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Senior Contributor

OptionEye....June 19th

Good morning.

 

There is no top! Corn up 13. Soybeans up 29 and Wheat up 13 as well. These should be exciting times but down here on the exchange floor it is eerily quiet. With the advent of electronic trading there is no 'open' and 'close' any more as we are already open and the market doesn't really close. Yesterday we had a blow off high and it was like a Christmas trading session. If it wasn't for the noise from the options pits you could have heard a pin drop.

 

In the timeline of trading I am old. My father started in 1962 and up until he retired in 2001 the business had changed a little but in no way resembles what we have today. In 2007 we introduced the electronic pit and since then we have seen rapid change. The economy has had something to do with it as well bringing new money to our shores in the hopes of returns the equities and bonds don't give anymore.

 

All in all I think the changes have been a good thing. Better trade certainty and faster service. The downside has been the way the quants have changed pricing and volatility but I still think we are in our infancy and those things will get sorted out by the market.

 

Do you think your business has seen the same pace of change?

 

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5 Replies
Senior Contributor

Re: OptionEye....June 19th

I think going from around the $2/bu mark in corn to $6/bu has had some changes to farming.   Both good and bad.  

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Senior Contributor

Re: OptionEye....June 19th

Not sure about the pace but I am old enough to have driven horses to help with farm work as a boy.

And last week I was passing a field and noticed a tractor working at scuffling edible beans, the 'operator' was out in the field beside the still moving tractor checking something. He them walked back over and climbed into the still moving tractor while I passed by.

I used to have to try to stay awake so i could stay on the rows when I did that.

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Contributor

Re: OptionEye....June 19th

What fireworks do you expect in July corn?

 

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Veteran Advisor

Re: OptionEye....June 19th

Scott,

 

I think you bring up one of the biggest questions to be asked this year in ag marketing. How has the farmer's business changed with the new markets? I'm curious what the answer to that question is as well. I'm guessing this thread will bring a variety of answers. But, I think the real answer is it's too early to tell. Or, folks don't even know yet that that will be a question they will be forced to answer this year. Why? It's the old thing of "they don't know what they don't know." Let me zero-in on this thought and give this example.

Last year, an insurance agent told me he wasn't on Facebook, didn't know why he should be, had no interest to be. Months later he was asking curiously about how you start a Facebook page, what you put on it and how often you post or visit the page. Even later in the year, he admitted he started a Facebook page for his agency. He couldn't believe the response he was getting from prospective, young clients looking for insurance coverage. Further, he started to get so much business that he considered hiring more office help to monitor the social networking-based business. He couldn't believe people wanted to buy insurance coverage, over the internet, and not come into the office and shake hands. In fact, he said to me, "Mike, I may never meet some of these people."

The point is, he didn't know what he didn't know, when he was asking why have a Facebook page. I should say, despite the surprising response, I don't think he still believes this is how you should do business. But, regardless, his business has changed.

 

I don't know how the farmer's marketing business will change. But, if you tighten down the slots of a hog feeder, less corn comes out and the hog figures out that something is different. Ultimately, the hog's pattern of eating will change. He might have to come to the feeder more often each day, vs. belllying up like he did in the past.

 

Placing corn or soybean sales by calling to the floor changed a long time ago. Then you had a lot of key trading on the open and close. Now, that is changing. It seems like the "hog feeder slots keep getting tightened down", creating more changes in the ag marketing sector.

 

At this point, farmers reading this are saying yeah but I don't use the 'board' directly. And that may be true. But, the person that you place your order with, sell your physical crop to, etc. does have to figure out the trends, patterns, habits and mechanics of this new electronic, extended hours, nearly 24-hour commodity trading environment.

 

Thanks for sharing,

 

Mike

 

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Senior Advisor

Re: OptionEye....June 19th

IMO there has been a revolution in IT. Much more important than any action in the pits.

 

There was a situation a few years back when I recieved the temperature reading in a field from Argentina (below freezing) before noon the same day from a contact of the person that is one of my main information hubs that has contacts from all over the world. It was two days before the info became common knowledge to insiders (traders, analysts and the like). I know what is going on in Ukraine and elsewhere. 20 years ago this info drifted to the top if it was major and widespread, but too late to incorporate it into a marketing plan that could capitalize on a trend like that. Cargill's teletypes were the best information and far in advance of what a farmer could know.

 

In other words, the information gap between buyers and sellers, globally, has closed. The same IT has affected all fields but, closing the time gap on information in marketing is HUGE. Grain has always been global but, not information. Most other facets of farming have been bigger, better, faster but, didn't change the information issue until now.