Forgive us the pun, but when it comes to commodity markets being threatened by the latest fiscal crisis in Washington, dairy futures always seem to be front and center. A few months ago it was the “Dairy Cliff” coinciding with the fiscal cliff. This time around, with the sequestration looming, dairy (along with cattle and hogs) may be facing disruptions again. Futures Magazine has the CME press release:

As the CME Live Cattle contract utilizes USDA grading/inspection in the delivery process, a furlough of USDA staff may require the Exchange to modify in accordance with Exchange rules the current operational process around delivery/settlement of these products. In addition, CME Group’s cash-settled livestock and dairy products could also be impacted in the event the data used to compile these indexes is unavailable. Finally, CME Group’s spot call dairy markets could be impacted in the event USDA grading/inspection staff is unavailable effective on March 1, 2013.

The list of CME livestock and dairy contracts that may be impacted, include:

• Live Cattle futures Feb 2013 contract
• Lean Hog futures and options, April 2013 and subsequent contracts
• Feeder Cattle Futures, March 2013 and subsequent contracts
• Milk (Class III and IV), Butter, Cheese, Non-Fat Dry Milk, and Whey March 2013 and subsequent contracts
• Spot Call (Butter, Cheese and Non-Fat Dry Milk), March 1 and subsequent trading days

As we pointed out last time, dairy futures are rather thinly-traded, and a part of just a single CTA that we know of. But we know several ag programs who delve into hog and cattle futures, and as with the last manufactured crisis coming out of the Beltway, this isn’t just an issue for traders. Futures trading disruptions can have reverberations that effect farmers, meat packers, grocers, and eventually, consumers. Last time the “Dairy Cliff” fears came to nothing in the end… here’s hoping the latest round of Washington theatrics follows the same pattern.