Grain trade in the dark without monthly USDA crop report

Reuters

By Christine Stebbins and Julie Ingwersen

CHICAGO, Oct 10 (Reuters) - For the first time in 40 years,farmers, exporters, processors and traders will have to livewithout a key monthly crop report that they rely on to forecastmarket direction because of the U.S. government shutdown.

The U.S. Department of Agriculture report that was due to bereleased on Friday covers everything from the size of the U.S.corn harvest to China's soybean imports.

"It's like flying an airplane and all of a sudden the flightcontrol goes down," said Dennis Collins, a director withTrilateral Inc in Chicago. "People are flying blindly and don'thave any updated data to figure out where they are or where theyshould be relative to true market value."

USDA's reports are often criticized by traders and analystswhen the data defies expectations, but are still viewedworldwide as the gold standard for crop forecasts. Analysts andtraders use the monthly figures as guideposts in formulatingmarket outlooks.

"Everybody is guessing more. Less information is not goodfor the market," said Gary Blumenthal, president of WorldPerspectives Inc based in Washington, D.C. "For those of us whomake our living by analyzing and second-guessing these reports,it's probably more traumatic."

"If you are one of the ABCDs, you have to figure yourinternal data is pretty good," said Blumenthal, referring to thebig commercial grain firms - Archer Daniels Midland Co,Bunge Ltd, Cargill Inc and Louis DreyfusCorp - which have their own private information onexport activity, crop size and farmer selling.

The USDA's October crop report is the latest and biggestitem in a series of agricultural data products that weresuspended on Oct. 1 when President Barack Obama andcongressional Republicans failed to end a standoff that forcedthe first government shutdown in 17 years and left hundreds ofthousands of federal employees out of work.

To compile its monthly report, USDA starts at the farmlevel. Its staffers take two full weeks to survey growers andinspect crops in thousands of fields.

It is unknown whether the government will even issue itsOctober crop report at this point, or roll the data into itsNovember edition. The reports are normally released around the10th of the month.

"Once we get past this next report date, then we startmaking assumptions based on assumptions, and that is wherethings get really rough," said Bill Gentry of Risk ManagementCommodities in Lafayette, Indiana.

"The speculative interest or the peripheral participants arestepping back, saying, 'I do not know, so I do not need to behere.'"

With that, Chicago Board of Trade futures markets have seenmarket volatility slip despite steady trading volume, whichtraders attribute to big grain companies and country elevatorshedging the harvest of a bumper U.S. crop.

One measure of market activity, or volatility, is averagetrue range which measures the daily high-low price of acommodity. Average true range volatility, developed specificallyto track commodities, shows CBOT December corn futures volatility now at its lowest level since late March.

The lack of USDA data "probably has subdued trade somewhat,"said Dan Cekander, director of grain market analysis for NewedgeUSA in Chicago.

However, he added, trading volume has been relativelysteady, bolstered by the annual U.S. corn and soybean harveststhat trigger hedge-related selling by farmers, commercial grainhandlers, end-users and speculators.

Typically, market volatility peaks on the days when USDAreleases its monthly and quarterly crop reports. The releasesare often accompanied by limit price moves in CBOT grain futuresas traders and analysts reset their working balance sheetsagainst the milestones supplied by USDA.

The longer the trade goes without official governmentnumbers, the greater the risk of the market drifting off course.

"Once USDA is up and going and they open the flood gateswith data - what's that going to do to the markets?" saidCollins of Trilateral. "If it comes out as expected then itwon't be a problem. If not, it could be chaotic for awhile."

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