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Fri October 11, 2013
Government Shutdown Stops USDA Data, Leaves Farmers Guessing
Normally, Friday would be a big day for the commodity markets. The U.S. Department of Agriculture’s World Agricultural Supply and Demand Report is due, providing what is widely excepted to be the most trusted and complete snapshot of farm markets in the middle of harvest season. But, with the government shutdown the report is not coming out. In fact, farmers and ranchers aren’t getting any of the USDA information they rely on, and in this case, ignorance is not bliss.
Most people involved in production agriculture are accustomed to a fire hose of data; accessible, reliable, unbiased information, from the USDA. Steve Meyer, president of Paragon Economics, a company that advises pork producers, says going without government data has created a lot of mystery.
“We don’t know how many animals were harvested last week,” Meyer says. “We don’t know what they weighed. We don’t know how much meat was put on the market. We don’t know what the prices paid by wholesale buyers were. We don’t know what those prices translated into farm prices last week. So, we’re kind of shooting in the dark here for a little while.”
USDA data helps level the playing field between farmers and the huge corporations they sell to. Pig farmers, for instance, use it to negotiate with the handful of big packing houses that are, in many cases, their only customers. Without the USDA, Meyer says the little guys are at a disadvantage.
“There are a lot of those sellers that only deal with one or two packers,” Myers says. “That packer deals with 100 suppliers. And because of that difference in perspective on the markets, the packer can know a lot more about what’s going on than the seller can know about what’s going on. And, that really underlies why we have public information in the United States.”
Farmers use USDA numbers to help make decisions about what to raise, what to sell, and for how much. It helps them decide what they can afford to pay for land and farm equipment. Without it, Daniel O’Brien, an economist at Kansas State University, says, they’re more likely to make costly mistakes.
“You add to the risk of being surprised down the road,” says O’Brien.
Now, you might think that forcing farmers and traders to make big money decisions relatively uninformed would send commodities markets into a tizzy. But Chad Hart, an economist at Iowa State University, says the markets are fine.
“Thus far, you’ve seen very little movement,” he says.
In fact, major crops like corn and soybeans have been trading within a very narrow range, with prices changing less in the two weeks following the shutdown than they might normally within minutes of a big USDA crop report. One reason nobody’s freaking out – yet – according to Hart, is the fact that the USDA isn’t the only window on agriculture.
“There are workarounds to this problem,” Hart says. “There are alternative sources. Not quite as extensive, but useful.”
There are private firms that make it their business to collect and sell agricultural market information. News organizations collect it. Some farm publications have been pleading for information from their readers, or amassing what they can on social media. Hart says farmers he has spoken with are also working their sources.
“They’re doing a lot more talking with their local elevator, their seed salesman, their crop insurance agent, basically trying to cobble together as many different sources of information as they possibly can to help fill in the missing USDA data,” Hart says.
This kind of scrambling means extra work and aggravation, of course. But, Hart says, actual financial pain caused by the sudden absence of USDA data is hard to pin down.
“I would relate this to a slowly evolving illness,” says Hart. “By that time you really start to feel the symptoms, you’re going to know you’re going to slide down a while. You can feel that cold coming on before it hits you.”
The longer the government shutdown lasts, the more market conditions are likely to change unnoticed, and the harder food prices are likely to swing when USDA statisticians are allowed to get back to work generating the torrent of reliable information American farmers, food processors and consumers expect.