D.C. shutdown keeps soy traders guessing

A lack of government trading information reports makes it hard for traders to know if China is buying U.S. soybeans

CHICAGO, Ill. (Reuters) — Commodity traders are in the dark because of the partial U.S. government shutdown, unable to see daily and weekly reports of agricultural exports to obtain clues as to whether China is following through with promises to buy grain and soy amid the ongoing trade war.

Traders have been anxiously awaiting proof from the U.S. Department of Agriculture that China is increasing purchases of grains and soy from U.S. farmers, who are preparing their spring seeding plans and trying to secure financing for seeds, fertilizer and land rents.

Now, trade experts and grain analysts warn the suspension of the reports is clouding the marketplace and potentially giving an advantage to big grain companies directly involved in the export trade. The government shut down partially at midnight on Dec. 21.

“We’re watching sales to China like a hawk,” said Ted Seifried, vice-president and chief agricultural market strategist for the Zaner Group.

Beijing recently resumed buying U.S. cargoes after the two countries agreed on Dec. 1 to a trade war truce. However, hefty tariffs on U.S. cargoes remain in place, and there is uncertainty over how much the top U.S. soybean customer will purchase.

The gap also gives the large commercial grain merchants an advantage by allowing them to keep their export deals with countries like China and Mexico out of the public marketplace.

Rich Feltes, vice-president for research with Chicago-based brokerage R.J. O’Brien, said the absence of USDA export sales data can increase the risk involved in trading agricultural markets, pushing speculators to the side.

“It gives a little bit of unfair advantage to exporters who either are or are not making sales, and can trade that information accordingly,” he said.

Along with its weekly export sales reports, the USDA has issued daily announcements of grain and soybean sales of more than 100,000 tonnes since 1977. The reporting system was launched in response to the purchase of millions of tonnes of U.S. grain by the Soviet Union in 1972 in deals that resulted in soaring U.S. grain and food prices.

University of Illinois agricultural economist Scott Irwin said the partial shutdown could also deal a blow to farmers suffering from the U.S.-China dispute by delaying aid payments meant to help offset some of the losses for crops hit by retaliatory Chinese tariffs in a trade war launched by U.S. President Donald Trump.

“If you’re talking about cash in the farmer’s pocket, the longer this goes on, the longer it’s going to delay that program, which is really just getting ramped up,” Irwin said.

The shutdown affects about 800,000 employees of the departments of homeland security, justice, agriculture, commerce and other agencies.

A lengthy shutdown could also jeopardize the release of a host of hotly anticipated monthly and quarterly grain supply and demand reports.

The USDA said recently that if the shutdown continues, it would halt its World Agricultural Supply and Demand Estimates (WASDE) report and reports by its National Agricultural Statistics Service, which tracks quarterly U.S. grain stocks and U.S. winter wheat seedings.

Those reports, along with an annual summary of U.S. crop production, were scheduled for release Jan. 11.

In the reports, Feltes said analysts expected to see the USDA trim its estimates of the average 2018 U.S. corn and soybean yields, imply strong feed use of corn in the first quarter and shed light on how many acres of winter wheat farmers were able to plant this past autumn, given excessive rains in many areas.

“Those are all bullish influences that we are going to be denied confirmation of,” he said.


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