Traders and analysts love to disagree with United States Department of Agriculture reports, but without them, there’s nowhere to even begin a debate about the true state of crops.
That’s what farmers, traders, analysts and commercial crop users are discovering now that USDA reports are suspended because the U.S. government is partially shut down while Congress wrangles over the budget.
There’s no official baseline any more — at the most sensitive time of the farming year.
“People don’t like to be in the dark. Markets don’t like to be in the dark,” J.P. Gervais, Farm Credit Canada’s chief economist said.
Regular, minor USDA reports have not been issued for days, such as crop status and progress, weekly exports and livestock cash markets. Other U.S. government reports, such as the Commitment of Traders report of the Commodity Futures Trading Commission, are also unavailable, leaving much fog hanging over the underlying nature of futures market positions.
Futures markets had to alter or suspend some products until they have data again.
So far, markets are carrying on without fresh USDA numbers.
But Gervais said traders won’t know what to do when the World Agricultural Supply and Demand Estimates report is not released as scheduled Oct. 11.
That report contains updated estimates of U.S. crop production, as soybean and corn harvest advances. The report also estimates global production.
The October WASDE report is critical, setting the table for the markets until the South American harvest begins. If the report surprises market players, prices can move wildly.
“If you look at the October report, over the past few years that’s a critical report,” said Gervais.
“For all the controversy with USDA reports… it’s still the biggest piece of central information we have.”
Upon the issue of any major USDA report, analysts and traders debate and question the findings, but most respect the USDA’s efforts to establish a well-sourced assessment of the true supply and demand situation.
The reports help establish a market consensus on the world supply and demand for major crops.
There are other sources of information, from private companies, other governments, farm and trade organizations, but none have the widely accepted credibility of the USDA’s rigorous efforts.
“I don’t think there’s a tool as good as the USDA in aggregating information to end up with a stocks-to-use ratio that stitches together all the information in the market,” said Gervais.
Mike Krueger of advisory service The Money Farm thinks grain companies and exporters will be OK without USDA information for a while, but some major players in the markets lack the commercial basis to develop their own notions of the underlying supply and demand situation.
“It’s the speculator that’s flying in the darkness right now,” said Krueger on Oct. 7.
“They won’t have harvest progress reports this afternoon. We don’t know day to day whether there have been any export sales over 100,000 tonnes.”
The U.S. government shutdown has nothing to do with agriculture, but the timing is terrible because U.S. crops are coming in and the market is desperate for updated information as soon as it is available.
Even when the U.S. government’s non-essential services, such as USDA reports, are re-instated, reports will almost certainly be delayed for days as agency staff undertake the gargantuan task of chasing down crop information through its large scale surveys.
Then the analysts take necessary time to extrapolate the true commercial situation and outlook from the numbers they arrive at.
Krueger said he wonders if USDA will cancel the October WASDE report, if it is delayed for too long, turning instead to the November report, making it more potentially explosive in its implications.
One positive outcome of the shutdown, Krueger said, is that it is making the crop markets realize its reliance upon USDA data.
“We always trash the USDA, but no matter what you think of the numbers, they always put numbers out in some sort of way and we’re missing them,” he said.