Lockup, lockdown, locking out prying eyes in an era where everyone’s wired

Agriculture markets can move violently when U.S. Department of Agriculture reports are issued.

And they always draw attention to themselves. For days before important and even only-semi-important reports come out people chatter about what could be in the reports Getting your guess right can mean lots of money if you’ve taken a position in the market based on your guess. (Our own Markets Editor D’arce McMillan talks about a recent USDA report in this video.)

That’s why security is such a concern for USDA and for everyone in the markets: if someone can somehow get access to crucial numbers days, minutes, seconds, tiny fractions of a second before the rest of the market they can get a huge gain on other players. The old movie Trading Places is all about this, with some nefarious types figuring out a way to get their hands on the numbers in a USDA Frozen Concentrated Orange Juice report and then manipulating the futures market to try to make illegal and unethical windfall profits from their scheming. (There really is such a futures contract, the FCOJ. I’ve seen it traded live at the New York Board of Trade, which is now part of ICE.)

So the USDA officials who are going to write any particular report are locked into a section of the sprawling USDA complex in Washington, D.C. and cut off from all contact with the outside world, even having their computers cut off from accessing any information from outside the lockup facilities. Close to report issue time, accredited agriculture reporters are allowed into the lockup, where they have to surrender cellphones and other wireless devices, and they as well have to work on computers that cannot access the rest of Planet Earth. They are given advanced access to the report so they can sort through the numbers and write stories, but the room’s servers block anything getting outside the room until the report is officially issued, then the electronic floodgates are opened, the info can flow forth, and the reporters and analysts are allowed to leave the lockup and see if the outside world still exists. For a feature by me on the security measures and concerns, go here and read this. It was in our May 16 printed issue.

Katie Micik of DTN talks about the live lockup atmosphere in this blog post here. She regularly covers the big releases so she gets to go through the life-shortening stress of having to crunch mountains of numbers in the pre-release period. I don’t go to Washington much, so I mostly live this stress second-hand through Twitter, where I see dozens of analysts that I follow racing to shoot the numbers out as soon as they become available, fighting to be the first. But I recently got to visit D.C. and while there I and the members of the North American Agriculture Journalists got to tour the USDA lockup facilities in a more relaxed mood, with no actual lockdown in progress. As someone who covers these report this was cool, and I put together this video-slideshow here to give you a sense of what it’s like to be in there.

 

About the author

Ed White — Ed White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

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