CHICAGO Oct 3 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 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
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
The critical day for CME October lean hogs is Oct.
16, the final settlement day, with prices determined by USDA
market price data. The last trading day is Oct. 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
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 Oct. 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.