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The Value of USDA Announcements in the Electronically Traded Corn Futures Market: A Modified Sufficient Test with Risk Adjustments

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  • Joshua Huang
  • Teresa Serra
  • Philip Garcia

Abstract

The paper assesses the value of USDA information in the electronic corn futures markets. While recent research has documented large price volatility spikes after USDA announcements, increased volatility does not directly translate into value. Using multiple newly developed risk‐premium measures and intraday data, we extend the Carter and Galopin approach based on estimating the risk‐adjusted profits that accrue to advanced USDA information. Using the 2010–2020 period, the analysis demonstrates that USDA announcement surprises have economic value, with WASDE surprises from NASS‐WASDE joint events being always valuable under all risk preferences. While the value is sensitive to these preferences, risk is relatively small because prices usually move in the direction of the market surprise which minimises losses. NASS surprises also contain value, though less than WASDE and only for the less risk averse traders. While overall risk is generally small, the intensified volatility right after the announcement points to the presence of noise and to the inadequacy of inferring the value of public information through price variability alone.

Suggested Citation

  • Joshua Huang & Teresa Serra & Philip Garcia, 2021. "The Value of USDA Announcements in the Electronically Traded Corn Futures Market: A Modified Sufficient Test with Risk Adjustments," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(3), pages 712-734, September.
    • Handle: RePEc:bla:jageco:v:72:y:2021:i:3:p:712-734
    DOI: 10.1111/1477-9552.12426
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    References listed on IDEAS

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    2. Olga Isengildina Massa & Berna Karali & Scott H. Irwin, 2024. "What do we know about the value and market impact of the US Department of Agriculture reports?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 46(2), pages 698-736, June.
    3. Cao, An N.Q. & Heckelei, Thomas & Ionici, Octavian & Robe, Michel A., 2024. "USDA reports affect the stock market, too," Journal of Commodity Markets, Elsevier, vol. 34(C).

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