Reaction of wheat, corn, and soybean futures prices to USDA "Export Inspections" reports

United States Department of Agriculture's (USDA) weekly "Export Inspections" reports, along with USDA press releases that report large sales and USDA's weekly "Export Sales" reports, originated to address public concerns that grain trading companies may make abnormal profits from their information regarding export sales. Assuming grain markets are efficient, prices should react to these reports only if they provide new information to the market. Finding such a price reaction would suggest the reports are fulfilling their public policy goal of making private information public. Regression analysis is used to analyze the impact of "Export Inspections" reports on nearby wheat, corn, and soybean futures prices. Survey data of the expectations of market traders are used as proxy variables for the market's expectations of wheat, corn, and soybean export inspections. The analysis uses data from 1988 through 1991. Significant price responses to new information in "Export Inspections" reports are found consistently only for soybeans. Furthermore, the response to new information is small and accounts for less than 2 percent of the total change in price. One explanation for this limited impact is that the USDA issues press releases for large sales or cancellations. These press releases may account for many of the sales and cancellations that generate export inspections. The limited impact of "Export Inspections" reports brings to question their public policy usefulness. However, the finding that the price response of corn, and especially soybean futures, is conditional upon the state of the market suggests the public policy relevancy of the report may not depend on its small unconditional impact, but rather on: its impact during selected states of the market; and the importance of providing public information to the market during these market states.