Ep. 55 Do Daily Large Export Sales Reports Move Markets?

00;00;19;24 – 00;00;22;25
Dr. Ryan Loy
Eunchun, thank you so much for joining me today. How are you?

00;00;22;27 – 00;00;25;01
Dr. Eunchun Park
I’m good. Thank you for having me.

00;00;25;03 – 00;00;39;08
Dr. Ryan Loy
Of course. If our listeners don’t know Eunchun, he is a professor in our department at, you know, Agricultural Economics Department up in Fayetteville. And actually, I’ll give you a chance just to kind of introduce yourself, talk a little bit about the things you do, the research and, those sorts of things.

00;00;39;10 – 00;01;12;12
Dr. Eunchun Park
Yeah. I’m working at Agriculture Economics and Agribusiness in the University of Arkansas. I’m also, affiliated in a Fryar Price Risk Management Center. I always, you know, introduce myself as “Risk Guy.” So I do many risk-related topics in agriculture economics. That includes futures and options markets and crop insurance and agriculture policy and this kind of stuff.

00;01;12;13 – 00;01;43;18
Dr. Eunchun Park
So that includes, like, insurance and options pricing and new information impact on futures market, price reactions, and this kind of stuff. And, I came here in 2021… in this department. Before that, I worked four years at Mississippi State University in Agricultural Economics Department. I got my degree at, PhD degree, at Oklahoma State.

00;01;43;21 – 00;02;00;18
Dr. Eunchun Park
And before I came down in the U.S., I, born and raised in South Korea and my undergraduate and graduate is, I graduated from Korea University. And I, my major was also agriculture and commerce. So, yeah. That’s me.

00;02;00;21 – 00;02;12;26
Dr. Ryan Loy
That’s a great story. And it’s very interesting. And, you know, a lot of your reputation, you know, precedes you, Eunchen. When I was a student at Oklahoma State University, I knew about you and your methods and what kind of stuff you worked on before I even had met you.

00;02;12;28 – 00;02;13;10
Dr. Eunchun Park
Oh, really?

00;02;13;25 – 00;02;15;13
Dr. Ryan Loy
Oh, yeah. Yeah. So. Absolutely.

00;02;15;13 – 00;02;16;07
Dr. Eunchun Park
Thank you, thank you.

00;02;16;10 – 00;02;34;26
Dr. Ryan Loy
And for people who don’t know you, Eunchun, I suggest to reach out to him. He is a great resource when we’re talking about risk management and agriculture. And as he had mentioned, he is, part of the Fryar Price Risk Management Center, which is a sponsor of this podcast. And so they do a lot of great work out of there, working on exactly what they say they do.

00;02;34;26 – 00;02;45;05
Dr. Ryan Loy
Price risk, right? Right. So today really what we’re talking about is a recent report that Eunchun had put together and doing some analysis. Are you getting this published as well?

00;02;45;08 – 00;03;04;08
Dr. Eunchun Park
Not yet. This… under review right now. So… I cannot say very detailed stuff because it’s not, proven yet from the peer review process so that I can, I can say something about that, that topic, of course.

00;03;04;10 – 00;03;33;22
Dr. Ryan Loy
Absolutely. We can talk about some of those, general, you know, general, what it means and why we’re looking at this. And when we’re talking about daily large export sales and, you know, those reports, that was something that was new to me when I had actually seen this report and reading through, and it’s very interesting. So, you know, can you just maybe walk us through, you know, what is the daily large export sales reports and how it’s different than other USDA reports like the WASDE or weekly export reports?

00;03;33;24 – 00;04;10;21
Dr. Eunchun Park
Yes. Daily large export sales reports are managed then by Foreign Agricultural Service under the USDA. The origin of the daily export sales report was started from 1960s and 70s during the Cold War between Soviet Union and United States. At the time, some unanticipated large export was happening from U.S. to Soviet Union, and the federal government did not gather all information, central, you know, system was not developed yet.

00;04;10;23 – 00;04;37;15
Dr. Eunchun Park
So when market knows about that news, there was like huge price spikes or futures market for corn and soybeans. And then, you know, federal government started to, you know, formalize their reporting system to avoid, like, that kind of unexpected shocks in the market. So, one part of it is the daily large export sales report.

00;04;37;15 – 00;05;02;19
Dr. Eunchun Park
Another is, like, gathering this daily information for weekly report. So there is two different kind of report for export sales. One is daily large sales report and the other one is weekly large sales report. You know, the main difference is like daily export sales… I’m going to describe later, maybe. But there are kind of like, unanticipated reports.

00;05;02;19 – 00;05;32;15
Dr. Eunchun Park
So when some large export sales, what’s happening? The exporter, actually, should report their details of things to Foreign Agricultural Service, but weekly is like the known report. So, like, given time, given day, you know, gathering or, export sales report during the week, and then they report things. So the big difference between daily versus like, weekly is, like, unanticipated

00;05;32;16 – 00;05;35;24
Dr. Eunchun Park
one, and the other one is anticipated one.

00;05;35;27 – 00;05;50;15
Dr. Ryan Loy
That’s a very good viewpoint, thank you for describing that. And, really, what you’re talking about is saying, okay, well, the, you know, the weekly export sales, you know, those are expected and they come out on a certain day. And whatever had happened in that week, no matter what happened in that week, is going to be in that report.

00;05;50;17 – 00;06;27;05
Dr. Ryan Loy
And everybody in the market expects that. Whereas what we’re talking about today is an unanticipated, and maybe I shouldn’t use this word, but an unanticipated shock to the markets from sales that nobody was anticipating, right? And so when we talk about this, one of the things you highlight in the reasoning for kind of, you know, researching this topic and trying to get the information out, was this issue of the two day reporting lag, when it comes to this, daily export sales report. And for any of our listeners, there’s a figure in the newsletter this week that kind of that describes this on a timeline as to what it looks like.

00;06;27;12 – 00;06;44;03
Dr. Ryan Loy
It’s a very informative figure, and I recommend all the listeners to go and look at the newsletter this week. But could you walk us through that two day reporting lag and how it can create that, you know, asymmetric information, especially towards some of the farmers and maybe even some of the policymakers?

00;06;44;05 – 00;07;28;10
Dr. Eunchun Park
Sure, sure. Like, when a large export sales happens, the exporter has like the time until 2 p.m. Eastern Time or, maybe Central Time, and the following business day to report it, you know. Then the USDA FAS, the Foreign Agricultural Service, release that information, at 8:00 am in the morning or central time, to their webpage. And, you know, that makes roughly a two day window between, when the sales was happening and when the public find out that information, you know? So, if I’m the exporter, I have two days of a window.

00;07;28;10 – 00;07;58;10
Dr. Eunchun Park
They already know it will be announced in two days later, right? So during this period, maybe certain market persisted. And who knows about this information already that could potentially trade based on that information before everyone else knows about information, right? So, for instance, like, if I’m the stakeholder of some contract, I know that it will be announced that two days later.

00;07;58;12 – 00;08;25;10
Dr. Eunchun Park
And, you know, there is like in CME Group, major trading, platform for corn futures and soybean futures, they have two sessions. One is like overnight session and the other one is the day session. Day trading session. So 8 a.m. in the morning, Central Time is like, is intermission time between overnight session and day trading session.

00;08;25;13 – 00;08;54;11
Dr. Eunchun Park
Okay. So maybe, because like, my trading session ended at 7:45 a.m. and the day trading session start at 8:30 a.m., and this information announced at 8:00 am in the morning, right? So if I know that information and if I want to get some unethical, you know, benefit by using this inside information, I may purchase some futures right before the announcement, like 7:45.

00;08;54;14 – 00;09;23;04
Dr. Eunchun Park
Yeah. And then, I know that price goes up, right? Because of very large export sales means like increase of the demand for U.S. corn and soybean. And price will go up dramatically right after the announcement. Then I can sell my, futures right after they announce. Maybe I cannot find any, I mean, solid evidence, but I just want to see that there are, you know, hypothetically,

00;09;23;06 – 00;09;25;07
Dr. Eunchun Park
there is opportunity […]

00;09;25;09 – 00;09;28;02
Dr. Ryan Loy
That’s right. And I think that’s the important notion here.

00;09;28;02 – 00;09;29;07
Dr. Eunchun Park
That’s right.

00;09;29;10 – 00;09;48;06
Dr. Ryan Loy
The opportunity and the door it leaves open for that. And the question you’re asking is, is this is this a, a real, you know, basically system that could be in place that may happen? Or it may not. But at least there’s some evidence that the door is open there for it, especially when you have a two day lag period.

00;09;48;06 – 00;10;18;03
Dr. Ryan Loy
Right? Right. Somebody knows about that sale. Somebody does, right? And the question is, you know, who? And is there asymmetric information? And one of the points you made, which I think is very important, is we’re talking about large volumes of this commodity being sold. And you had mentioned that, you know, if you know ahead of time that the price will go up because of that demand, that’s now, you know… from that large export sale, these reports don’t just consider us selling a couple tons to another country.

00;10;18;03 – 00;10;31;17
Dr. Ryan Loy
These are, this is a lot of weight. And is there a minimum amount of either fiscally or production-wise, that has to be sold to make it on these large export sales reports?

00;10;31;22 – 00;11;00;25
Dr. Eunchun Park
So the mandatory reporting requirement is like, 100,000 metric ton or more for a single, destined country. So, for instance, if I’m the exporter and I made a contract to some countries like more than 1000 thousand… or, no, a 100,000 metric ton or more, and I need to report it, daily basis, right? Okay.

00;11;00;25 – 00;11;36;00
Dr. Eunchun Park
And then, and I also find that, like, there are two parts during the research. One is like, as I mentioned before, there are possibilities of, like, unethical trade by using, you know, insider information. And another one is, you know, how much price reacts through the report. So if we just simply can expect that the greater export volume can make the greater price changes and destination maybe matters, right?

00;11;36;00 – 00;11;58;17
Dr. Eunchun Park
I mean, we know that, for instance, China has been the largest importer of the U.S. corn and soybean. And then probably market react more dramatically if the export sales report, the news is destined to China, right? Okay. And, and those kind of things are, the main thing that I looking for.

00;11;58;19 – 00;12;19;05
Dr. Ryan Loy
No. That’s perfect. Yeah. That’s a great that’s a great viewpoint. So basically, when we’re talking about these sales reports in particular, they’re gonna move the markets regardless because at that volume, right? We’re not talking out like sometimes they will… yeah, sometimes they will. But, really that volume and destination of these reports is extremely important. From this perspective,

00;12;19;05 – 00;12;38;11
Dr. Ryan Loy
and what we’ve been talking about, you know, what you know…. And, you know, I think you’ve kind of already answered this, but maybe from a policy standpoint, you know, what kind of are… what are these risks in going and continuing this system where there is that two day lag? You know, the sales happen. Only the actors involved know about it.

00;12;38;13 – 00;12;48;02
Dr. Ryan Loy
They have until the next day to report it, and then the next day it becomes public. So what, kind of from a policy standpoint, are those risks for delaying that, when we’re talking about the markets?

00;12;48;05 – 00;13;10;18
Dr. Eunchun Park
Right. As I said before, the main risk is that some traders or stakeholders, you know, may have an, like unfair advantage, and could profit from this kind of early, you know, knowledge and information, which potentially makes a problem, right? Especially for market fairness and transparency.

00;13;10;20 – 00;13;13;08
Dr. Ryan Loy
That’s right. And so that’s a that’s a big issue when it comes to it, right?

00;13;13;08 – 00;13;39;00
Dr. Eunchun Park
It could like, possibly undermine trust in the market, right? Some partisans believe that not everyone is trading at the same formation and at the same time. That’s problematic, right? Though reducing reporting lag, you know, could help limit this risk. For instance, like, reducing windows or, you know, just real time reporting system.

00;13;39;03 – 00;13;40;08
Dr. Ryan Loy
Real time reporting, right?

00;13;40;12 – 00;14;06;01
Dr. Eunchun Park
Or just simply, moving the announcement time. Now you can like at 7:45, at 8:30 there an intermission and announce what’s happening during the intermission. Right? But if I just simply move that reporting time it during the day trading session, like 11 a.m. or 10:30, market is moving very dramatically. If I, even though I know that information,

00;14;06;01 – 00;14;08;17
Dr. Eunchun Park
it’s pretty hard to get the good position, right?

00;14;08;23 – 00;14;12;13
Dr. Ryan Loy
That’s right. You’d be harder for you to time everybody else, right?

00;14;12;14 – 00;14;31;07
Dr. Eunchun Park
But like 8 a.m., maybe I can use night trading session because night trading session is, like, price movement… It’s less, you know, less volatile than the day trading session. I can get good position to get another good benefit compared to the day trading session time, right?

00;14;31;10 – 00;14;52;18
Dr. Ryan Loy
Very interesting. That, it’s a very interesting perspective. I’ve learned a lot so much reading this report and talking to you about this. And you know, we all know that these reports are extremely important. And you know, when we talk about the June Acreage report, you know, that significantly can shift the markets and shift expectations and completely reverse course from what we expected,

00;14;52;18 – 00;15;15;02
Dr. Ryan Loy
right? It has the ability to do that. But that, you know, is it comes in in June and everybody expects it to happen. And again here, nobody expects this to happen. And so it’s, it’s mostly a shock outside of the actors involved. And so from that perspective, you know, how might, you know, grain elevators, co-ops or even farmers who market themselves,

00;15;15;05 – 00;15;23;00
Dr. Ryan Loy
how can they maybe respond differently to these markets if these reports were released in real time?

00;15;23;03 – 00;15;54;23
Dr. Eunchun Park
Maybe stakeholders, you know, could adjust their cash beats, or having strategies, or our inventory management work correctly, right? And in response to, demand changes. And it would help them better align, maybe, their buying and selling strategies. And with futures market movement, like that potentially improving margins, maybe, or reducing risk associated with price changes.

00;15;54;25 – 00;16;34;00
Dr. Eunchun Park
And also again, it is about the fairness and market transparency, right? The real time recording issue. And we should mitigate any possibility, that someone can use this inside information to gain unethical benefits or do preannouncement trading. That’s the main, concern that I have. And, that’s why I suggest maybe, moving the, timing or, like, system like this shorter, shorten the, the lags between, you know, contract and, announcement probably can help, like, mitigate those kind of issues.

00;16;34;02 – 00;16;57;04
Dr. Ryan Loy
It surprises me that there isn’t, with the technology we have nowadays, it surprises me that there isn’t like a, I don’t know, a monitor, like an ‘Internet of Things’-type monitor at every port that these happen, that where they’re just kind of automatically reported and that would be, you know, very interesting like almost a dashboard or something like that, that just gets updated constantly.

00;16;57;06 – 00;17;10;27
Dr. Ryan Loy
It’s interesting to me that, that, that isn’t you know, the case being used here. I would have assumed, if you would have asked me before reading this that tech, that does exist and that is used. But it’s very interesting to learn that this is how it’s reported and this has been the status quo.

00;17;10;29 – 00;17;38;22
Dr. Ryan Loy
So I kind of have, you know, on are kind of finishing this up here. I, I have, two questions and I’m going to kind of jam into one question here. And so from, from a broader perspective here, in conclusion, you know, what’s the big takeaway for producers in Arkansas? And how can us as ag economists, help interpret and use these reports more effectively and help, you know, watch these export trends and help them make sense?

00;17;38;24 – 00;18;08;25
Dr. Eunchun Park
Okay. Let me start with, the broader takeaway, maybe. Yeah. I mean, the daily exports sales reporting is like good information and very important information to manage, risk, for stakeholders. The timing and the size of this export sales, you know, we can track the trend of the exporting, right? We know that, like, large export sales was happening, destined to some specific country.

00;18;08;27 – 00;18;33;13
Dr. Eunchun Park
We can expect that maybe next few months, that’s going to be happening again, right? Then kind of like the trending I know, you know, following the trend and timing and size of export sales can give like, all the signals of shift of the global demand, right? And also especially for our major, buyers like the China or Mexico.

00;18;33;13 – 00;19;02;29
Dr. Eunchun Park
Right. And, you know, being, informative or attentive to the daily sales report release can help probably producers and also agribusiness, you know, you know, participants to move manage price risk more effectively, I guess, of course. And this is very important information and also for Arkansas ag economist is like, you know, can help.

00;19;02;29 – 00;19;28;15
Dr. Eunchun Park
They, they’ll get this kind of information out from writing timely analysis like we have good resources in the department, like the Fryar Center. And, Dr. Ryan Loy, you, and Hunter Biram, we have very good extension experts, in many different kind of like, agricultural economics topics, you know. That includes, like our activity includes educational outreach,

00;19;28;15 – 00;19;54;07
Dr. Eunchun Park
right? And market briefing stuff or, I interpret the significance of large export sales, what they occur, when they occur, right? And we can talk about, what’s the meaning of this import and the report and, you know, you can track the current trend less, six months is for those large export sales. Which country is the largest buyer over the last six months?

00;19;54;13 – 00;20;26;14
Dr. Eunchun Park
That may give us, like, the good implications, right? Helping producers understanding about the report, how they support matter, how to act on them, you know? Economist can support better, you know, risk management and marketing strategy to lock our farming communities and grain elevators and risk management. So I think, that’s our role as, you know, extension economist and ag economist and that’s in the department and Fryar Center of Price Risk

00;20;26;14 – 00;20;27;22
Dr. Eunchun Park
Management, right?

00;20;27;24 – 00;20;45;29
Dr. Ryan Loy
That’s right, that’s right. And I really appreciate you hitting on all that because it is very important. And that’s exactly right. And, you know, really just taking away from here, this is just another, you know, opportunity to improve risk management, you know, looking at this issue, is it one, is there a possibility of some asymmetric information?

00;20;46;01 – 00;21;06;21
Dr. Ryan Loy
How can we remedy that and improve the risk management of our farmers in the state? And it’s, it’s excellent. And I encourage, you know, all of our listeners who, you know, who are tuning in today to please reach out, get to know Eunchun. He’s fantastic. And as he mentioned, he’s part of the Fryar Center, who, and they do great work and they’re housed in our department.

00;21;06;24 – 00;21;27;02
Dr. Ryan Loy
And so I’ll again, they sponsor this podcast and where this podcast is actually housed is on that Fryar Center website. If you go there to look at our newsletters, I encourage you to click around, look at some of the reports Eunchun has done, familiarize yourself with them because they are a really great resource and they’re here to help, you know, that’s what they want to do.

00;21;27;02 – 00;21;44;04
Dr. Ryan Loy
And I know that’s what Eunchun does. And all of his research is extremely helpful from a risk management standpoint. Eunchun, I really appreciate you joining me today. I really do. And, I’ll give you an opportunity, if there’s any other thoughts you want to add. Otherwise, please stick around for the market report.

00;21;44;06 – 00;21;58;02
Dr. Eunchun Park
Okay. I will work on my job. And, I try to provide many outreach stuff as much as I can. Thank you for having me again. It was great, my pleasure to be here to talk with you.