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Despite Shutdown,
Ag Industry Moves Forward

The U.S. government shutdown is causing commodity traders to look to other resources for market information and will lead to gaps in historical data.

The uncertainty as to when the government shutdown would end has troubled the agricultural industry and those wanting to make trading decisions for their crops and livestock.

“I don’t know how long this will last, but context is important,” said Glynn Tonsor, associate professor and livestock economist for Kansas State University (K-State) the week before the shutdown ended. “The sun still came up today. Feeder cattle are being sold. Corn is being harvested. Those kind of physical activities I don’t think are changing. What is changing, at least in the short term until the shutdown is resolved, is how we discover ag prices, how they’re reported and how people make buy-sell decisions.”

USDA entities were among those not functioning due to the shutdown. Even the USDA's website was not available for use. The USDA’s Agricultural Marketing Service (AMS) is the entity responsible for facilitating the fair marketing of U.S. agricultural products and reporting rice averages.

Ag commodity traders rely on those unbiased numbers from the AMS, Tonsor said. Some private companies also develop cash numbers and might issue them for a fee, but many of those companies use AMS data to figure their numbers. Tonsor points out that even AMS data aren't free, as the AMS is a tax-paid service. Due to the shutdown, the most recent cash numbers available for cattle, for example, are from Sept. 27.

Tonsor said people should educate themselves about the origin of the data and the potential targeted audiences, if any, of private data companies. The AMS is viewed as an unbiased source, much like universities, he said. A private provider might show a rosier example of prices to cow-calf producers, for instance, if that’s its targeted audience.

“I don’t want to come across as an advocate for USDA, but I have made a point to try to raise awareness to ag producers that a lot of publicly gathered data gets repackaged, and folks like me and others end up bringing it to them,” Tonsor said. “Understanding where that data comes from, how it’s collected and the fact that it isn’t collected for free is very important.”

Tonsor and other K-State ag economists spoke about the government shutdown implications on agriculture at the 2013 Agricultural Lenders Conference Oct. 8 in Garden City, and Oct. 9 in Manhattan.

How long the government shutdown would continue and how long commodity traders would go without base-reported prices was uncertain. While the shutdown concluded Oct. 17, another potential shutdown looms in three months. Without the AMS data, it is evident that the marketplace is uneasy, but Tonsor said the typical cow-calf producer who is going to sell his or her calves is probably still going to do it.

“We’re still going to find a price that makes transactions go forward, but the cost of that price-discovery system, at least in the short term, has gone up,” Tonsor said. “Everybody is adjusting to find this information somewhere else, and maybe it’s not as efficient. Not everybody has the same network. Not everybody has access to the same private data sources.”

Tonsor said in addition to using private sources to obtain data, people should consult their personal networks and do some searching online to better understand the current markets.

Another problem that has developed out of this shutdown is gaps in historical perspectives of the markets. The feeder futures market, for example, has a cash settlement index that is based on prices reported from various parts of the country. Tonsor said because no information was being collected, there won’t be the ability to build that index for the traditional way of settling the feeder cattle contract.

“We are definitely building gaps, some of which will not be resolved even if the shutdown ended right now,” Tonsor said. “Every day, every minute that goes by, there is something that is not being captured that won’t be back-filled. Some things that are being captured won’t be back-filled because of computer systems being down. So you have gaps in the data series.”

Information from these conferences will be available online at (http://www.agmanager.info/).

comment on this storyEditor’s Note: Katie Allen is a communications specialist for K-State Research & Extension News Media and Marketing Services.



 

 

 


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