On August 25, the USDA Foreign Agriculture Department released its weekly export sales report using a new reporting system. Based on some unreasonable values in this report, regular users of this data are beginning to suspect that the report is inaccurate. The USDA quickly retracted the report and postponed the publication of more export sales reports. On September 1, 2022, the USDA announced that it would return to the old export sales reporting system so that it could resolve its technology 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. First, what is the status of export sales for old crop 2021-22 and new crop 2022-23 marketing years for corn and soybeans? USDA export sales data is available through August 11, 2022. Late August and early September are an unusual time for export sales information.
With the old crop marketing year for corn and soybean ending on August 31, this time period often sees old crop export commitments canceled or moved from one marketing year to another. As a result, weekly changes in old crop export sales commitments are often flat or negative in late August. At the same time, sales of new crops are usually large compared to other weeks of the year.
Based on the information we have, the outlook for exports of old crops of corn and soybeans in the United States is mixed. Corn exports are unlikely to reach the expected marketing year totals if unobservable export sales commitments in late August follow typical historical patterns. Forecasting new crop export sales in the absence of USDA data is more difficult for the reasons mentioned above.
The second and broader question concerns the value of the availability of USDA export sales data for agricultural commodity markets. What would be lost if export sales reports were not released every week?
It is clear that the lack of export sales reports does not prevent exporters from arranging new sales. Trade in agricultural commodities will not stop. Nor does it eliminate all public information. Export sales reports are just one data item among the many reports provided by the USDA and other sources. However, increased uncertainty about export sales may lead to some trade disputes.
Previous cases in which USDA reports were not released due to federal government shutdowns shed some light on this question. The analysis of these cases indicates the volatility of the implied options and therefore the cost of managing the risk using the options was high. However, these shutdowns affected nearly all USDA data products which are expected to have an even greater impact.
The status of US corn and soybean export sales
Old corn and soybean crop sales for the 2021-22 marketing year were strong, above the previous 5-year average although below record levels set in the previous 2020/21 marketing year. The latest US Department of Agriculture (WASDE) global agricultural supply and demand estimates from the August 2021/22 project. US exports are 2,450 million bushels for corn and 2,160 million bushels for soybeans.
The data from the Export Sales report helps market watchers to ascertain whether actual exports are likely to reach the expected levels of WASDE. This data shown in Figure 1 indicates that US exports are likely to reach the expected level of WASDE for soybeans, but not for corn. Total soybean export commitments (exports cumulative to data plus pending sales) were approximately 2,190 million bushels or 30 million bushels above the level expected for WASDE. Total corn export commitments were about 2,400 million bushels, or 50 million bushels, less than the level expected for WASDE.
What likely happened in the last three weeks of the marketing year for which the data was reported? Typically, most of the remaining remaining sales are converted into actual exports, but some sales of older crops previously announced are canceled or postponed to the marketing year of new crops.
The net result is that there is no weekly change in export commitments, as evidenced by the five-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 fell by about 15 million bushels in the last three weeks of the marketing year.
In the absence of actual export sales reports from the USDA, it is unreasonable to expect 50 million bushels in corn export sales. Meanwhile, 2021/22 soybean export sales will reach WASDE projected levels even if some of the outstanding sales commitments in the final weeks of the marketing year are cancelled. The obvious limitation of this conclusion is that it assumes that the present will be similar to the past.
It is difficult to determine new crop export sales 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 weekly change in export sales commitments in the first five weeks of a new marketing year observed between 2016 and 2020 is about 57 million bushels per week for corn and just over 75 million bushels for soybeans.
The range of historical results during this period is large. The loss of USDA export sales data during late August and early September indicates greater uncertainty about the state of export demand during a period when export demand may be volatile.
What is lost when export sales are not reported?
The general rationale for providing USDA information 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 pricing then improves resource allocation decisions along the supply chain.
More accurate pricing can take two broad forms: price levels and price volatility. Economic analysis has shown that the release of USDA reports, especially the monthly WASDE reports, causes the observed price levels to be adjusted, indicating that the reports contain valuable information about fundamental supply and demand conditions. Studies have also shown that expectations about price volatility, represented by option prices, are lower when reporting is made.
But what happens when this public information is not available? This is a difficult question to answer because the USDA has consistently provided public information for commodity markets since the 19th century. Detailed data such as that in WASDE and export sales reports has been available since the 1970s.
However, two recent studies looked at unique cases where the federal government shutdown halted the release of WASDE reports for October 2013 and January 2019. These studies found no evidence that corn and soybean prices were wrongly priced, but there are some indications of higher market volatility in the absence of these reports. Specifically, the decline in the implied volatility of options and option prices that typically follows the release of USDA reports in October 2013 and January 2019 was not observed.
The temporary absence of USDA export sales reports may have a similar effect as did 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 comprehensive picture of supply and demand for commodities. There may be a slight uptick in price volatility in the absence of export sales reports over the next few weeks and additional volatility on September 15th when export sales reports resume as market prices are reconciled with new data.