‘Shutdown Shenanigans’ Could be Big Negatives for Grain Markets and U.S. Credit Ratings
Effort to Prevent Shutdown 092823
As politicians debate spending levels and funding to Ukraine, the potential for a U.S. government shutdown looms ever larger.
Without a reprieve, the shutdown will go into effect at 12:01 a.m., Sunday, Oct. 1, at which point there will be a lapse in funding and all so-called nonessential government functions will stop.
Crop Production And Progress Reports
If Congress is unable to pass a stopgap funding measure or approve funding for the next fiscal year between now and then, farmers will likely be impacted in a variety of ways near-term.
“First and foremost, it probably means we don't have an October crop report,” says Chip Nellinger, marketing analyst and owner of Blue Reef Agri-Marketing Risk Management.
Without a quick resolution, there likely would be no World Agricultural Supply & Demand Estimates (WASDE) report on Oct. 12. Various other crop production and progress reports would also be suspended.
“That's going to be a real negative to the grain markets,” Nellinger told AgDay TV’s Clinton Griffiths on Thursday. “So all those government reports, the weekly export sales reports, you know, even some of the meat reports, those grind to a standstill. And typically, when there's a lack of news or no news from that standpoint, it's bad news to markets. Usually it means that we've got some selling pressure ahead.”
Could U.S. Credit Ratings Take Another Hit?
If a U.S. government shutdown goes into effect this weekend, it would be the seventh such event. There have been six partial or full government shutdowns since 1990, according to Reuters. While some were resolved in less than a week, the most recent one in late 2018 and early 2019 lasted over a month.
“You get less supply of treasuries being offered because of the shutdown, similar to what happened when we had the debt cap discussion a few months back,” says Alan Brugler, marketing analyst and advisor and president of Brugler Marketing & Management.
“That could actually lower interest rates short-term, although as Moody's pointed out, these financial shenanigans ultimately hurt credit ratings for the United States,” Brugler adds.
Moody’s is the only one of the three major credit rating agencies to assign the United States an outstanding rating of AAA. The other two, Standard and Poor’s and Fitch Ratings, put the U.S. credit rating at AA+.
For more on this developing story, check out today's news report from AgDay TV’s Clinton Griffiths.
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