Futures Traders Could Reap Fortune With a Leak of Crop Estimates : U.S. Farm Forecasters Work in Super Secrecy
It is 6:41 a.m. when the signs go up in the Agriculture Department, “Lockup in Progress,” and the cloak of secrecy is complete. Window shades are drawn and fastened with wire clips, rooms are swept for electronic bugs, telephone and computer links to the outside are severed.
Uncle Sam’s premier farm statisticians can go to work now. Sealed off behind a barricade of two sets of double metal doors and guarded by armed police, they will assemble the latest forecast of the nation’s winter wheat harvest.
“The information on the size of the U.S. crop is a very, very important piece of information to everyone this involves--traders, flour millers and producers,” says Ray Hancock, chairman of the Crop Reporting Board, the official soothsayer of American’s agricultural bounty.
Instant Profit
But why all the secrecy? For traders, the numbers could mean instant profit in the futures markets should they slip out early.
“That advantage would be worth fortunes,” says L. Duane Jewell, secretary of the reporting board.
By all accounts, the last breach of security occurred in 1905. One of the top board officials, it seems, tipped a cotton trader to the crop outlook using a window shade.
“His signal was transmitted literally by raising and lowering the blind,” says Hancock.
The man was caught, and now all window shades are locked down when crop reports are prepared and released.
The electronics age required new safeguards against eavesdropping, and nowadays the department routinely checks for hidden transmitters in and around its fifth floor lockup area. A technician sweeps the main meeting room of the reporting board several times on forecast days.
“You can’t be too careful,” Jewell observes.
The USDA began to estimate crops and livestock in the 1800s to aid producers in valuing their goods.
Offset Advantage
The goal was to offset the advantage held by commodity buyers, who had greater access to market happenings. That’s still the mission, and release of crop reports is timed carefully to the closing of markets in the Midwest.
Minutes before 3 p.m. Washington time, reporters line up on a shaded strip of carpet in a room just outside the lockup area. Each news organization has a designated phone. At the stroke of 3 p.m., Hancock gives an OK and reporters rush to their open lines to dictate the latest crop news.
Some 300 reports will be issued annually for assorted topics from wheat, corn and soybean production, inventories of milk, rice and cattle to the outlook for pears, prunes and papayas.
The reporting board bases its estimates on information from its state offices, weather reports, surveys of producers and measurements from randomly selected fields and farms by nearly 2,700 part-time workers.
This year, the metal fire doors will shut 31 times for “lockup,” at least two a month, often three. And as much as an entire L-shaped wing of one floor of the Agriculture Department is sequestered for all or part of a day.
“It doesn’t matter who you are; once you’re in, you’re in,” says Jewell.
Just ask the Pepsi-Cola man who came several years ago to service a machine on the fifth floor of the building and failed to leave in time.
“He stayed with us all that day,” Jewell recalls with a chuckle. The driver’s truck was double parked on Independence Avenue.
For the June wheat report, the doors swung shut at 6:41 a.m. and did not open until a few minutes after 3 p.m. Sometimes the lockup begins as late as 1:15 p.m.
“It’s really an eerie feeling,” one board member says of the day-long isolation. “It’s worst in the winter. You can’t tell what the weather is doing.”
