By Christine Stebbins and Julie Ingwersen
CHICAGO Oct 10 For the first time in 40 years,
farmers, exporters, processors and traders will have to live
without a key monthly crop report that they rely on to forecast
market direction because of the U.S. government shutdown.
The U.S. Department of Agriculture report that was due to be
released on Friday covers everything from the size of the U.S.
corn harvest to China's soybean imports.
"It's like flying an airplane and all of a sudden the flight
control goes down," said Dennis Collins, a director with
Trilateral Inc in Chicago. "People are flying blindly and don't
have any updated data to figure out where they are or where they
should be relative to true market value."
USDA's reports are often criticized by traders and analysts
when the data defies expectations, but are still viewed
worldwide as the gold standard for crop forecasts. Analysts and
traders use the monthly figures as guideposts in formulating
"Everybody is guessing more. Less information is not good
for the market," said Gary Blumenthal, president of World
Perspectives Inc based in Washington, D.C. "For those of us who
make our living by analyzing and second-guessing these reports,
it's probably more traumatic."
"If you are one of the ABCDs, you have to figure your
internal data is pretty good," said Blumenthal, referring to the
big commercial grain firms - Archer Daniels Midland Co,
Bunge Ltd, Cargill Inc and Louis Dreyfus
Corp - which have their own private information on
export activity, crop size and farmer selling.
The USDA's October crop report is the latest and biggest
item in a series of agricultural data products that were
suspended on Oct. 1 when President Barack Obama and
congressional Republicans failed to end a standoff that forced
the first government shutdown in 17 years and left hundreds of
thousands of federal employees out of work.
To compile its monthly report, USDA starts at the farm
level. Its staffers take two full weeks to survey growers and
inspect crops in thousands of fields.
It is unknown whether the government will even issue its
October crop report at this point, or roll the data into its
November edition. The reports are normally released around the
10th of the month.
"Once we get past this next report date, then we start
making assumptions based on assumptions, and that is where
things get really rough," said Bill Gentry of Risk Management
Commodities in Lafayette, Indiana.
"The speculative interest or the peripheral participants are
stepping back, saying, 'I do not know, so I do not need to be
With that, Chicago Board of Trade futures markets have seen
market volatility slip despite steady trading volume, which
traders attribute to big grain companies and country elevators
hedging the harvest of a bumper U.S. crop.
One measure of market activity, or volatility, is average
true range which measures the daily high-low price of a
commodity. Average true range volatility, developed specifically
to track commodities, shows CBOT December corn futures
volatility now at its lowest level since late March.
The lack of USDA data "probably has subdued trade somewhat,"
said Dan Cekander, director of grain market analysis for Newedge
USA in Chicago.
However, he added, trading volume has been relatively
steady, bolstered by the annual U.S. corn and soybean harvests
that trigger hedge-related selling by farmers, commercial grain
handlers, end-users and speculators.
Typically, market volatility peaks on the days when USDA
releases its monthly and quarterly crop reports. The releases
are often accompanied by limit price moves in CBOT grain futures
as traders and analysts reset their working balance sheets
against the milestones supplied by USDA.
The longer the trade goes without official government
numbers, the greater the risk of the market drifting off course.
"Once USDA is up and going and they open the flood gates
with data - what's that going to do to the markets?" said
Collins of Trilateral. "If it comes out as expected then it
won't be a problem. If not, it could be chaotic for awhile."