The 2019 Government Shutdown Increased Uncertainty in Major Agricultural Commodity Markets

In January 2019, a government shutdown prevented the U.S. Department of Agriculture from publishing information about the situation and outlook for major U.S. agricultural commodities. We show that, as a result, Chicago Mercantile Exchange Board of Trade markets for corn and soybeans experienced heightened market uncertainty, elevating the cost of hedging. We use historical options data to estimate that the shutdown and publication delay increased the price of hedging, according to two different approaches. If the January 2019 report had been released on time and it had the impact of a normal report at that time of year, ATM corn options would have been 7% ( 6.1% - 8.2%) cheaper, while the price of soybean options would have fallen by 31% (24% - 35%). If the report had instead generated the same IV reduction as the makeup February 2019 publication did, it would have reduced ATM corn and soybean hedging costs by about 22% and 43%, respectively.