Grain traders in Chicago and beyond breathed easier on Tuesday morning after the world's premier market for corn, wheat and soybean futures weathered its first trading session with the "live" release of a major federal crop report.
Heading into Tuesday's trade, big farm groups had feared a surge in volatility that could favor lightning-fast hedge funds over farmers after the CME Group extended the trading cycle at its Chicago Board of Trade to overlap the U.S. Department of Agriculture's key early morning reports.
Analysts long accustomed to a two-hour break between overnight trade and CBOT floor dealing fretted that they couldn't offer sound advice.
Even technologically sophisticated players had back-up plans: Citigroup's commodities team sent four commercial brokers down to the floor before the report came out, hours earlier than normal, positioning them to place complicated trades in person.
"Just in case things go wrong," said Terry Reilly, a senior agricultural futures analyst at Citigroup.
For weeks, grain brokers, traders and marketers have been honing spreadsheets and trying to calm clients about the U.S. Department of Agriculture's all-important monthly report coming out at 7:30 a.m. Central time (8: 30 a.m. EDT, 1230 GMT) -- the first release ever during active trading of Chicago futures.
It helped, say brokers, that Tuesday's report held little news to rile the market. After its release, corn prices whipped briefly higher, then tumbled, trading in a 25-cent range, about a 4 percent swing. Within four minutes the market had found its footing, with prices marginally lower.
Wheat and soybeans reacted similarly, but then drifted lower, pressured more by rain forecasts than U.S. data.
About 6,400 lots of July corn changed hands in the five minutes following the report, about equal to the busiest periods of floor trading in recent months -- although much less than during the most frenetic USDA report days, when trades would remain pent up until the 9:30 a.m. CDT (10: 30 a.m. EDT, 1430 GMT) open.
CRASHING OR NOT
Before the world's premier grains exchange moved to nearly around-the-clock trading last month, farmers, brokers and traders everywhere had a full two hours to parse thousands of USDA data points while trading was halted.
On Tuesday, nerves ran high. If grain markets went "haywire" following the U.S. government's latest crop report, some agricultural industry heavyweights said they were prepared to call Congress before they called their brokers.
As the morning sun hovered low in the sky, bets swirled across the floor of the Chicago Board of Trade that the USDA site would crash. It didn't. But it took some traders up to 20 minutes to access the full World Agricultural Supply and Demand Estimates report from the USDA website, due to the surge in demand for the data.
Six blocks away, the office phones rang steadily on the 24th floor where Citigroup's Chicago commodities team works. Reilly and fellow analyst Sterling Smith huddled over a speaker in a conference call with a meteorologist.
Both men were weary. The night before, they had stayed late, double-checking reports and pre-writing what they could for client notes. This morning, they came in early, trying to prepare for the unknown.
The scientist told them that weather patterns were holding in the Midwest, with little change in computerized forecast models for North America. He paused, and asked the men if they were ready for the report.
"As best as we can," Smith said.
"Good luck, guys," the scientist said.
Smith sighed and turned back to his keyboard.
The clock ticked down.
The dawn of nearly round-the-clock trading has pulled the world's leading grains trade into the modern era and shaken the culture of traditional pit trading at the Chicago Board of Trade and its counterparts in Kansas City and Minneapolis.
While other markets such as oil and fixed income have long grappled with "live" data, the more end-user sensitive grain trade has avoided the frantic periods in which humans vie with computers to make split-second trading decisions. Almost all major U.S. agricultural data was released when the CBOT was shut.
Tuesday's trading activity will help determine what recommendations the Farm Bureau, National Farmers Union, and National Grain and Feed Association submit to the USDA regarding the timing of future reports, which is now under debate.
The American Farm Bureau Federation will consider asking members of Congress to get involved in determining when USDA should issue its reports if volatility surges, said Kelli Ludlum, director of congressional relations for the Farm Bureau.
The USDA is collecting feedback on when to release crop reports because last month, the CBOT, which dominates agricultural markets, and rival IntercontinentalExchange expanded the trading day.
The National Grain and Feed Association and others have pushed the exchanges to halt trading for USDA reports so market participants have time to review the data thoroughly.
Yet, it is clear the markets are going to be open when the reports are released, the USDA's chief economist said last week. He said the reports will likely be issued later in the day, when higher volume can help minimize the impact of new data on the markets.
P.J. Quaid, an independent broker in the corn options pit, arrived on the CBOT floor at 6:35 a.m. to prepare for the USDA's first live release. In the past, he'd stroll into the building around 7:20 a.m. and take his time reading the report during the two hours the markets were closed.
Some traders skipped their routine of having breakfast at Ceres, the restaurant named after the Roman goddess of grain that is located in the CBOT building, to be on the trading floor in time.
As the moment for the report approached, a shushing sound spread across the room. Scores of traders crowded in the corn options pit, craning their heads toward an electronic screen attached to a nearby pole that listed key numbers from the report.
One number Quaid wanted to see -- inventories of corn left over from the last harvest -- was not listed. Unwilling to leave his perch, Quaid did the only thing he could: He used his iPhone to surf through Twitter to track down the key figure.
Steps away, in the aisles of trading desks, brokers fielded calls from customers. Normally, the clients would want their analysis of the USDA data. But on Tuesday morning, some were rushing to place orders -- even before they had fully digested the report for themselves.
Glen Hollander, a third-generation grain merchant at Chicago-based Hollander & Feuerhaken, dialed his biggest client five minutes after the release of the report to discuss the data, but drew a rebuff because trading was going on.
"He told me to call him back a little later," Hollander said, with a laugh. "I'm obsolete."