As the partial government shutdown marches on, the U.S. Department of Agriculture has taken a weed whacker to its closely-watched crop reports that hold significant sway on commodity prices.
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But despite the loss of USDA and other government data, markets have remained on course as traders turn to alternate sources of information.
Earlier this week, the USDA’s monthly U.S. crop production report and World Agricultural Supply and Demand Estimates report became the latest casualties of the shutdown that began on Oct. 1.
The monthly crop report provides forecasts for U.S. and global production, consumption and stockpiles of major crops.
The agency’s weekly reports on agriculture exports, crop condition and grain inspected for export are all on the back burner as well. A report on farm exports, normally issued every Thursday, is considered a valuable gauge of global demand but has already skipped two weeks.
And the Commodity Futures Trading Commission’s update on traders’ positions in U.S. futures markets is about to miss a second Friday.
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Even with a scarce amount of government data, traders have pressed onward. In fact, markets may be better off without the volatility created by USDA reports, said Darin Newsom, a senior commodities analyst at DTN.
“I think it’s a good development for the market,” he said. “The grain market is behaving like it should.”
On Friday morning, corn for December delivery was trading at $4.34 a bushel, or nearly 1% lower. Wheat was up slightly at $6.86 a bushel, while November soybeans dipped about five cents to $12.82 a bushel.
The U.S., a big supplier of corn, soybeans and wheat, is the world’s largest farm exporter.
Getting Data Elsewhere
A cutoff in federal funds put a stop to the USDA’s data collection efforts, which involves an army of part-time enumerators across the nation. For the October report, they would inspect hundreds of production plots and send that data back to the agency.
The USDA also contacts thousands of farmers to gauge their expectations for production, and eventually, final harvest results.
In the meantime, private research firms and consultants like DTN have helped fill the data void during the partial shutdown.
“I think that’s probably how it should be,” Newsom said. Private firms “provide the same information the USDA tries to release every month.”
He explained that Friday, which would normally see volatile trade in the wake of the monthly crop report, could be the biggest test for the grain market during the shutdown.
The markets will be tested again in November if the shutdown is lifted in time for the next round of reports. November’s crop report is normally overlooked, Newsom explained, but it could prove “chaotic” if the October report is shelved for good.
Newsom believes that if lawmakers remain at odds, market watchers will be able to see for themselves that government crop reports shouldn’t carry as much weight as they do.
“If the shutdown continues, it will prove how silly and unnecessary these reports are,” he added.
Yet the fact remains that USDA reports typically shake up the market in the short-term, and not having those reports is unfamiliar territory for many traders.
“I do think there’s a certain segment of the commodities market, especially the grain market, that feels lost without those reports,” Newsom said. “But I personally don’t think they have any value, regardless.”