Experts: Lack of USDA reports could benefit grain market

Some grains merchandisers say the postponement of USDA's market reports may actually end up benefitting the market. It allows the industry to trade on basic market fundamentals instead of USDA reports, says Darin Newsom, senior analyst for DTN.
Matthew Weaver

Capital Press

Published on October 9, 2013 10:15AM

A lack of USDA reports during the federal shutdown could wind up helping the grain market, an analyst says.

With the length of the shutdown still uncertain, reports like the USDA’s World Supply and Demand Estimates report, originally slated to be released Oct. 11, have been postponed.

“As crazy and counterintuitive as this may sound, I think this allows for markets to get back to trading on real fundamentals,” said Darin Newsom, senior analyst for DTN in Omaha, Neb. “I think what we’ll realize is that we don’t need chaos created by government reports.”

The reports have strayed far from their original intention, Newsom said, calling them outdated and unnecessary.

“I think this will provide us the opportunity to see what things can really be like, to see how markets can really behave,” he said.

“There are so many good reports put out by private companies now, we may not miss the USDA reports,” echoed marketing consultant Clark Johnston, based in Ogden, Utah.

Speculators and funds put a lot of emphasis on the USDA, but everyone else in the market trades their own numbers, said Dan Steiner, grains merchant for Pendleton Grain Growers and Morrow County Grain Growers.

“Without input from the government, the market is trading how the market trades,” he said, likening the USDA to a referee: “You don’t have to have a referee to have a game.”

The analysts said the government shutdown has impacted grains prices.

Newsom said trade volume during the shutdown has been down, particularly in corn, but that’s normal for this time of year as harvest kicks off in the Midwest.

Newsom said the trade is much more orderly now, with factors like weather, harvest, potential yield and hedge pressure setting the price instead of headlines tied to reports.

“Even if the market prices are lower, it seems to be based more on reality than what we’ve seen in quite some time,” he said.

Johnston said prices have gone a little higher than they might have because of the lower volume.

Volume will likely stay low during the shutdown, Newsom said, as many traders don’t know how to trade anything else.

“Most people’s sense of reality is that this isn’t going to last a great, long time,” he said. “Before too long we will be back to the old system of having USDA reports and having the increased volatility and chaos.”

Because of the delay, when the shutdown is over and the USDA’s market report returns, Steiner said, it could have an effect on the market. It’s too early to tell whether it would be a positive or negative impact, he said.

Farmers may not have the exact numbers shipped or sold, but they can tell how the market is reacting overall, Newsom said.

“From a farmer’s perspective, they need to sit back and say, ‘The information is there. It’s not in the form I’m used to seeing it, but it is there, I can use it and still be profitable with it,’” he said.


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