With U.S. government shut, private data providers step in

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When the U.S. Department of Agriculture went dark this week due to the partial government shutdown, phones lit up at commodities firm Urner Barry.

The USDA typically provides quotes on beef, pork and chicken prices, but 156-year-old New Jersey-based Urner Barry quickly became the go-to source for livestock traders searching for market quotes.

"It's certainly been more active around here," said Jim Kenny, director of business development for the firm.

Urner Barry is not alone. The shutdown has elevated the profiles of companies that sell data similar to that which the government normally provides and boosted their subscriber lists.

Market participants are scrambling to find reliable sources for information that can make a difference between profit and loss as they bring corn, beans, or cattle to market.

The shutdown is shedding light on the quality of privately-produced data and giving some providers a chance to position themselves as substitutes for the taxpayer-financed variety.

The phenomenon has affected more than just the commodities sector. Financial markets, which rely on government reports including unemployment, were adjusting to a constrained information flow this week. The shortfall put the investor spotlight on vendors such as Automatic Data Processing, which produces a private-sector version of the Bureau of Labor Statistics' monthly jobs report.

The Labor Department on Thursday delayed its employment report for September due to the shutdown and said a new release date had not yet been set.

The agricultural markets stand alone, though, in their reliance on a steady stream of government data, some of it published on a daily basis. Daily USDA market reports are used by meat packers to determine how much they pay livestock producers for their cattle and hogs. They are among thousands of government reports issued in varying frequencies, among them estimates on planted crops, estimated yields, harvested acres and livestock being fattened for slaughter.

Agencies suspended many of their data releases after the shutdown began on Tuesday when lawmakers failed to settle a dispute in which Republicans are demanding the dismantling of President Barack Obama's signature healthcare law.

Thursday came and went without previously scheduled USDA data on weekly export sales, and the U.S. Commodity Futures Trading Commission did not issue weekly data on Friday detailing positions held in commodity markets.

NO SUBSTITUTE

The companies stepping into the government data void tout vast reservoirs of pricing information and industry contacts as selling points for their services. However accomplished they may be, none are considered as definitive as the government reports.

The U.S. Grains Council, which promotes U.S. grain exports, follows private data from firms like Informa Economics and Pro Exporter even under normal conditions as a way to stay on top of crop production forecasts. There is still no substitute for the breadth and depth of USDA data, said Thomas Sleight, president of the council.

Food companies and grain traders are coming to terms with the fact that the shutdown will likely delay the release of key USDA report scheduled for October 11, which was set to detail crop production and supply and demand numbers.

Creation of the report, which affects prices of grains and other agricultural commodities around the world, starts at the farm level with USDA workers taking two full weeks to survey growers and inspect crops in thousands of fields.

"We have to always recognize the efforts and assets that they (USDA) apply to this question," Sleight said about the size of the U.S. harvest. "That's going to be hard to replicate."

The October 11 report was considered key because foreign grain buyers are eager to learn the size of the 2013 U.S. corn harvest after a devastating drought slashed output last year, he said. A wet spring in 2013 delayed planting in many areas, pushing back the start of the harvest and keeping the crop's size uncertain.

Private data, including reports on crop yields around the country, can fill the government void somewhat, said Bill Tierney, chief economist for AgResource Company and a former USDA grains economist.

Tierney compared the experience of relying solely on private agricultural data to trying to cross a room filled with furniture. "Without the USDA, you've turned down the illumination considerably, but you're not in the dark," he said.

CONTINGENCY PLANS

Some private forecasters are limited in their ability to take advantage of the government shutdown because they rely on USDA data as a key source for their databases.

Crop forecaster Lanworth typically uses satellite services provided by the U.S. government to estimate crop production around the world.

With U.S. data feeds interrupted, Lanworth this week began using European weather outlooks and satellite data, President Nick Kouchoukos said. European data is comparable to U.S. data in scope and quality, but U.S. data is Lanworth's standard. The shift from one to another is time consuming because it introduces another set of data into the firm's modeling, he said.

"We have been profoundly affected just in terms of efficiency and standards," Kouchoukos said about the shutdown. "We like every one else are eager to get our regular data back."

Lanworth is a brand of Thomson Reuters Commodities Research and Forecasts.

SEEKING AN EDGE

In the livestock sector, top U.S. meat packer Tyson Foods Inc (TSN.N) said it plans to start using Urner Barry hog data to determine prices on Monday because USDA figures are unavailable.

A competing information provider, Cattle Fax, expects an increase in demand for its reports on the beef industry if the shutdown persists, senior market analyst Kevin Good said. The member-owned organization, formed by cattlemen in 1968, claims to have the largest private database of beef data in the country.

"Service providers like Urner Barry and Cattle Fax are both having a hay day with the government shutdown," said Shane Johnson, a marketing consultant for brokerage Hurley and Associates, in a note to clients on Friday. "At least somebody's enjoying it!"


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