These changes have some major implications for both farmers selling grain on the board, as well as the brokers and companies -- large and small -- buying and selling both cash grain and futures contracts. Now, many players in the market say that a lot more than just historical market fundamentals now play a larger role in the trade, which will likely see even more volatility than it does now because of the latest changes.
With word that the CME Group's open outcry session will begin at 7:20 AM Central Time on days when USDA releases its major monthly crop production and grain stocks reports at 7:30 AM, it makes crucial the first seconds after those reports' release, says Johnston, Iowa-based AgTraderTalk.com market analyst and trader Kevin Penner.
"By 7:30:01 AM, the algorithm traders and headline-readers will have already taken position," he says. "7:31 will be too late and by 7:35, it will be old news even though normal traders still haven't read through page 1."
But, just because a broker or clearing house can make an instantaneous decision based on a scenario painted by a combination of USDA data and an algorithm created before that data's released doesn't necessarily mean it will be the right decision, adds Don Roose, market analyst and trader with U.S. Commodities in West Des Moines, Iowa.
"There will be people who run at it and die," he says. "They may take quick action, the numbers may be misinterpreted and by the end of the day the trade will level it out."
This latest round of changes at the CME Group go a few steps further in a trend that's been underway for the last few years. Rather than a fundamental commodity, many market-players will see the grains as an asset for valuation in a larger portfolio, Penner says.
"Grains now seem to be an asset that hedge funds and other investments can attempt to buy and profit from. Whereas in the past the exchange was mostly used by commercials as a means of hedging now it’s more like an online casino where big fund money can try and buy low and sell high (or sell high and buy it back lower)," he says. "The power that this big money has to move the market in a manner totally unrelated to weather or supply/demand is unnerving."
The latest change in an evolving market
This week's adjustments to trading session hours (both open outcry and electronic) are just the latest in a trading environment that's changed quite a bit over the last decade. Just a few years ago, a daily swing in the cash corn price of 2 or 3 cents, for example, meant a lot. Today, that's nothing, says Agriculture.com Marketing Talk senior contributor Canuck_2.
