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Crop data: Free today, paid tomorrow?
A general lack of USDA data has many short-term implications: Markets don't have weekly export sales reports, crop progress reports, or monthly data on grain supplies at home and abroad -- all numbers critical to the construction of today's grain market prices.
But what about further down the road? A longer term absence of federal crop data (numbers that private crop forecasting and analytics firms use alongside their own data and analysis) could change the general availability of such data. In other words, what's free now may not be for long.
"The likely downsides of a sharp reduction in USDA grain market information over time would be that what is now a 'public good' available to all regardless of economic means, e.g., access to grain market information from the USDA, would very likely become to a significant degree a for-fee enterprise that not all U.S. grain producers would likely be able to pay for and therefore have access to," says Kansas State University Extension ag economist Daniel O'Brien. "The vacuum in local market information would likely eventually be filled by private means should the USDA’s grain market information function be done away with or sharply curtailed. However, the key question is the degree to which the public good, which is now USDA grain market information, would be adequately replaced and provided for medium to small agricultural producers here in the U.S. and abroad."
Adds MDA Weather Services senior ag meteorologist Don Keeney, who relies on some USDA data in the weather information products he creates: "The cessation of by the USDA would certainly be a boon for many private forecasting services, but I’m sure there would be a big negative reaction among many producers."
Another potential outcome of this vacuum, O'Brien says, is that trading platforms, like CME Group and the Minneapolis Grain Exchange (MGEX), could offer products -- whether free or paid -- comprising crop data to "cover the need for public information." That's going to be tough to pull off to the degree to which the federal government has traditionally been able to via USDA-NASS.
"it is possible that we would see the commodity futures exchanges (CME, MGEX, etc.) eventually bring together resources to cover the need for public information," O'Brien says. "This happens in other countries (South America, for instance). However, it still seems that the availability of domestic and international market information to all market participants regardless of economic means would be reduced – even more than may be the case in some instances in markets at this time."
Then there is historical information, which has continued value to the trade in establishing long-term baselines for price and supply/demand trends. Those reports are still around, but if private firms or trading houses take over those reporting duties, the transition will not be the easiest in the world, O'Brien says, and markets will react.
"The long-term historic high-quality data set that is heavily relied upon by the U.S. and world agricultural sectors for market perspective and analysis of the relative impact of ag market factors on price prospects would be discontinued or curtailed. If this were to happen, there would be an intense effort to bootstrap and/or jackknife together the old USDA data sets with the new private industry consensus forecasts that would likely become available," he says. "However, in the transition from public to private information, the reliability of market information and therefore of market decision making would suffer – with the possibility of greater grain market price volatility and uncertainty."
While the general lack of USDA reporting likely will cut short the crop and livestock industries' information stream, there is opportunity for others who could provide that data, O'Brien says. But again, that's something that, though free today, may not be that way forever.
"To the degree that grain markets would be more vulnerable to the withholding of cash price or local production information by major local/regional market participants – then market performance and efficiency could suffer," he says. "The means of overcoming this vulnerability and helping market arbitrage to be all that much more effective would likely be the development of an even more voracious and aggressive set of private 'in-the-field' grain market information entrepreneurs – seeking and finding the info gaps that may exist from time to time in local ag markets, and trumpeting them to the larger market (for a fee)."
Ultimately, though, MDA's Keeney is doubtful that USDA -- even with the resumption of federal government operations -- will ever do away with its full complement of crop production, supply and demand, and other reports.
"I’m a bit cautious in buying into the idea that USDA will completely stop issuing reports," he says. "There will likely be some that go away, as has happened in the past few years, but I think there will be too much public outcry if they would try to do away with many of the major reports."