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Ag investors' diary of a US government shutdown - week two

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As the US government shutdown enters a second week, continues the diary, in investors' own words, of the impact on agricultural commodity markets.

For the first week's diary, click here.

Friday October 11

"Once we get past this [October 11 Wasde] report date, then we start making assumptions based on assumptions, and that is where things get really rough.

"The speculative interest or the peripheral participants are stepping back, saying, 'I do not know, so I do not need to be here.'" Bill Gentry, Risk Management Commodities

"A lot of talk is centred around a Wasde report release the week after next." US Commodities

"The last time the government had a temporary closure was 17 years ago for around three weeks but the recovery from this was quick because the government lowered interest rates to jump start the economy and it worked well.

"Now with interest rates already at near zero, this option doesn't exist, making the road out of this financial fiasco unpaved and not clearly marked." Judith Ganes Chase, J Ganes Consulting

Thursday October 10

"I hear more chatter, unconfirmed that [the USDA] may need a minimum of 4-5 days following the reopening of government to tabulate the next Wasde crop report.

"The next crop report may be early the week of October 21 if the government reopens late next week - even temporarily - as latest Washington chatter suggests." Richard Feltes, RJ O'Brien

"Uncertainty creates doubt -- exactly what we do not need as U.S. exports are poised to bounce back strong from a tough, drought-impacted year." US Grains Council

"If we knew what was going to happen, you would be the first to know." US Grains Council

Wednesday October 9

"It is currently our understanding that going forward the Upper Midwest Federal Order will continue to release both the weekly and monthly prices as scheduled.

"Therefore, it is our intention that the final settlement of the CME Milk (Class III & Class IV), cheese, butter, whey and non-fat dry milk futures and options contracts will occur on Wednesday, October 30 as scheduled." CME Group

"With no export news or government reports, all traders have to go on at the moment is yield results"

Mike Mawdsley, Market 1

"We are totally in the dark whether any business, or how much business, is going on." Mike Mawdsley, Market 1

"If there has been an impact on the markets from the partial government shutdown it may be more related to lower volatility than an overall negative or positive affect.

"The price swings appear to be tapering." US broker

"The USDA has not said when we could see the October Wasde report, with some in the trade thinking it could be 5-7 days after they return to work, while others think they may skip October altogether and look forward to the November report on November 8.

"All data needed from other agencies within the USDA may not be complete for an October report." Benson Quinn Commodities

Tuesday October 8

"There seems to be agreement that yields are getting bigger. What the trade would really like to see is the USDA acreage numbers, and how much was lost to prevent plant." Don Roose, US Commodities

"The absence of the benchmark USDA pricing data has caused packers and producers to scramble to find new ways to price hogs.

"Price discovery is always difficult and it becomes especially challenging when the normal pricing benchmarks are removed overnight." Paragon Economics and Steiner Consulting

"It is interesting to note that average trade estimates for the USDA October Wasde report [which has been postponed]… suggest that the trade is somewhat sceptical of USDA 2013-14 row crop forecasts." Richard Feltes, RJ O'Brien

Consensus estimates for the Wasde forecast a 27m-bushel decline in the forecast for US corn production, but a 68m-bushel rise in the end-2013-14 inventory number. For soybeans, traders forecast a 7m-bushel rise in the harvest forecast, and a 17m-bushel rise in the stocks estimate.

Monday October 7

Events: US Department of Agriculture announces it will not release its October edition of its much-watched Wasde world crop supply and demand report.

CME Group, "under CME rule 701 (declaration of force Majeure)" releases details of settlement details for October lean hog futures and options in case input from USDA pricing data, needed for convergence of cash and futures prices, is unavailable.

"USDA will not issue a Wasde report this week due to the lapse in federal funding"

USDA spokeswoman Courtney Rowe

USDA spokeswoman Courtney Rowe

"The longer the shutdown continues, the higher the likelihood for more data to be reported all at once. Thus, the market will need to quickly digest this data once these figures are again reported.

"Therefore, we are mindful of the potential increase in near-term volatility of prices but look further down the forward curves to gauge how expected demand performs." Christopher Narayanan, Societe Generale

"With the lack of any USDA announcements or upcoming reports in sight the market appears to be trading in smaller ranges until more news arrives.

"The market is holding onto other sources of information for direction." Illinois-based broker


"Although this lack of USDA information may not be good for most commodity markets, it may have actually helped wheat values"

European commodities house

"The funds have been holding very large short positions in wheat and the prospect of 'flying blind' may have encouraged them to buy more of these shorts back in." European commodities house

"Last week, uncertainty surrounding extent of the government shutdown was an element in trade for nearly all commodities reliant on the regular release of government data on supply, demand and cash market pricing.

"Trade volume dropped as most markets simply marked time, with neither bulls nor bears willing to aggressively take or exit existing market positions." Doane Advisory Services


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