CHICAGO U.S. livestock markets are reeling from this week's disruption of data from the U.S. Department of Agriculture as the federal government shutdown drags on, while grain traders are muddling through without a key report on weekly export sales.
"It's a bigger deal for the livestock traders as they rely on daily numbers - slaughter, wholesale pork and beef prices. On the grains, you're missing more of the big picture," said Don Roose, president of Des Moines-Iowa brokerage U.S. Commodities, which serves both crop and livestock customers.
The USDA, which issues thousands of market reports that the agricultural industry relies on to price everything from hogs and cattle to soybeans and corn, pulled the plug on those reports on Tuesday when the government shut down.
Daily USDA market data is used by meat packers to determine how much they pay livestock producers for their cattle and hogs. The CME Group (CME.O) counts on government livestock values to calculate the final price for its lean hog and feeder cattle futures contracts at expiration.
Roose said he missed Thursday's USDA weekly exports sales report - which summarizes the previous week's export business - but said he can live without it for now. Traders have a general sense of weekly grain sales, and with the U.S. harvest revving up, there has been a steady flow of crop yield reports from farmers and grain elevators filling some fundamental voids on grains.
But it's different in the ag world for livestock.
"The most popular question this week: 'With the USDA shutdown do you have any idea how the lean hogs future will settle?' said Noel Blue, a CME options trader with Futures International.
The critical day for CME October lean hogs is October 16, the final settlement day, with prices determined by USDA market price data. The last trading day is October 14.
"The concern here is that October hogs go off the board in eight days and the hog index is needed for that to happen," said Jim Clarkson, a CME floor broker and analyst for A&A Trading Inc.
CME said this week if the shutdown continues, it may need to modify price settlement procedures at expiration for its lean hog and feeder cattle cash-settled futures.
On Wednesday, the CME suspended its lean hog and feeder cattle price indexes, both of which are based on USDA price data to determine final livestock settlement values. Meat packer Smithfield said Tuesday it was adjusting its purchase pricing for hogs until the federal government reopens.
Some traders are relying on industry-connected sources such as packers and producers for price information, while others shell out big bucks to private companies to fill the gap until the budget debacle is resolved and the government reopens.
Dennis Smith, a broker with Archer Financial Services in Chicago, said that working in a price vacuum is difficult and some traders are "going by feel and perception from the field."
"I'm going to be hurting in about a week because business is coming to a standstill. Given the drop in hog volume, everything is going to grind to a halt," said Smith, who is mitigating some of his client's risk through options.
CME lean hog trading futures volume was 27,768 contracts on Wednesday, versus 52,503 on Tuesday and 46,912 contracts a week ago. In contrast, the grains futures volume is up on the week.
Traders will face another big void on Friday without the Commodity Futures Trading Commission's weekly traders data, which summarizes players' positions and is available only from the government. They are also bracing for a likely delay in USDA's monthly crop estimates and supply-and-demand forecasts due on October 11.
"The longer this goes on - not having export sales, not seeing harvest updates, not having the CFTC report - leaves us in a fundamental void, hence higher risk," said Rich Feltes, vice president of commodity research for big brokerage R.J. O'Brien.
(Additional reporting by Sam Nelson; Editing by Dan Grebler)