Shutdown leaves markets in dark

Shutdown leaves markets in dark

With most USDA and CFTC employees furloughed, ag markets are left scrambling to find sources for critical supply and pricing data.

WITH more than 800,000 federal workers currently off the job as Congress wrangles with the budget, agricultural producers, traders and analysts are flying relatively blind from the lack of a great amount of sensitive market data normally provided by the U.S. Department of Agriculture and Commodity Futures Trading Commission (CFTC).

While federal food safety inspectors were unaffected by the shutdown — because they are designated as "essential" in USDA's contingency plans — the Agricultural Marketing Service (AMS), National Agricultural Statistics Service and Economic Research Service are all on the sidelines until Congress passes a continuing resolution to fund the government.

Reports such as the weekly "Broiler Hatchery" were not released, and should the shutdown persist, it could scrap the monthly "Crop Production" report and the key "World Agricultural Supply & Demand Estimates" report USDA is due to release Oct. 11.

The October crop reports — and the weekly "Crop Progress" report due out each Monday evening — are even more critical to the trade now that harvest is getting into full swing and corn prices have fallen to their lowest levels in more than three years.

Even so, the more immediate disruption is the absence of AMS's daily livestock slaughter and price reporting data.

"As it stands, there will be no publication of livestock slaughter or prices," economists Steve Meyer and Len Steiner wrote in the "Daily Livestock Report." "Markets will continue to function, and trades will no doubt be made, but buyers and sellers will not have the normal publicly available data from which to gauge offers and bids."

Furthermore, USDA took the unprecedented step of completely shutting down its website, thus withholding historical data from the market as well. A scan of other Cabinet-level department websites indicated that most were still online, although with the caveat that information was not being updated during the shutdown and that some functions would be limited or unavailable.

Last week, CME Group announced several potential issues related to the lack of USDA data and temporarily suspended calculation of its lean hog and feeder cattle indexes.

Despite AMS employees being off the job, however, federal milk marketing orders were released, allowing CME to calculate final settlements of September cash-settled milk, cheese, butter, whey and nonfat dry milk futures and options contracts as scheduled.

CME confirmed last Thursday that live and carcass grading performed by USDA graders will be available as needed for all live cattle deliveries against the October 2013 live cattle contract. At this point, for any cattle deliveries occurring during the government shutdown, the most recently issued reports by USDA for adjustment factors will be used to calculate final invoice amounts for live and carcass deliveries.

How long the shutdown drags on could disrupt settlement of CME's October hog and cattle contracts.

Speaking at the National Chicken Council's annual meeting in Washington, D.C., last week, Sen. Chris Coons (D., Del.) said he expected the shutdown to last at least another week — a sentiment echoed by other Capitol Hill sources late last week.

Additionally, USDA's Foreign Agricultural Service discontinued administering its market development programs, including the Market Access Program and Foreign Market Development program. Organizations such as the U.S. Grains Council and U.S. Meat Export Federation rely on those programs as part of their efforts to increase exports of U.S. agricultural commodities, which will be worth watching as the situation drags on.

Perhaps most concerning, CFTC will not publish its "Commitment of Trader" and other similar reports, keeping the market in the dark about the positions of other producers, consumers and speculators. Of its 680 employees, just 28 CFTC officials were "excepted" from the shutdown because they are considered essential to carrying out the commission's oversight and enforcement activities.

Likewise, the Energy Information Administration has sufficient funds carried over from the last fiscal year to keep publishing weekly data on physical oil, gas and ethanol supplies only through Oct. 11, at which point weekly publication will also cease.

The absence of federal data of interest to the agricultural commodity markets underscored how much the markets rely on those data functions.

While private industry sources such as CattleFax, Express Markets and Urner-Barry provide some beef and poultry pricing and supply data to subscribers, the breadth, depth and cost (free) of USDA's offerings to the public are hard not to appreciate at this point.

Volume:85 Issue:41

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