NORMAN — The lack of agreement between our politicians and the subsequent lack of federal government data collection due to the shutdown has already impacted livestock markets, according to Dr. Darrell Peel with Oklahoma State University. The impacts will grow exponentially if the situation persists for many more days.
The most significant initial impacts are on business arrangements that base beef and cattle transactions on USDA price reports. While the “last available data” suffices for a few days, it becomes less and less valid with more time.
Agricultural markets rely, to a much greater extent than most industries, on publically supported data collection and dissemination and for very good reason: there is tremendous public value in assuring smoothly functioning agricultural markets and reliable food supplies.
For the cattle market broadly, the impacts have not been too severe so far but will grow dramatically in the coming days. Not having the flow of daily and weekly data is like driving with no headlights into the blackness of twilight.
Price determination becomes more uncertain, and price discovery becomes more labored and inefficient in the growing vacuum of market information. The impacts of no data are many and widespread.
Without price reports, cow-calf producers are uncertain of the value and market trends for calves; stocker producers cannot assess cattle markets to plan stocker purchases for winter grazing. Futures prices become less reliable and likely more volatile.
Cash-settled contracts, like the Feeder Cattle futures, will be unable to terminate properly without market reports. The lack of daily and weekly slaughter data makes it impossible to assess the impacts of withdrawing Zilmax from the market, or to assess indications of herd expansion with cow and heifer slaughter.
The monthly Cattle on Feed report may be delayed, canceled or decreased in accuracy, even if the shutdown is over before the release date because it is based on surveys that should be in progress at the current time. There are many more current examples, and many more will arise if the situation persists.
Mexican cattle export data is reported on an annual cycle, a “crop year,” if you will, from September through August. The latest Mexican cattle export data through August 2013 shows a 12-month export total of about 800,000 head of cattle exports from Mexico to the U.S.
This is down 47 percent from the previous annual cycle. U.S. data confirms that the year-to-date pace of cattle imports implies a similar calendar year total. Of course, the previous year was the second largest ever, but the recent total is also 17 percent below the 2004-2010 annual average in the Mexican data.
Fewer cattle are coming to the U.S. from all of the key exporting states in Mexico compared to last year’s elevated levels. Several states are down, not only from last year, but also are below long-term average levels indicating the drawdown in cattle inventories in those states, which include Chihuahua, Coahuila, Nuevo Leon, Sinaloa, Tamaulipas, Veracruz and Zacatecas.
Two important exporting states, Durango and Sonora, whose exports were down in the 12-month period, were still exporting at levels higher than the long-term average. However, the long-term average in Durango reflects several years of reduced exports due to disease restrictions.
In general, the drop in Mexican cattle exports to the U.S. reflects an overall shortage of cattle inventories in the country as well as demand for cattle in Mexico to maintain domestic beef production.
Heath Herje is an agriculture educator with Cleveland County Cooperative Extension service.