The current government shutdown has no end in sight, and the lack of data from USDA and other government agencies has left the markets without a crucial, reliable source of information they normally depend on. The conventional wisdom is that markets will tend to trade in a tighter range when presented with a lack of information.
To challenge that assumption, we examined price movement of March contracts during the government shutdown that occurred from December 22, 2018 to January 25, 2019 and compared it to the same period during 2017-2018 a year prior.
The average daily change in prices was slightly higher for corn and soybeans during the shutdown rather than the year prior, although the difference was only .92 cents for corn and 1.62 cents for soybeans. Wheat was .3 cents less compared to the pre-shutdown year.
Price changes over the entire length of the shutdown were also mixed across commodities. Corn traded the same over both periods, with soybeans making higher gains during the shutdown year, and wheat less compared to the year prior. Soybeans should be considered a bit of an outlier due to the price being impacted by developments with the first China trade war at this time.
We also examined the average daily volume of trades that occurred over this time. Both corn and soybean trading volumes were significantly lower during the shutdown from the year prior, with soybeans seeing just over a 50% decline in the average volume during the shutdown. This suggests less liquidity in the market as traders were less likely to make moves during the shutdown.
Overall, our findings indicate that price volatility and direction is not directly impacted by a shutdown, but the activity levels of traders do drop substantially. This lack of movement and fresh data makes the next WASDE report to be released of even more importance, as the potential for large changes in supply and demand expectations between reports increases the longer data collection and reporting is delayed.
