Indiana farmer guest of USDA report ‘lockup’

WASHINGTON — From a window blind to cell phones, security has changed over time, but keeping crop report data secret until its official release has been the goal for over a century.

U.S. Department of Agriculture’s Agricultural Statistics Board has special security procedures in place during the data compilation of market-sensitive reports, including the monthly crop production and world supply and demand estimates.

While secrecy is in place, there is some transparency as guests can visit the “lockup facility” to tour the secured area and learn more about the stringent security and report procedures.

Among the guests at the Aug. 12 report releases was John Adam Jr., Indiana Corn Marketing Council District 9 director, representing Franklin, Jennings, Jefferson, Ripley, Dearborn, Ohio, Clark, Switzerland and Scott counties, and Sellersburg area farmer.

“When we first got there, they talked to us about what’s going on. Then we went into a room where there were lockers and they take all of your communication devices from you and they give you a key for your locker where the cell phones are stored,” Adam said.

“We then had to go through a metal detector that I also think checks to see if we have any devices. You have to go through a two-door system to get in there for added protection.

“Once you get in there, there’s a whole lot going on. They take you into the room where all the information over the last 10 or 12 days came in.

“There were people in there all night discussing all of the information that they had gathered, and everybody gives their opinions on what they thought while they were putting all of this together during the night. Once they got it all gathered up, they gave us a printout of the report.

“We then went into another room and that’s where they presented the report to us on a screen.”

There were about 30 guests in the lockup from various locales, including representatives from Indiana Farm Bureau, the ICMC and the Indiana Soybean Alliance, as well as other states.

Second Visit

This was the second time Adam was a guest for the USDA lockup.

“I went with the Farm Bureau around 1996. We went into the same room and everything. It was pretty much the same process as it is now. I don’t even think I had a cell phone with me back then, so I didn’t have to worry about them taking it away from me,” he said.

“They told us back then that in the early 1900s somebody one year used the blinds on the building to get messages out. Since then, that can’t happen.

“Back in 1996, the media was allowed in the room, but I think it was in 2019 when they decided the media had a little advantage on getting some information out because they could hand-pick information like corn and immediately give it out to somebody. They don’t let that happen now.

“It being my second time, I saw some things that I hadn’t seen before.”

USDA’s crop production report, the first farmer-survey-based estimates of the growing season, projected record average yields for corn and soybeans, as well as record high yields in Indiana and Illinois.

“We got some of our stuff planted later than normal, but everything is looking really good,” Adam said.

“In May we couldn’t get a break. Every two or three days we’d get a quarter-inch, a half-inch of rain. We do a lot of no-till in my area and you just have to wait until the ground gets right for you to plant.

“We’ve just been battling waterhemp in the soybeans. It doesn’t seem like everybody is spraying fungicide on the soybeans like they did before. I think with the reduced commodity prices, they’re trying not to spend anymore money on them than we have to.”

Window Shades Scheme

The story the lockup guests were told about the window shade episode dates back to 1905.

The history of “Safeguarding America’s Agricultural Statistics” was compiled by Rich Allen of USDA’s National Agricultural Statistics Service in 2007, detailing the move to protect from insider trading that led to the current lockup procedure.

The summary and release procedures for the USDA Bureau of Statistics’ reports in the early 1900s produced separate summary tabulations for each data source available, up to six sources, in some cases.

The indications from all sources were brought together only shortly before a report was scheduled for release.

Three specific individuals, led by the bureau chief, reviewed the indications, compared them to data from earlier months and years and decided on the state and national figures to publish.

This process needed to be finished in sufficient time to allow for typing and setting up the telegram formats that were transmitted across the country at the moment of release.

It is also relevant that the release time for cotton reports in those years was noon, Eastern Time, and that the commodity markets discontinued trading for an hour starting at noon on release days.

The original procedures allowed the three people who had determined the final numbers to go about their business, or even leave the building if they wished, once a report’s contents had been set.

In 1904, there were rumors about insider trading. As came to light later, one of the three Bureau of Statistics people, E.S. Holmes, Jr., did have an outside partner, a New York cotton trader named Louis Van Riper, according to USDA’s history of the report procedures.

Shortly after an estimate was set, Holmes would meet Van Riper and tell him what cotton estimate was going to be published. Van Riper would take whatever market action would be most profitable based on the advance information.

Bureau Chief John Hyde did not believe that insider trading was possible. However, he announced an additional measure to demonstrate the “integrity” of the system by decreeing that none of the three members would leave the work area until the report had been released.

That did not deter Holmes and his partner. They worked out a signal system using a particular window blind to indicate the level of the figure to be published.

They apparently estimated a probable level for the national figure and if the actual total was close to their estimate, Holmes raised the window blind to the middle of the window.

If the total was higher or lower, Holmes adjusted the blind based on the scale they had contrived.

Bureau Chief Hyde felt he had taken care of any possible opportunity for data being leaked, but the insider rumors persisted.

The scheme came to light following the cotton acreage report issued on June 2, 1905. The three members met and adopted the state and national figures to be published.

After Holmes had sent his signal, one of the other people who had worked on the report asked for reconsideration. After further review, the figures to be published were revised.

At that point, the outside partner had already interpreted the original signal and proceeded to place trades.

The scheme came to light when Van Riper charged in a telegram that a “fraudulent” report had been released. In explaining why he thought this was a false report, he unwittingly revealed that he had the information ahead of time.