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Shutdown increased uncertainty for market

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When USDA's November reports on supply, demand and production are released, it will end two months of added uncertainty for those who deal in the commodity markets.

When the government shut down for 16 days this month, USDA staff didn’t immediately send out a press release communicating the cancellation of its Oct. 11 crop report and supply/demand estimates.

With all USDA Web sites shut down, a couple of USDA staffers did send e-mails indicating that the reports would be cancelled. Finally, a news release announcing the cancellation arrived in e-mailboxes on Oct. 17, the day after the government got up and running again.

During those 16 days, the market remained in the dark about key market indicators at home and in the world.

John Robinson, Extension economist with Texas A&M University, said around 25 government reports were cancelled.

Commenting on the shutdown’s effect on the markets during the Ag Market Network’s Oct. 14 conference call, Robinson said, “Our government has had a long history of promoting markets and promoting commerce by providing information that reduces uncertainty and helps all parties,” Robinson said. “In the absence of it, we deal with more uncertainty than usual.”

USDA reports range from daily spot quotes and quality reports, to weekly export and crop progress reports to monthly supply, demand and production updates. There is also Commodity Futures Trading Commission commitment of traders report “that give us a picture of what the speculative funds are doing,” Robinson said.

For cotton, October reports are especially important, Robinson said. “This is harvest time, a time of the year when we would typically be looking for confirmation of the benchmark estimates that USDA puts out in August and September. We look for trends, we look for short crops getting smaller, or large crops getting bigger.”

USDA also estimates production, supply and demand in foreign countries, and these reports usually contain crucial information for the market to digest. For example, Robinson noted that during the last week in September, heavy rains in India might have delayed or damaged the cotton harvest, numbers that would have been reflected by USDA reports, had they been assembled.

Kelli Merritt, a cotton marketer and broker from Lamesa, Texas, said the cancelled USDA report concerned cotton importers interested in the supply of high quality U.S. cotton. “They’ve heard reports that quality may be down in this year’s crop. They want to know whether they’ll have enough high quality cotton to meet their needs. Unfortunately, there were no reports on those numbers.”

The monthly frequency of USDA reports also allow markets to react to incremental changes in crop estimates of production, supply and demand. With the next report on Nov. 8, it will have been nearly two months since the last report. No doubt, it will receive more attention than usual.

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