a set time, which they grabbed and contacted their news desks to dictate the latest commodity and livestock expectations.
In the internet age, reporters were required to give up their cellphones and other electronic devices before going into the lockup pressroom. USDA officials released the current report data at between 10:30 a.m. and 11:30 a.m. ET, giving news teams time to digest the information and prepare stories.
USDA then opened internet connections to the pressroom at 12:00 p.m. ET sharp, allowing the news agencies to begin transmitting their articles and data. Typically, the first DTN flash story would appear in online and satellite products before 12:01 p.m. ET.
At the same instant, USDA sent data to its own websites. Officials said that data typically appears on their site about two seconds after sending, or 12:00:02 p.m. ET. During that one- to two-second delay, “there has become a significant amount of trading” taking place, ahead of the public at large having access to the data,” Johansson said.
In the news release, USDA said evidence suggests trading activity “worth millions of dollars” occurs in the one- to two-second period immediately following 12:00 p.m., “which could not be based on the public reading of USDA data. The inference is that private agents are paying the news agencies for faster data transmission to get a jump on the market.”
News organizations have invested in high-speed data systems to deliver content to customers with the lowest amount of “latency,” or delay from the time the data is sent until the user receives it. Many had paid for high-speed data line access into the USDA building housing the lockup pressroom.
USDA officials said they did not plan to invest in newer technology to solve the two-second latency issue.
The pressure point now shifts to users who can most quickly gather and digest information from the dozens of pages of data that is posted on the USDA site.
“Rather than having access to reporter-analyzed information a few seconds after release, DTN readers will now have to wait for our reporters to sift through the information at noon Eastern Time with analysis that will appear many minutes after that,” said DTN Editor in Chief Greg Horstmeier.
“So while in theory this gives everyone equal access, in reality, this creates a situation in which whoever can invest the funds to electronically digest USDA data from that website quickly will have not only a second or two advantage, that organization will have 10, 15, even 30 minutes advantage over the average person trying to sort through the all the raw data on USDA’s site.
“This ‘level playing field’ has the potential of a gigantic high spot in it for someone,” Horstmeier said.
Media representatives on the call also raised concerns about the ability of USDA’s websites to handle the onslaught of users that would be accessing that site at report release time.
Officials said that, over recent years, they have worked on “hardening” the site. “We feel comfortable we’ll be prepared to accommodate the change in traffic we expect starting Aug. 10,” Johansson said. Officials gave no details on how that hardening occurred, nor did they describe any contingency plans for release days should the site crash.
Seth Meyer, head of the World Agricultural Outlook Board, which prepares the monthly WASDE reports, said he had received complaints and comments from various farm groups over recent years about the trading volume in the seconds following report release.
“Part of this is from our own due diligence,” Meyer said. “We get comments not from big commercial entities, but smaller folks, farm groups and data users of NASS, indicating they believe this is a problem.”
According to “Safeguarding America’s Agricultural Statistics,” a report covering USDA’s reporting systems from 1905-2005, the concept for lockup procedures began following a 1905 leak of information on acreage estimates.
DTN Staff Reporter Emily Unglesbee, DTN Ag Policy Editor Chris Clayton, DTN Contributing Editor Jerry Hagstrom, and DTN Editor in Chief Greg Horstmeier reported on this story.