April 16, 2014

Iowa official calls for time out on commodity trades

A key state official says commodity trading should be suspended around the release of USDA reports that estimate the supply and demand for crops like corn and soybeans. It appears commodities markets soon may operate nearly around-the-clock and State Ag Secretary Bill Northey says it makes sense to take a brief time out to let farmers and investors “digest” those USDA reports.

“The risk of somebody getting the information of that report even seconds before somebody else could cause somebody to have an advantage over somebody else,” Northey says. “You know, how fast is your email? How fast is your system? Who’s closer?”

At this time of year the USDA estimates the amount of U.S. farmground that’s been planted with corn, for example, and that estimate ultimately impacts the price of corn. Those reports are released early in the morning, before trading starts, but once the commodities market goes round-the-clock, some worry there will be wide price swings when the USDA estimates are released.

“I think it does make sense to have a short, kind of cooling off period where everybody’s able to look and digest what that report is,” Northey says.”…There’s some discussion about changing the reports to the afternoon or running them on weekends to take them out of that live (trading) time. I think that makes sense, but I’m not sure of the mechanics that’s going to come out.”

Northey made his comments Friday on the “Iowa Press” program which will be rebroadcast at noon Sunday on Iowa Public Television.

The Chicago Mercantile Exchange plans to allow electronic trades 21 hours a day, starting June 4. Trading is currently restricted to 17 hours a day. When USDA reports are issued at 7:30 a.m. central, the trading has been suspended under the 17-hours-a-day schedule.