Livestock Markets Coping Without USDA Reporters

10/12/2013 7:00 AM
By Philip Gruber Staff Writer

With the federal government shutdown now in its second week, much of the attention has focused so far on the congressional stalemate, blacked-out agency websites and the National Park Service’s mania for barricades.

But with only “essential” USDA employees authorized to work, livestock owners are left trying to navigate a world without government market reports. All federal market reporters are furloughed until Congress and President Barack Obama agree on a continuing resolution to restore funding.

Although the furloughs have knocked out a large amount of public, third-party livestock market data, the shutdown has not slowed down the auctions.

“We’re still open, and sales are robust,” said Michael McDermott, sale barn office manager at New Holland Sales Stables in New Holland, Pa.

Some customers have called wondering if the sales will still go on, but McDermott said he has not encountered much concern beyond that.

The auction had 7,000 sheep and goats on Monday. Activity has been steady thanks in part to the Muslim holiday Eid ul Adha next week, he said.

Pricing has not been problematic so far, but the shutdown “will have some effect if it continues much longer,” McDermott said.

Denise Frame of Vintage Sales Stables in Paradise, Pa., agreed that business is going just fine without the government.

“We’ve run like we’ve run for many, many years,” she said. Because Vintage uses a private grader, that service is uninterrupted. Like New Holland, Vintage is simply without a USDA reporter. But Frame said the auction has other ways to disseminate its information.

“It’s more difficult to figure your way around without the reports,” said Kevin Niehls of Niehls Angus Beef in Barto.

Niehls follows Lancaster Farming’s printed reports and Drovers’ audio reports as he plans to sell his fat and feeder cattle. The newspaper has received very few USDA-sanctioned reports for sales held since the shutdown, and Drovers has not released its report in two weeks.

For now, sale prices from early last week are a passable guide, but a prolonged shutdown will make it more difficult to follow the broader agricultural trends that influence beef prices, Niehls said.

Lack of a World Agricultural Supply and Demand Estimates Report and corn and soybean market reports, for example, create an information void.

The Chicago Mercantile Exchange bases its feeder cattle index on USDA Agricultural Marketing Service data but has changed its formula to replace the USDA data during the shutdown.

Trading on the exchange on Oct. 4 was 40 percent lower than on Sept. 30, the day before the shutdown, largely because of the pricing uncertainty, according to Kelly Gee of the Wall Street Journal.

Tyson and Cargill plan to use information from Urner Barry, a market reporting company from New Jersey, Gee said. A message left with Urner Barry staff was not returned by press time.

Without the accustomed market reports, farmers can still get some of the information they want, but they will have to work harder for it, Matt Diersen, a South Dakota State University Extension risk management specialist, wrote in a release.

Proactive farmers can search for information on the Internet, call auction houses and read their reports.

“Then, you would need a network to do that in the other states with cattle. And you would need to try to exclude from your view any cattle that are too big, too small, too thin, too heavy, too fancy or with any feature different from the quality grade used in past valuations,” Diersen said.

Cattle prices hit an all-time high just as the shutdown started, so prices may have gone even higher without farmers knowing. Uncertainty about ending prices could make sellers hesitant to sign futures or options contracts, he said.

Usually, a farmer would use USDA’s Livestock Risk Protection or a similar program to take advantage of high prices, but those instruments are not available during the shutdown.

In the short run, producers might choose put options that can be sold if the government insurance programs receive funding. These would at least guard against big near-term price swings, he said.

Diersen also recommended that auctions publish as much information as they can to help keep trade moving.

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