“It’s a little eerie coming up here now,” said a senior Minneapolis Grain Exchange official to me as we came out yesterday onto the viewing balcony above the exchange’s trading floor.
The prices that hard red spring wheat and all the other ag commodities at other exchanges are trading for were flickering and changing as the market moved, and on Monday that meant most were going up. That wasn’t what was eerie. What was eerie was the fact that thousands of contracts were being traded through the exchange yesterday, but there was no one down on the trading floor. The lights were off. The old futures trading pits were empty, the booths where traders’ orders came in were all sitting vacant, and all the tables on the south side of the long trading floor – where the cash market operated for decades – were all clear and unused.Â
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The exchange, like Winnipeg’s, went all-electronic a while ago, and the trading floor now exists in the ether, not here in the MGEX’s east building. I remember being down on the trading floor a couple of years ago, chatting with a few traders and seeing up close the workings of the famous Minneapolis market. Now it’s all a matter of stats and numbers changing on webpages.
The same thing happened to the cash market years ago. Traders – hundreds of them – used to meet here on the floor of the exchange to bid on samples of grain from elevators and rail cars across the Midwest and west. But the commercial grain trading system changed, moved to phone lines and long term commercial relationships, and the function of the Minneapolis cash market began to evaporate. Until a few years ago a couple of cash grain traders would still show up at the MGEX and check out samples of rail car loads that were sitting down at the terminals here. Like the futures and options floor traders, those traders now work out of offices and over phone lines and across the internet.
But, just like the futures biz, the cash market is bigger than ever, and like the futures market, still public to a degree. Everyone can see what futures are trading for minute-by-minute. The cash market is not as visible, but farmers can still see what grain is roughly trading for. The USDA records cash grain sales from across the U.S. farm belt and posts them every day. It doesn’t reveal the details of individual sales and generally offers local daily averages, but farmers still get a sense of what grain in their and other areas is selling for. And the MGEX posts all of this on its website as part of its public price discovery role. The futures market relies on a tight connection between real-world cash prices and the futures market and the futures traders and commercial futures users watch the cash prices closely to ensure convergence is occurring and proper relationships exist.
The floor’s silent here, but the information is still public and easily accessible. It’s eerie to see the empty trading floor and draws pangs of nostalgia from those who’ve been down there, but for farmers, the market’s still functioning as it was designed to do, offering an honest and up-front price for grain that farmers can use to keep their buyers honest.
