Export sales data Snafu – how did it affect the markets? – Eggfax

On August 25, the USDA’s Foreign Agricultural Service released its weekly export sales report using a new reporting system. Based on some unimaginable values ​​in this report, regular users of these data began to suspect that the report was inaccurate. The USDA immediately withdrew the report and postponed further export sales report releases. On September 1, 2022, the USDA announced that it would revert to its legacy export sales reporting system until it had resolved its technical issues. Public reporting of export sales data is expected to resume on September 15, 2022.

The absence of regular export sales reports raises at least two questions. Firstly, what is the status of export sales for the marketing years for the old crop 2021-22 and new crop 2022-23 for maize and soybean? USDA export sales data is available as of August 11, 2022. Late August and early September are an unusual time for export sales information.

Since the old crop corn and soybean marketing year ends on 31 August, this time period often results in the old crop export commitments being canceled or transferred from one marketing year to the next. As a result, week-to-week changes in older crop export sales commitments are often flat or negative at the end of August. Also, new-harvest sales are generally larger than in other weeks of the year.

Based on the information we have, the prospects for exports of old crop US corn and soybeans are mixed. Corn exports are unlikely to reach the expected marketing year totals if the now-invisible export sales commitments followed typical historical patterns at the end of August. Predicting new crop export sales in the absence of USDA data is more difficult for the reasons mentioned above.

A second, broader question concerns the value of having publicly available USDA export sales data for agricultural commodity markets. What will happen if export sales report is not released every week?

Obviously, the lack of export sales reporting does not prevent exporters from arranging new sales. Trade in agricultural commodities will not stop. Nor does it eliminate all public information. The Export Sales Report is just one data item out of many data items provided by the USDA and other sources. However, greater uncertainty about export sales could generate some trade friction.

Previous examples where the USDA report was not released due to a shutdown of the federal government shed some light on this question. An analysis of those cases suggests option-implied volatility and thus the cost of managing risk using options was increased. However, those shutdowns affected nearly all USDA data products, which would be expected to have a major impact.

US corn and soybean export sales status

Both old crop corn and soybean export sales for the 2021-22 marketing year have been strong, higher than the previous 5-year average, although below record levels in the previous 2020/21 marketing year. The USDA’s most recent World Agricultural Supply and Demand Estimate (WASDE) August projects US exports of 2,450 million bushels for corn and 2,160 million bushels for soybeans by 2021/22.

Data from the Export Sales Report helps market watchers gauge whether actual exports are likely to reach WASDE-estimated levels. These figures shown in Figure 1 suggest that US exports are likely to reach WASDE-estimated levels for soybeans, but not for corn. Total soybean export commitments (accumulated exports for data and outstanding sales) were approximately 2,190 million bushels or 30 million bushels above WASDE-estimated levels. Total corn export commitments were below WASDE-estimated levels of about 2,400 million bushels, or 50 million bushels.

Click on an image to enlarge

What is likely to happen in the last three weeks of the marketing year for which the data was reported? Most of the remaining outstanding 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 not necessarily a week-to-week change in export commitments, as shown by the 5-year average shown in Figure 1. In some years, export commitments decline at the end of the marketing year. For example, 2020/21 corn export sales commitments declined by about 15 million bushels in the last three weeks of the marketing year.

In the absence of an actual export sales report from the USDA, it is unreasonable to expect 50 million bushels in corn export sales. Meanwhile, 2021/22 soybean export sales will reach WASDE-estimated levels, even if some outstanding sales commitments are canceled in the final weeks of the marketing year. The obvious limitation of this conclusion is that it assumes that the present will be identical to the past.

In the absence of regular weekly export sales data, it is more difficult to pin down new crop export sales. The opening weeks of a new marketing year are generally one of the most active 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 the new marketing year seen between 2016 and 2020 is approximately 57 million bushels per week for corn and more than 75 million bushels per week for soybeans.

The range of historical results during this period is large. The loss of USDA export sales data in late August and early September implies greater uncertainty about the state of export demand during periods where export demand may be volatile.

What is lost when export sales reports are not reported?

The broad rationale for USDA information provision on agricultural commodity markets is as follows: Better information about supply and demand conditions allows traders to discover market prices that more accurately reflect the value of those commodities. More accurate values ​​then improve resource allocation decisions along the supply chain.

More accurate pricing can take two broad forms: price level and price variability. Economic analysis has shown that the issuance of USDA reports, particularly the monthly WASDE reports, causes price levels to adjust, indicating that the report contains valuable information about the underlying supply and demand conditions. Studies have also shown that expectations about price variability, represented by option prices, tend to decline upon release of the report.

But what happens when this public information is not available? This is a more difficult question to answer because the USDA has continuously provided public information to commodity markets since the 19th century. Such detailed data is available from the 1970s in WASDE and export sales reports.

However, two recent studies consider unique cases where federal government shutdowns led to the October 2013 and January 2019 release of WASDE reports. These studies found no evidence that corn and soybean prices were inaccurate, but the absence of these reports did provide some indication of high volatility in the market. Specifically, a decrease in option-implied volatility and option prices that were not typically observed in October 2013 and January 2019 following the release of the USDA report.

The temporary absence of USDA export sales reports can have a similar effect as these missing WASDE reports. However it is important to note that export sales data is only one piece of information relating to the market; The WASDE report has a more comprehensive picture of commodity supply and demand. In the absence of export sales report in the next few weeks, there could be slight volatility in prices and additional volatility on September 15 when export sales reporting resumes as market prices coincide with the new data.

Joe Janzenmore

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