A weather market is starting to rain money at the Chicago Board of Trade.
Through the first six months of the year, grain traders endured long, boring stretches in the pits as prices drifted down to some of the lowest levels in memory. Last week, that changed in a hurry after much-anticipated rains failed to materialize across key Midwest growing areas.
The upshot: The sort of busy markets that bring riches to exchange members who ride the ups and downs.
“It’s been pretty volatile,” noted veteran grain analyst Conrad Leslie. “It’s good for traders.”
Last week, volume in the Board of Trade’s agricultural futures and options averaged 414,575 contracts per day. That’s up from average daily volume of 332,328 contracts in July, which, in turn, was up sharply from the same month a year earlier.
More busy days could be coming, especially in the wake of a key government report, due Thursday, which will include estimates for corn, soybean and wheat production.
And even more than any government report, the weather will rule. “All we can do is remain alert to conditions day-by-day,” Leslie noted.
That can translate into opportunity for traders. On Monday, prices opened lower, then turned higher amid conflicting views on the impact of widespread showers over the weekend.
The rains provided some relief to crops in Illinois and elsewhere, but no one’s sure how much. Some say so much damage is done, only heavy rains could prevent more.
To be sure, Illinois farmers have sounded the alarm lately, saying their crops have suffered, and griping about what they consider unrealistically low prices. Traders had been discounting those complaints because growing conditions were so good–until recently.
Thanks, anyway: For more than a year, the London International Financial Futures Exchange pushed the Commodity Futures Trading Commission to allow its trading screens into the U.S.
Last week, just days after the CFTC caved in, the Londoners inked a deal with the Chicago Mercantile Exchange that appears to reduce the importance of their regulatory triumph.
Under a partnership arrangement, members of both exchanges will be able to trade each other’s flagship short-term interest-rate contracts over either the LIFFE Connect system or the Merc Globex2 system.
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While LIFFE’s black box will match so-called spread trades of Merc Eurodollar and LIFFE Euribor contracts, members can get access through either system.
The kicker, of course, is that Globex2 already has CFTC approval to trade in the States. Still, LIFFE is pleased that it cleared the regulatory hurdle, a spokesman said, because it plans to market its terminals to non-Merc members and to those interested in trading other contracts besides short-term rates.
On top down under: Even as the major U.S. exchanges mull plans to dump their member-run governance, become for-profit and launch public offerings, the Australians may be showing the way.
Last week, the Sydney Futures Exchange agreed to sell a 50 percent stake to a publicly traded technology company, Computershare Ltd., for $84.4 million.
Insiders say that deal provided enough up-front cash so that Sydney members will agree to demutualize, giving up their membership rights while retaining their remaining equity. Once that’s accomplished, a public offering could follow, and the 50 percent ownership stake held by members could yield even more cash.
Meantime, the shouting and waving of Sydney’s traditional open-outcry trading floor is almost a relic. The exchange is on track with its plan to shut down the floor and go all-electronic around Oct. 1, a spokesman said.