In The Cattle Markets
By: John D. Anderson
In normal times, participants in commodity markets are faced with an embarrassment of riches when it comes to market data. Particularly since the advent of mandatory price reporting, the coverage provided by public reporting on prices and volumes in the livestock sector has been impressive. It has also been quite easy to take for granted. Daily – and on some items (e.g., slaughter cattle and boxed beef) twice daily – reports have for over a decade now been available at the click of a mouse. This data has been more than just a convenience. Market institutions of considerable importance have built up around the availability of the data. The cash settlement of Lean Hog and Feeder Cattle futures contracts against cash market indices constructed from Agricultural Marketing Service (AMS) data are a couple of examples of such institutional arrangements. Formula price contracts, a staple in both the hog and fed cattle markets, also depend on timely, transparent information to provide inputs into price formulas.
In the absence of AMS price/quantity data, alternatives will have to be found. Private sources do exist. By all accounts, the Yellow Sheet from Urner-Barry has gained a fair number of subscribers over the past week. How good of a substitute for USDA data are such private data sources for cattle and hog prices? We are in the midst of a natural experiment that will surely tell us quite a bit about that.
Within USDA, the shutdown is affecting more than just AMS market reports, of course. Earlier this week, it was announced that the October supply and demand estimates report would be a casualty of the shutdown. The October report is generally one of the most closely watched monthly updates because it incorporates acreage information from FSA and so generally represents a more definitive figure for acreage of the major crops than prior reports. As usual, private firms have put out their own pre-report estimates in advance of the report. This year, it looks like the pre-reports will have to suffice as a proxy for an official report – at least for the time being. The average of the pre-reports for corn and soybean harvested acreage, yield, production and 2013/14 ending stocks as compiled by Thompson-Reuters is summarized below:
Harvested Average Total 2013/14
Acreage Yield Production End. Stocks
Corn (million ac.) (bushels) (billion bu.) (billion bu.)
October Estimates 88.142 156.5 13.802 1.923
USDA Sept. 89.135 155.3 13.843 1.855
October Estimates 75.933 41.5 3.156 0.167
USDA Sept. 76.378 41.2 3.149 0.150
Compared to last month's report, the trade expects harvested acreage to be reduced a bit but for yield to be increased slightly on both crops. On balance, corn production is reduced slightly (about 40 million bushels) from last month while soybean production is about even with last month's estimate. Expectations for ending stocks on both crops are modestly higher than last month's USDA figure, reflecting the latest stocks data – released just before the shutdown on September 30.
Looking ahead, other reports will clearly be delayed or cancelled as a consequence of the shutdown. Weekly Broiler Hatchery reports have already been interrupted. Other monthly reports are also questionable. For example, surveys required to compile the monthly Cattle on Feed report will have to be performed soon (very soon) if that report is to be completed on schedule. Those surveys will not be done during the shutdown. There is a legitimate debate to be had about the size and scope of federal government spending. That debate has taken a decidedly contentious turn with the current government shutdown. Unfortunately, commodity market transparency is quickly becoming collateral damage in the process.
Markets were for the most part, of course, not reported last week. Unofficial sources indicate that fed cattle prices were around $126 last week. Fed cattle futures were roughly steady for the week, with the nearby October contract ending the week at $128.05. December corn finished the week at $4.43 ¼.