Crop data at risk due to shutdown

by Laura Lloyd
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CHICAGO — The ongoing lack of fresh data on corn and soybean supply and demand from the U.S. Department of Agriculture has introduced additional uncertainty into trading these commodities, which may show up in lower market participation and a tendency to sideways price action, Michael Cordonnier, Ph.D., president of Soybean and Corn Advisors, Inc., in Chicago, told Milling and Baking News.

In actuality, CME Group open interest for corn and soybeans has actually expanded since Oct. 1, when the federal government shutdown began. Corn futures’ open interest was 1,215,467 contracts as of Oct. 8, up from 1,182,752 on Oct. 1. Soybean open interest on Oct. 8 was 623,084 contracts, up from 616,871 contracts on Oct. 1. Nearby contracts, though, have changed only modestly in price during the period of the government shutdown, supporting the idea of sideways trade in an under-informed market. On Oct. 1, November soybeans settled at $12.68 a bu while on Oct. 8 they settled at $12.88¾ a bu, up 20¾c but less than 2% on the week. December corn futures have risen from $4.39 a bu on Oct. 1 to $4.41¾ a bu on Oct. 8, up only 2¾c, or less than 1%.

Of special concern, Mr. Cordonnier said, is the survey of producers involved in the creation of the monthly Crop Production report, which, along with the World Agricultural Supply and Demand Estimates, was scheduled to be released on Oct. 11. He said only half of the production survey was completed in the last week of September and there was remaining work to be done gathering data. If the U.S.D.A. doesn’t complete the second half of the survey for a lengthy period, “that’s not good,” he said, because production numbers may be skewed, especially for soybeans, because of damage that may occur to crops waiting to be harvested.

He said that if the break in data collection dragged out too long in October, it might make sense to scrap the October Crop Production report and start afresh in November.

Mr. Cordonnier said mature soybeans awaiting harvest are particularly vulnerable to threats such as mold, excessive rainfall and shattering of pods, all of which may reduce production, which would typically mean higher futures prices. Mature corn, he said, can stand in the field longer without sustaining damage.

While he admitted farmers don’t need U.S.D.A. data to keep harvesting their crops, Mr. Cordonnier said the lack of fresh, reliable production, export and supply-and-demand information will make it harder to market soybeans and corn because accurate pricing requires this information. Market participants recently guessed that about 20% to 25% of the row crops have been harvested as of early this week.

“The soybean market is more volatile than corn, with supply and demand tighter,” Mr. Cordonnier said. He added that everyone expects the corn crop to be record large, but the size and condition of the soybean crop is more “at risk.”

The lack of export data also is of special importance to the soybean market. According to anecdotal evidence, U.S. exports during the period of the government shutdown have been “pretty darn good” and are expected to continue to be strong, especially to China, he said. The 2014 Brazilian crop being planted now is expected to attain record size for that country, but won’t be available until February at the earliest, Mr. Cordonnier said.

“From now until then, we will be the only game in town,” he said.

Nevertheless, the resumption of export data from the U.S.D.A. after a protracted shutdown “might be a surprise,” and disrupt the market, he added.
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