With the lapse of government funding on October 1, the USDA had to shut its doors, forcing the department to discontinue updating prices for pigs in the cash market, which has caused an upheaval in the livestock market.
Cash and futures markets use the USDA quotes as a reference point for trading. A lack of pricing means that the US’s largest meat manufacturers, Tyson Foods and Cargill — as well as the farmers and ranchers who sell to these companies — have no way of knowing how much they should be paying for pigs. Both companies have been looking to Urner Barry, New Jersey-based market-research firm, for similar information.
Tyson and Cargill have presented farmers and ranchers with two options: either directly determine a price with the company, or use Urner Barry’s formula to calculate a price. But due to the USDA’s interrupted data stream, many traders are fearful of trading, causing trading volumes to decrease; after the shutdown, trading volumes in lean-hog futures dropped 40%.
Sixteen days in to the government shutdown, Obama signed a bill into law that ended the it. However, it will take the USDA, meatpackers, and farmers and ranchers a period of time to recover from the dearth of information.
October 17, 2013
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