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Shutdown harkens back to the old days for grain traders

In the absence of government crop reports, Big 4 traders tap their networks to navigate markets.

by Isis Almeida and Mario Parker

For the world’s largest agricultural-commodity traders, the longest-ever U.S. government shutdown feels like a flashback.

In the absence of crucial government crop reports, the likes of Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co., known collectively as the ABCDs, are tapping their wide networks and in-depth research to navigate markets. That’s giving them an edge, bringing back memories of when information didn’t travel as fast and they had a bigger advantage over rivals.

Agriculture markets have been mostly in the dark since the U.S. Department of Agriculture ceased issuing reports that set the tone for trading in livestock and crops. Data including U.S. wheat plantings and the agency’s monthly “World Agricultural Supply and Demand Estimates,” typically a market-moving global benchmark, have already been delayed.

“You look at an ADM, Bunge or Cargill, they know the trades, they know the sales and those of us who are not inside don’t,” Stephen Nicholson, senior analyst for grains and oilseeds for Rabobank, said in an interview in Chicago last week. “It’s not that it’s wrong or right, that’s just the reality of it.”

The data void signals the trading goliaths, each with more than a century of history, will hark back to the roots that for years gave them an advantage buying crops in producing countries and delivering to consumers.

In the 1970s, the biggest trading houses -- which back then included Continental Grain Co. and Andre & Cie SA -- used intelligence gathered on a faltering Soviet Union crop to sell millions of tons of grains in a secretive deal known as the Great Grain Robbery.

Even much earlier, information was so key to their business that in the 1920s, Cargill bought and developed a teletype technology that ultimately allowed private messages to be sent almost instantly with a proprietary shorthand, according to the company’s website.

“If you sat in Minnesota, the trader in Geneva would tell you ‘this is what happened overnight,’ and you’d be ready to go,” Nicholson said. “You kind of go back to that old time where the grain traders have a bit of an advantage over the rest of us now, because you don’t have USDA data being disseminated on a daily basis.”

Still, no trader has access to all information and, in varying degrees, they all rely on the USDA as the basis for their own assessments and for confirmation of deals. The agency has a lot of important data the market has come to rely on, said Tom Halverson, chief executive officer of CoBank, a $125 billion lender to the agriculture industry.

‘Asymmetric Information’

Data is also the foundation for production decisions, and its absence is leaving farmers and ranchers adrift as they try to plan for 2019.

“The oxygen, or the lubricant, of markets of all kinds is information and to a certain degree, taking down one leg of the information platform has asymmetrical impacts,” Halverson said. “If you are a farmer and you don’t have access to the entirety of the information flow of the large internationally-active commodity trading companies, you probably are at an asymmetric information disadvantage while this goes on, relatively.”

The business of agricultural commodity traders has been challenged in recent years as information now travels faster and is more widespread, not only via the USDA but also on social media. Farmers can sit in the cab of a combine, pull out their tablets or smartphones and get real-time data on everything from weather in competing countries to prices.

Twitter may be a good way to find out which companies sold what in international grain tenders and the use of satellite imagery has seen the spread of crop-forecasting companies like Gro Intelligence, which is distributing its data for free during the shutdown. Indigo Ag, another startup, shared its January corn and soybean yield forecasts for the Americas.

‘In House’

While new technology has helped, it can’t compensate for the USDA’s absence. The shutdown means smaller traders are contending with the lack of detailed confirmation on the resumption of soybean sales to China, an advantage that many of the big houses have as they struck the deals themselves.

The big companies have “stuff in house that helps them track what’s going on,” said Craig Dobbins, an agricultural economics professor at Purdue University in West Lafayette, Indiana. “They have offices all over the world. They have people that are buying and interacting with the local markets.”

--With assistance from Patrick McKiernan.

To contact the reporters on this story: Isis Almeida in Chicago at ;Mario Parker in Chicago at

To contact the editors responsible for this story: Tina Davis at

James Attwood, Will Wade

© 2019 Bloomberg L.P

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