Seth Meyer, ChairmanWorld Agricultural Supply and Demand Estimates (WASDE)

Interagency Commodity Estimates Committee World Agricultural Outlook Board, Chairing Agency

High Frequency Trading,

Equity, Efficiency and

the Release of Information

WAOB - World Agricultural Outlook Board WASDE - World Agricultural Supply and Demand Estimates Report

Interagency Commodity Estimates Committees (ICEC):

• Wheat

• Rice

• Oilseeds (incl. Soybeans)

• Grains (Maize, Sorghum, Barley, Oats)

• Cotton

• Sugar

• Beef, Pork Poultry

• Dairy

Interagency Commodity Estimates Committee (ICEC)WASDE Process

Ukraine Corn

WASDE and Crop Production and are market movers

Some of the US Government’s Principal Federal Economic Indicators (PFEIs), some with ‘lockup’

•World Agricultural Supply and Demand Estimates (WASDE) + Crop Production-USDA

•Crop Production - USDA

•Housing Starts - Dept. of Commerce

•Gross Domestic Product - Dept. of Commerce

• Employment – Dept. of Labor

Are High Frequency Traders a Positive or Negative?• They just ‘are’. USDA is agnostic with respect to

their presence.

• They are not going anywhere so we have adjusted.

• They are ‘fundamental’ traders, it may be ‘simplistic’ and ‘lack nuance’ (?) but rely on some reduced form representation of market response to released information.

• Evidence suggests they don’t ‘solve’ the market completely or at least not in the short run.

are

There is No Going Back

Peak Movements by Commodity

Changes in Lockup Over TimeMotivations not independent

• Changes in release times • After Market Close• Before Market Open• Noon (11am Chicago)

• Changes in Market Status• Market Closed/Market Open when released• No longer a choice

• Press in ‘Lockup’

Big Movement Days by Year

Source: CFTC Sharp Price Movements in Commodity Futures Markets

Daytime Trading Hours Overnight Trading HoursTop Price Movement Days

Why noon in Washington D.C.?

Chicago, Illinois

London, UK

Dalian, China

8am Eastern 12 noon Eastern 3pm Eastern

Press In Lockup (ended July 2018)

• Pressroom with dedicated machines on an internal network (no outside communications).

• Access available for no charge to credentialed press operations.

• Would receive Crop Production and WASDE 90 minutes before release.

• Would load stories and ??? into their own system queue.

• Single physical switch isolated USDA and Press, thrown at 12:00 noon.

Comparison of Data flow PathsUSDA (purple) vs Press (yellow)

Closer

Closer…….Closer

Closer…….Closer……there it is.

Associated Press Website

October 2018 July 2018, since deleted

File TransmissionPress

Distance

~1 mile

Press File Size

0 or 1

USDA File Distance

~1000 miles

USDA File Size

40 pages1-2 mb

depending on file type

August 10 data compared to previous releases

• August 10

• 3,570,640 Hits

• 339.2 GB

• July 12

• 1,649,917 Hits

• 211.7 GB

• June 12

• 485,084 Hits

• 68.3 GB

The August 10 release saw a 636%

increase in requests from June

0

100

200

300

400

0.0

1.0

2.0

3.0

4.0

1-Jun 1-Jul 1-Aug

Hits GB

Million Hits GB Downloaded

From 8am - 8pm Eastern3,570,640 Hits on WASDE site

● Peaking at 11:55am● 77.8% of Hits were offloaded to distributed network system

339.2GB of bandwidth● 99% of bandwidth was offloaded to distributed network system

Summary of August 10th, 2018

View of Traffic from 8am - 8pm Eastern on August 10

Pre-Report Trade Range for Global Grain Carryout Stocks for 2018/19

Reuters

China Corn Production RevisionsNovember WASDE

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November WASDE October WASDE

Cumulative Change = 297 mmtBased on Third National Agricultural Census

Source: China National Bureau of Statistics and USDA.

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November WASDE October WASDE Stocks/Use

China Corn Stock Changes

Cumulative Change = 149 mmt

Source: USDA.

Pre-Report Trade Range for Global Grain Carryout Stocks for 2018/19

Most of the ‘Surprise’ related to China Stocks

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Wheat Corn Soy

MMT

Wheat

Corn

Soy

December US Corn FuturesNovember 8 WASDE Release

Major WASDE ChangesCorn 2018/19

Ukraine Corn Production+2.5 mmt to 33.5 mmt

US Corn Yield-0.11 mt/ht to 11.23 mt/ht

US Corn Production -3.9 mmt to 371.5 mmt

US Carryout -2.0 mmt to 44.1 mmt

US Price Forecast+$3.94 to $141.73 mt

Conclusions

• We (USDA) are agnostic as to the participation of high frequency traders

• High Frequency Traders and systems are not going anywhere

• We also cannot go back to a trading ‘halt’

• USDA and other data release organizations have to adapt and prepare

• Our objective is to provide a level playing field, speed will still ‘win’

• The report continues to have considerable market effect, indicating a contribution to market information