The agricultural commodity world returned from holidays expecting to have updates on South and North American crop figures, US stocks/exports/prices, and fund positioning in the futures markets. Instead, a lack of information dominates as federal agencies remain closed due to the government shutdown (with little change in sight).
The USDA’s benchmark supply and demand report, the WASDE which is set to be released on the 11th, will be delayed or not released (it was skipped in the shutdown of 2013). Of course, the problem is not only the changes of production, it is the shared view, the USDA may not always be correct in figures (in fact they have a large potential range of errors), but they are the standard that everyone trades off (and what prices move on).
“Without the monthly guidance the USDA offers, potential corrections in the future may be large and this can amplify price volatility”
Keith Flurry, Stable
The January report is important as it would finalize the 2018 crops helping everyone in the supply chain plan for the coming season. Without the monthly guidance the USDA offers, potential corrections in the future may be large and this can amplify price volatility. This impact is all the more exaggerated as the CFTC’s Commitment of Traders (COT) report, which breaks down the participation in the markets by funds and commercial entities, is also not being published. The weekly report can be used to see if speculators have large positions (both long and short) that may be susceptible to major corrections if news or markets change.
Without either report, the market has to guess the potential crop changes in the future (which gets harder with more time) and guess what the positions are in the futures exchanges. This is difficult on a weekly basis and almost impossible now as there has not been a report since Dec 11. Some non-govt businesses are trying to fill this void by making their data publicly available but the market grows accustomed to a data source. Its removal leads to a vacuum of information filled with rumour and hearsay and depending on market conditions this could certainly increase price volatility.
Stable is a commodity price volatility insurance product designed and built by farmers. We help farming and food businesses of every size and sector manage the risk of volatile prices so they can invest in their future with confidence. Stable’s index-insurance platform enables farmers and food businesses to insure themselves from a wide range of volatile commodity prices and input costs.
To find out more about Stable or to book a demo, please visit our website or call us on +44 (0) 203 8599390 or email email@example.com and we can show you how dairy farmers are using Stable to protect their balance sheets.