BROOKINGS, S.D. - The recent federal shutdown has affected two of South Dakota's largest cattle markets - the calf and feeder markets - explained Matthew Diersen, Professor and SDSU Extension Risk Management Specialist.
"In South Dakota livestock markets are usually well-functioning with good price coverage, however the federal shutdown has affected the calf and feeder-weight cattle segments hampering routine price discovery and the ability to transfer risk," Diersen said. "These markets are the largest livestock sector in terms of economics and the number of producers affected by price changes."
He explained that prices for calves and feeder cattle are normally monitored and reported by the U.S. Dept. of Agriculture's Agricultural Marketing Service (USDA AMS). However, with the shutdown, the market reporters were furloughed.
The AMS reports prices for fed cattle, swine, forages and many other crops.
"The prices are compiled into state and national price series and monitored and used by sellers and buyers seeking a fair value," Diersen said. "A key series affected is the Chicago Mercantile Exchange's (CME) feeder cattle index, which is a weighted average of AMS prices."
Diersen further explained that series is used as the settlement price for feeder cattle futures contracts. He added that the CME Group has issued several statements regarding their contingency plans for the index and settlement of feeder cattle and other livestock contracts.
"So, what are cattle worth this week? That is more difficult to answer," he said.
With these trusted sources temporarily shut down, Diersen said one could scour the Internet, call around, and try to watch and read the details of cattle traded at the dozens of auctions in South Dakota.
"Then, you would need a network to do that in the other states with cattle. And you would need to try to exclude from your view any cattle that are too big, too small, too thin, too heavy, too fancy or with any feature different from the quality grade used in past valuations," Diersen said.
Livestock Risk Protection Part of Shutdown
One would also observe this week that feeder cattle are being valued at all-time high levels. Thus, for anyone considering selling cattle in the future, Diersen said those values have risen also.
"That leads to a second problem," he said. "Without knowing with some certainty what ending price would be used to settle a futures or options contract, potential sellers may not be as willing to price or protect cattle."