Federal shutdown keeps markets in the dark

Published on: Oct 4, 2013

WITH more that 800,000 federal workers off the job as Congress wrangles over the budget, agricultural producers, traders and analysts are flying relatively blind, underscoring the amount of sensitive market data provided by the U.S. Department of Agriculture and Commodity Futures Trading Commission (CFTC).

While federal food safety inspectors were unaffected by the shutdown – designated as “essential” as part of the Department’s contingency plans – USDA’s Agricultural Marketing Service (AMS), National Agricultural Statistics Service (NASS) and Economic Research Service (ERS) are all on the sidelines until Congress passes a continuing resolution to fund the government. Reports such as the weekly Broiler Hatchery report were not released this week, and should the shutdown persist, it could scrap the monthly Crop Production report and World Agricultural Supply and Demand Estimates due to be released Oct. 11.

The October crop reports – and the weekly Crop Progress report due out each Monday afternoon – 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 3 years.

Even so, the more immediate disruption in market data is the absence of AMS’ daily livestock slaughter and price reporting data.

“As it stands, there will be no publication of livestock slaughter or prices,” wrote economists Steve Meyer and Len Steiner at 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, withholding historical data from the market as well. A scan of other cabinet-level department websites indicated that most, if not all, were still online, most with the caveat that information was not being updated during the shutdown and that some functions would be limited or unavailable.

Sources familiar with USDA’s operations told Feedstuffs that USDA hosts and operates its website in-house, perhaps leading to the site going dark while works were furloughed. Others, seeing a purely political motive, recalled former White House chief of staff Rahm Emanuel’s infamous quip about not letting a good crisis go to waste.

CME Group announced several potential issues this week 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 the exchange to calculate final settlements of September cash-settled Milk, Cheese, Butter, Whey and Nonfat Dry Milk futures and options contracts as scheduled.

 CME confirmed Thursday that both 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 the USDA for adjustment factors will be used for calculating final invoice amounts for live and carcass deliveries.

If the shutdown lingers, however, it could threaten settlement of October hog and cattle futures contracts.

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, considered essential to carrying out the Commission’s oversight and enforcement activities.