The recent U.S. government shutdown stopped the flow of information that normally is available from the U.S. Department of Agriculture (USDA). The lack of regular USDA information impacted the behavior of agricultural markets and its participants. Fortunately, the government shutdown only lasted for a short time, but it was long enough for most cash and futures market traders to realize how dependent our marketing system is on the regular flow of independent information.
The USDA market information and outlook forecasts make an easy target for marketing analysts and farmers because they often question and sometimes criticize the information contained in key reports. However, we often do not think about what might happen if this information was not available “free of charge” to the general public. In reality, no information is free, and there are significant tax dollars spent every year to collect the data, analyze figures and report findings. However, these costs are paid for by all U.S. taxpayers, not just those who directly use and benefit from the information.
Why does the USDA spend so much time, effort and money to prepare publically available information? The simple answer is that the USDA is there to help the people who buy and sell agricultural products, such as input suppliers, farmers, grain elevators, food processors, exporters and importers, make more informed decisions and help agricultural markets operate more efficiently.
It is commonly recognized that information has value. If one trader has timelier or more accurate information than other traders, the individual with better information can use it to his or her advantage. For example, if a corn exporter knows that corn yields across the U.S. are higher than is believed by corn importers, the exporter potentially can sell corn for a higher price than if everyone had the same information. The exporter would benefit from the more accurate information if a sale were made. However, what happens if the importer does not buy any corn because the price is too high to be competitive? The shared benefit from the trade would not take place because of inaccurate information and an export sale would be lost.
The weekly Export Sales Report, typically released every Thursday by the USDA Foreign Agricultural Service (FAS), is one of the key reports that were missed during the three-week government shutdown. During this time, exports of major agricultural products continued and the mandatory reporting requirements were met, but none of the export sales data was compiled and released. Importers took advantage of this lack of information to make larger than expected purchases of corn, soybeans and wheat. Typically, prices increase when a large export sale is made and reported by the FAS. However, because there was no public reporting of any export sales during the shutdown, prices did not respond until after the reports became public and everyone became aware of the amount sold. In this case, the importers may have benefited from the information gap.