Gov't Shutdown Not Causing Panic In Grain Markets Yet

06:25AM Oct 07, 2013
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What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading steady to fractionally higher, soybeans are around 2 cents lower and wheat futures are 1 to 4 cents higher. Cattle and hog futures are expected to open the week with a mixed tone. A lack of USDA data is likely to keep grain and livestock markets relatively quiet as traders aren't expected to add new positions amid the increasing uncertainty.


* Gov't shutdown continues. The U.S. government remains shuttered as Democrats and Republicans argue over spending. If anything, it appears both side have dug their heels in deeper, suggesting there is no end in sight to the government shutdown. House Speaker John Boehner said yesterday the U.S. is headed toward defaulting on its debt obligations, suggesting this battle will last through Oct. 17, when the proverbial debt ceiling is hit. The ongoing government shutdown is starting to cause a little more risk aversion in the financial markets, but that hasn't transferred to the grain markets -- yet. The longer the shutdown lingers, however, the greater the odds investors in all risky assets will get jittery and divert risk.

The long and short of it: With no end in sight to the government shutdown, there is virtually no chance USDA will be prepared to release its Crop Production and Supply & Demand Reports on Friday. And until the shutdown ends, there won't be an official announcement on a rescheduling date.

* Rains halt harvest. Cool, wet conditions halted harvest activity across much of the Corn Belt over the weekend. While harvest activity picked up early last week, the harvest pace remains behind normal. Unfortunately, the government shutdown will preclude USDA from releasing and progress or crop condition data this afternoon. This week's forecasts calls for warmer and drier conditions, though there is another rain chance by the weekend. But it will likely take several days before producers can return to fields, even with improved weather.

The long and short of it: The slower-than-normal harvest pace continues. In addition to the rains, some producers are waiting on crops to mature while others are hoping for a killing frost to dry down crops.

* Weather woes supporting wheat. Excessive fall rainfall through Russia and Ukraine is slowing winter wheat planting efforts, which is supporting the wheat market. Winter wheat production estimates are on the decline, with private forecasters and the respective ag ministries already trimming forecasts. If you can't get the crop planted, it won't produce -- no matter what weather conditions are moving forward. Meanwhile, Canada is harvesting a record wheat crop, but quality is poorer than normal.

The long and short of it: Global supply concerns are supporting wheat futures as traders sense this will push more demand toward U.S. wheat. But bullish news must be fed to the market on a regular basis to extend the corrective price recovery.


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