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Missing Data Dump, Worries About Price Discovery and Attempts to Fill the Void | KRVN Radio

Missing Data Dump, Worries About Price Discovery and Attempts to Fill the Void

Missing Data Dump, Worries About Price Discovery and Attempts to Fill the Void
Image: tupungato/iStock/Thinkstock

MOUNT JULIET, Tenn. (DTN) — As the partial government shutdown enters its 21st day, most employees responsible for compiling the January swath of market reports remain furloughed.

Most of USDA’s economists and statisticians responsible for producing the January crop reports remain on furlough as the partial government shutdown enters its 21st day. (DTN file photo by Nick Scalise)

USDA cancelled the reports last week, saying even if the government reopened before now, there wouldn’t be enough time for its economists to complete the reports. USDA was supposed to release its Annual Crop Production, Grain Stocks, Winter Wheat Seedings and World Agricultural Supply and Demand Estimates reports on Friday, Jan. 11 at 11 a.m. CST.

With the shutdown dragging on, it’s unclear when those reports will be released. Some traders, farmers and ranchers aren’t worried about the lack of government data, especially given the bearish tendency of recent reports. Some private businesses see the shutdown as an opportunity to highlight their own data and analytic services. Yet others, like University of Illinois agriculture economist Scott Irwin, worry the lack of data will make markets less efficient at achieving one of their primary functions.

“There is damage to the price discovery process in our grain and livestock markets due to the absence of the reports,” Irwin told DTN. “The question is, is it little or is it big? And the answer to that question really depends on how long the information is delayed.”

From his conversations with farmers, Irwin said he gets the sense people are delaying decisions, like what to plant and what kinds of inputs they need to buy.

“There’s a cost to that waiting,” he said. “Secondly, there’s a sense that the playing field is not as level as it would be with the USDA information.”

Larger market participants, like the ABCD grain merchants, often have their own information gathering and collection processes that can give them market insights unavailable to the broader public. “They now have more of an advantage than when the USDA is doing it in a comprehensive, unbiased manner and making it available to everyone,” Irwin said.

Irwin said he thinks the true market price, based on fundamentals, at any given point in time is a moving target.

“What the USDA data really does is it helps us get to the bullseye more quickly and get closer to the bullseye than we would without the USDA data,” he said.

The amount of damage to price discovery depends on how long the shutdown continues. If it’s only for a few more days or weeks, Irwin said, the damage probably won’t be very large. But if it lasts longer, he’d expect to see additional price volatility.

“I don’t even want to think what’s going to happen if somehow we wouldn’t have the Prospective Plantings report in March,” he said. “I don’t think that’s going to happen, but who knows?”

In the January round of reports, market watchers usually pay close attention to final corn and soybean yields, harvested acreage, wheat seeding and grain stocks for corn, soybeans and wheat in the January round of report, he said.

The shutdown isn’t only affecting the January reports. It’s also brought USDA’s export sales reporting system to a halt.

“It’s hard to imagine a worse time to be without that data if you’re a farmer trying to make marketing decisions,” Irwin said.

The lack of export sales reports right now is particularly disruptive given China’s recent reentry into the U.S soybean market.

DTN Lead Analyst Todd Hultman agrees, saying the weekly export sales numbers were designed to bring greater transparency to the grain markets in the wake Russia’s disruptive wheat purchases in the late 1970s. Hultman goes into greater detail in this week’s Todd’s Take column.

You can read it here: https://www.mydtn.com/…

“Whatever little tinkering that might happen in the final crop estimate is pretty insignificant compared to the outcome of the trade talks with China. That’s the real market concern,” Hultman said.

While much of USDA remains shuttered, private companies are attempting to fill the data void by offering free trials of their products, and in some cases, taking extra steps to fill the void.

Mercaris, a data service company that aims to bring market intelligence to organic and sustainable agriculture, is offering its Bi-Weekly Organic Grains Report free of charge. It also published a set of organic commodity import data that would otherwise be unavailable without USDA.

You can find more on that information here: https://mercaris.com/…

Another is Gro Intelligence, a data and analytics company that integrates numerous government and satellite data sources into advanced yield models. Regular DTN readers will remember Gro from the 2018 Digital Yield Tour, in which DTN reporters used Gro’s real-time models to give updates on crop conditions in 10 states.

You can find more information on the Gro’s models here: https://www.dtn.com/…

Jim Heneghan, Gro Intelligence’s senior vice president of agribusiness, said the company is offering free subscriptions while the shutdown is ongoing. It’s also generating supply-and-demand reports for several crops worldwide to help fill the void left by the government shutdown.

Gro will use its yield forecasting models for U.S corn and soybeans, Argentine soybeans and Indian wheat to populate the supply side of those balance sheets. For other countries, it will estimate supply by using a linear regression of historical production combined with satellite data, or it will use individual government forecasts, especially if those numbers were likely to be adopted by USDA.

Gro will also forecast demand for corn, soybeans and wheat. In all, Gro will release more than 1,000 forecast models covering 35 crops grown around the world.

To access a free subscription and Gro’s estimates, which will be released at 11 a.m. CST, visit: www.gro-intelligence.com/USGovShutdown

“We felt we were in a good position to replicate pieces, if not the whole report, in some fashion,” Heneghan said. He added that Gro isn’t trying to replace USDA, but it hopes members of the marketplace find its data useful.

University of Illinois’s Irwin said there’s a lot of talk, especially on social media platforms like Twitter, that USDA could be replaced by big data sources and modern satellite companies, but he thinks the shutdown highlights how important the agency’s data is to the marketplace.

“Do the USDA reports move the markets? And if they’re moving the markets, their information is not redundant and replaceable by big data firms. We wouldn’t be having this conversation today if the USDA data was not important and people were noting its absence,” Irwin said.

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