On August 25, the USDA’s Foreign Agricultural Service released its weekly export sales report using a new reporting system. Based on some implausible values in this report, regular users of this data began to suspect that the report was inaccurate. The USDA quickly retracted the report and postponed the publication of new export sales reports. On September 1, 2022, the USDA announced that it would revert to its old export sales reporting system until it could resolve its technology issues. Public reporting of export sales data is expected to resume on September 15, 2022.
The lack of regular export sales reporting raises at least two questions. First, what is the status of export sales for the marketing years of the old crop 2021-22 and the new crop 2022-23 for corn and soybeans? USDA export sales data is available through August 11, 2022. Late August and early September are atypical times for export sales information.
As the old crop corn and soybean marketing year ends on August 31, this period often sees old crop export commitments canceled or moved from one marketing year to the next. As a result, week-to-week changes in old crop export sales commitments are often stable or negative at the end of August. At the same time, sales of the new crop are generally large compared to other weeks of the year.
Based on the information available to us, the outlook for US old-crop corn and soybean exports is mixed. Corn exports are unlikely to reach projected marketing year totals if the now unobservable export sales commitments at the end of August follow typical historical patterns. It is more difficult to forecast new crop export sales in the absence of USDA data for the above reasons.
A second, broader question concerns the usefulness of having publicly available USDA export sales data for agricultural commodity markets. What will be lost if export sales reports are not released weekly?
Obviously, the absence of declaration of export sales does not prevent exporters from arranging new sales. Trade in agricultural products will not cease. Nor does it eliminate all public information. Export sales reports are just one of many pieces of data provided by the USDA and other sources. However, greater uncertainty regarding export sales can generate trade frictions.
Past cases where USDA reports were not released due to federal government shutdowns shed some light on this issue. Analysis of these cases suggests implied option volatility and therefore the cost of risk management using options was high. However, these shutdowns affected almost all USDA data products, which should have a greater effect.
The State of U.S. Corn and Soybean Export Sales
Export sales of old crop maize and soybeans for marketing year 2021-22 were both strong, above the previous five-year average but below record levels set in the 2021-22 marketing year. previous 2020/21 marketing. USDA’s most recent World Agricultural Supply and Demand Estimates (WASDE) August 2021/22 projects US exports of 2,450 million bushels for corn and 2,160 million bushels for soybeans .
Data from the export sales report helps market watchers determine whether actual exports are likely to reach the levels projected by WASDE. These data presented in Figure 1 suggest that US exports are likely to reach the level projected by WASDE for soybeans, but not for corn. Total soybean export commitments (cumulative data exports plus pending sales) were approximately 2,190 million bushels, or 30 million bushels above the level projected by WASDE. Total corn export commitments were about 2,400 million bushels, or 50 million bushels below the level projected by WASDE.
What likely happened in the last three weeks of the marketing year for which the data was reported? Most of the remaining pending sales are usually converted into actual exports, but some previously announced old crop sales are canceled or postponed to the new crop marketing year.
The net result is essentially no week-to-week change in export commitments, as seen in the 5-year average shown in Figure 1. In some years, export commitments decline at the end of the marketing campaign. For example, 2020/21 corn export sales commitments have declined by about 15 million bushels in the last three weeks of the marketing year.
In the absence of actual USDA export sales reports, it is unreasonable to expect 50 million bushels of corn export sales to materialize. Meanwhile, 2021/22 soybean export sales will reach WASDE forecast levels, even though some outstanding sales commitments were canceled in the final weeks of the marketing year. The obvious limitation of this conclusion is that it assumes that the present will be similar to the past.
New crop export sales are harder to pin down in the absence of regular weekly export sales data. The first weeks of a new marketing year are usually one of the busiest times of the year for export sales. For example, the average week-to-week change in export sales commitments in the first five weeks of a new marketing year observed between 2016 and 2020 is approximately 57 million bushels per week. for corn and just over 75 million bushels for soybeans.
The range of historical results over this period is wide. The loss of USDA export sales data in late August and early September implies greater uncertainty about the state of export demand during a period when export demand may be volatile.
What is lost when export sales reports are not reported?
The general rationale for the USDA’s provision of information on agricultural commodity markets is that better information about supply and demand conditions allows traders to discover market prices that more accurately reflect the value of these products. More accurate pricing then improves resource allocation decisions along the supply chain.
More accurate pricing can take two broad forms: price levels and price variability. Economic analysis has shown that the release of USDA reports, particularly the monthly WASDE reports, causes observed price levels to adjust, indicating that the reports contain valuable information about underlying market conditions. supply and demand. Studies have also shown that expectations about price variability, represented by option prices, decrease when reports are released.
But what happens when this public information is not available? This is a harder question to answer because the USDA has consistently provided public information to commodity markets since the 19th century. Detailed data such as WASDE and Export Sales reports have been available since the 1970s.
However, two recent studies examine unique cases where federal government shutdowns halted publication of the October 2013 and January 2019 WASDE reports. These studies found no evidence that corn and soybeans were mispriced, but some indications of greater market volatility in the absence of these reports. Specifically, the decreases in implied option volatility and option prices that typically follow the release of USDA reports were not seen in October 2013 and January 2019.
The temporary absence of USDA export sales reports can have a similar impact as these missing WASDE reports. However, it is important to note that export sales data is only one piece of market-relevant information; the WASDE report contains a more complete picture of commodity supply and demand. There could be slightly elevated price volatility in the absence of export sales reports over the coming weeks and additional volatility on September 15 when export sales reports resume as market prices will be reconciled with the new data.
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