Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. You know, Tracy,
Speaker 1: I think we tooked a few weeks ago, on maybe
Speaker 1: a month ago. I lose track of the time about
Speaker 1: how there wasn't very much volatility in markets these days
Speaker 1: and it was kind of a source of frustration for
Speaker 1: markets journalists. Yeah, we talked about that a lot, I feel, yeah,
Speaker 1: you know, we're always talking about it internally. I forget
Speaker 1: which episode it brought it up on. Maybe there's a
Speaker 1: little bit of market volatility picked up, but it's still
Speaker 1: kind of a big issue that, you know, where is
Speaker 1: the volatility? It's very boring. Are you going to tell
Speaker 1: me that you've actually found some volatility in the market. Yes, Tracy,
Speaker 1: I have some great news for you. I have found
Speaker 1: the volatility in the market. I have found a corner
Speaker 1: of the market that is not boring at all, that
Speaker 1: is thrilling every day. And not only that, it's not
Speaker 1: even that obscure, it's actually one of the it's a
Speaker 1: crucial market for the entire Really, part of me doesn't
Speaker 1: want to ask because I think it will be really obscure,
Speaker 1: But Okay, what is it. No, it's not obscure. I'm
Speaker 1: not gonna like site like, you know, the spread between
Speaker 1: Norwegian frozen salmon and Norwegian fresh salmon or anything anything
Speaker 1: like this. Uh No, the answer is the grains market.
Speaker 1: All right, you said it wasn't obscure. Well, come on,
Speaker 1: grains are not obscure. I mean most people bread all
Speaker 1: the time, and cereal and uh you know, soft agricultural
Speaker 1: commodities are. Okay, I'm pretty important to most people. I
Speaker 1: know they're a big part of life. But I guess
Speaker 1: when people think about the market, they don't necessarily think
Speaker 1: about the commodities market, even though I suppose in fairness
Speaker 1: a lot of the current financial instruments that we have
Speaker 1: in markets actually developed from boies, right, like futures, I
Speaker 1: think we're originally commodities oriented. Every time you read about
Speaker 1: the history of futures markets, it starts with some made
Speaker 1: up story, some some fantasy story about the farmer plants
Speaker 1: the corn and wants the lock of the price and
Speaker 1: sells it to the speculator. You know, that's like, that's
Speaker 1: the classic description of how commodity futures work. And guess
Speaker 1: what that's exactly what we're gonna be talking about today,
Speaker 1: because the action in grains lately, particularly in wheat, but
Speaker 1: also sort soybeans and corn, has been very exciting and volatile,
Speaker 1: and if you like charts that go up and down
Speaker 1: very fast, you should be paying attention to grains. All right. Well,
Speaker 1: I've always had a soft spot for commodities, mostly because
Speaker 1: I'm amused by the notion of accidentally taking physical delivery
Speaker 1: of like a bushel of corn or something. But I'm
Speaker 1: looking forward to this episode because, as you say, we
Speaker 1: need a little bit of excitement in markets now exactly.
Speaker 1: And so today on the Outlaws podcast, we're going to
Speaker 1: be talking to Tommy Grisafi. He is a risk manager
Speaker 1: at Advanced Trading, which is a firm that helps players
Speaker 1: in the agricultural space farmers, grain elevator operators, hedge and
Speaker 1: manage their risks. So right, you know, basically right in
Speaker 1: this whole story of why the futures market exists, and
Speaker 1: in addition to that, he trades these futures himself. Tommy,
Speaker 1: thank you very much for joining us. Thank you, thank you, Joe.
Speaker 1: It's a pleasure to be here, and what exciting time
Speaker 1: in the agricultural space. I I was listening before, and yes,
Speaker 1: it's very boring time in commodities. It's been a rough
Speaker 1: go for commodity traders the last few years. Someone who
Speaker 1: trades gold or crude oil, it's just it's just not
Speaker 1: sexy like it used to be when I first met
Speaker 1: you on Twitter in O eight oh nine, and yeah,
Speaker 1: those were what I miss and I say, Corn's limit down.
Speaker 1: And you know, think about when the Fukushima accident happened
Speaker 1: in Japan, how crazy we were, and it's it's just changed,
Speaker 1: and there's a lot of reasons why it's changed. But
Speaker 1: you know, let's move forward. You know, you can't look back.
Speaker 1: All we have is where we are today, right right,
Speaker 1: and what we have today. You know, as you said
Speaker 1: that a lot of the markets aren't very sexy right
Speaker 1: now from a volatility perspective. But one market that is
Speaker 1: very sexy is the wheat market and that's been, uh,
Speaker 1: that's been going absolutely wildly. Yeah, for those of us
Speaker 1: who haven't For those of us who haven't been following
Speaker 1: the wheat market as much as we should, Tommy, can
Speaker 1: you give us a sort of high level overview of
Speaker 1: what's been happening. Sure, there's three wheat futures. There's one
Speaker 1: that Minneapolis Grain Exchange sets up in Minneapolis. There's the
Speaker 1: Kansas City Border Trade which was bought by the Semi Group,
Speaker 1: but it was in Kansas City. And then there's the
Speaker 1: Border Trade Wheat contract, which probably has the deepest, most
Speaker 1: liquid e but wheat snapped wheat. So I have a
Speaker 1: customer who grows wheat in North Dakota, it goes to
Speaker 1: North Dakota mill, gets put on a truck, and that
Speaker 1: truck brings that flour all the way to New York.
Speaker 1: And that's what that wheat up there is what's used
Speaker 1: in your pizza dough and your bagels that New York's
Speaker 1: famous for. And I'm sure we could all relate. It's
Speaker 1: also the high gluten wheat. So if you're into the
Speaker 1: gluten free, you're probably not eating much of that. So
Speaker 1: then you have your casey wheat that's your traditional breads
Speaker 1: and whatnot. And then you have your board of trade wheat,
Speaker 1: which would be like a cracker. And so wheat's not wheat.
Speaker 1: It's graded by proteins. And you'll you'll read tweets or
Speaker 1: you'll hear information they're bidding up protein and you may
Speaker 1: not have understood what that meant, but now you will. Oh.
Speaker 1: I always thought protein referred to the animal like a
Speaker 1: hog or cow. But when people say they're bidding a protein,
Speaker 1: it means that the wheat with the higher protein content
Speaker 1: that stuff up in Minneapolis is selling for premium. Exactly,
Speaker 1: it can trade for dollars over so currently, Uh, you know,
Speaker 1: weat a couple of dollars over the other weeks, and
Speaker 1: so there's people who spread all three weeks against each other.
Speaker 1: You could buy Minneapolis, sell the board. You could buy Many,
Speaker 1: sell Kansas City. You could sell many and buy the
Speaker 1: other two. And lots of combinations, lots of spreading going on,
Speaker 1: lots of lots of fun, and unfortunately it's it's been
Speaker 1: slow for quite a while. And that's how I ended
Speaker 1: up with this position that advanced trading was they said,
Speaker 1: I love the grains, I love the commodities. How can
Speaker 1: I go help people? I went down to the border
Speaker 1: trade on a high school field trip, and uh, if you,
Speaker 1: if you eat three meals a day, you're affected by
Speaker 1: agg How can I go educate the American farmer on
Speaker 1: how to better use these products? That's how you ended
Speaker 1: up in North Dakota. I realized, and this is important
Speaker 1: where you could use it in other segments of Bloomberg
Speaker 1: and Finances. That technology has changed. So when you talk
Speaker 1: about a stock like Montsano, Tommy, how are they how
Speaker 1: do you have a customer who's two miles from the
Speaker 1: North Dakota board North Canada border growing wheat and corn
Speaker 1: and beans. And so when these big crops come along
Speaker 1: and everyone's like where they come from, it's really due
Speaker 1: that to the recent technology and modern changes of the seed.
Speaker 1: And uh, it's just amazing, just absolutely amazing. I just
Speaker 1: want to say, Tracy, I've already learned so much on
Speaker 1: this episode if with I think about two minutes in,
Speaker 1: so this is great. I want to let's let's sort
Speaker 1: of break things down. So we started on a little
Speaker 1: bit about all the volatility lately. Let's back up for
Speaker 1: a second and then return to that later. You're a
Speaker 1: risk manager at Advanced Trading. You talked about how you
Speaker 1: go up to the Dakota's help farmers and stuff. That
Speaker 1: sounds like what I was talking about. That textbook story
Speaker 1: that they always tell about how the futures market serves farmers.
Speaker 1: Is that right? Tell us about what you do in
Speaker 1: that capacity, you know, Joe, you couldn't be more more
Speaker 1: on the money. And so the border trade in the
Speaker 1: Semi group and the Minneapolis Grain Exchange. The Minneapolis Grain
Speaker 1: Exchange was actually formed by members of the Cargill family.
Speaker 1: So you want to talk about old money, there you
Speaker 1: have it. I could send you a little tidbit, you know,
Speaker 1: for you to read. So the old days, a farmer
Speaker 1: would see the prices were higher, and they would put
Speaker 1: their wheat on a horse and buggy and bring it
Speaker 1: to Minneapolis, and by the time they got there, the
Speaker 1: market would collapse. They said, this just isn't right. They said,
Speaker 1: I wish we had something to determine the price of
Speaker 1: what it was in the future. And that's how futures
Speaker 1: market started in Chicago with corn, wheat and beans and butter.
Speaker 1: And you read, you know, those are the classic Jesse
Speaker 1: Livermore stories. When you read Reminiscence of a Stock Operator,
Speaker 1: anyone listening, you know, buy it on audio taper. Read
Speaker 1: the book. If you haven't, if you're involved in commodities,
Speaker 1: there's no way you haven't read that book. And it's
Speaker 1: the old school commodity trading. And uh, the futures markets
Speaker 1: are very They were very influential to the modern day
Speaker 1: stock market and very influential to the options market because
Speaker 1: they started trading options on futures before they started trading
Speaker 1: options on stocks, and that's how the Chicago Board of
Speaker 1: Options Exchange was started. But nonetheless, going to you original question,
Speaker 1: So I'm up in North Dakota where technology has changed.
Speaker 1: They have beautiful, uh, fertile dirt in the Red River Valley,
Speaker 1: which anyone who is snapped familiar with. There there's a
Speaker 1: red there's a river called the Red River. It flows north.
Speaker 1: It's one of only two rivers I believe in the
Speaker 1: world to flow from south to north. Then it goes
Speaker 1: up to Winnipeg. And so when you're in North Dakota
Speaker 1: and it rains, your water actually goes up to Canada
Speaker 1: if you're along the Red River. But this soil along
Speaker 1: the Red River Valley is so fertile. And technology changed
Speaker 1: over the last twenty years, and so did the climate.
Speaker 1: It started raining more up in the Dakotas. Not this year,
Speaker 1: but just in general it started raining more. And so
Speaker 1: you have this beautiful fertile soil, the seed that in
Speaker 1: the old days, Joe and Tracy you'd plan a corn
Speaker 1: seed and you needed about a hundred days for it
Speaker 1: to mature. They can have they have corn seed. Now
Speaker 1: that's seventy day corn seeds. So you plan it in
Speaker 1: the ground, seventy days later, the plants mature and you're
Speaker 1: harvesting it. So a lot's change in technology. So the
Speaker 1: folks up and from the Chicago border tre to Fargo,
Speaker 1: North Dakota seven and fifty miles, and those folks up
Speaker 1: there couldn't feel more removed from the price action at
Speaker 1: the Border Trade, the Semi Group and the Minneapolis Screen Exchange.
Speaker 1: And so I'm actually up there. I have a place
Speaker 1: up there now in office and a apartment, and I'm
Speaker 1: they're educating people like the old fashioned brokers used to
Speaker 1: do in the sixties and seventies and eighties and say, hey,
Speaker 1: this is a future. But what's neat is with these
Speaker 1: options they could actually manage your risk. And I'm not
Speaker 1: going to teach you guys anything about options. I know
Speaker 1: you know a lot about it. But the farmers felt
Speaker 1: removed from the exchange. But as you know, futures are
Speaker 1: electronic now, so there's no difference if I'm sitting in
Speaker 1: my home in Valparaiso, Indiana, or my office at the
Speaker 1: Border Trade or my office in North Dakota. A matter
Speaker 1: of fact, no one even knows where I am. I
Speaker 1: have on the big fancy computers with eight screens and
Speaker 1: the Cisco voice over IP phone. No one knows where
Speaker 1: you are. And so I'm up there educating people, showing
Speaker 1: them how to manage risks. Say, hey, I don't know
Speaker 1: why wheats going up a dollar a day, But did
Speaker 1: you know you could set the floor with a adoption?
Speaker 1: And so there's an education process no different than people
Speaker 1: who had to learn, you know, the stock market education
Speaker 1: with these options the last twenty years. Wait, temmy, I'm
Speaker 1: still thinking about you know, the classic story of the
Speaker 1: farmer who wants to kind of ensure his crop output.
Speaker 1: So when you come up with the futures contract for that,
Speaker 1: how do you get two sides of the trade. Like,
Speaker 1: surely all the farmers back then we're looking at the
Speaker 1: same information and they were all thinking, well, you know,
Speaker 1: there might be a drought next year, and so I
Speaker 1: want the following protection. Who's taking the other side of
Speaker 1: that trade? And what are they looking at that the
Speaker 1: farmers aren't sure? That's a great question. Are you talking
Speaker 1: about years ago or modern day trading now? Or well,
Speaker 1: I guess I'm curious about both, Like what was it
Speaker 1: like years ago and what's it like now? Well, it's
Speaker 1: much more fast paced now very hard with this electronic
Speaker 1: markets and high frequency trading. One thing the farmers missing
Speaker 1: is they see the market go up, and they always
Speaker 1: think they'll have time to sell it. The second thing
Speaker 1: is is the whole world super focused on the stock market?
Speaker 1: Because what the stock market do the recent a few weeks,
Speaker 1: or what's it do every day? When I watched Bloomberg,
Speaker 1: Dow Jones New highs, it just it's a NonStop machine.
Speaker 1: Maybe someday it'll go down, and maybe it'll go down hard,
Speaker 1: But today then every other day it seems like the
Speaker 1: headlines are Dow Jones New High. Commodity markets are different. Again,
Speaker 1: anyone who's eating three times a day is affected by egg.
Speaker 1: But America is not set up. They have high egg prices.
Speaker 1: And if you don't believe me, look what happened when
Speaker 1: corn went to eight dollars. It about put the dairy
Speaker 1: industry out of business, It about put the hog industry,
Speaker 1: the cattle industry, and and so America is set up
Speaker 1: to run on affordable food. Matter of fact, when you
Speaker 1: look at the farm bills, it's called the Affordable Food Act.
Speaker 1: So to your question, things move a lot different now.
Speaker 1: Fifty years ago they didn't have options. So as far
Speaker 1: as a bushel corn being four dollars and you being
Speaker 1: able to spend twenty cents on a corn, put that
Speaker 1: didn't exist if years ago. Now for twenty cents one
Speaker 1: thousand dollars, you can set that floor. You don't know
Speaker 1: how many bushels you're producing, but you can set that floor,
Speaker 1: and you have something an insurance policy from four to zero.
Speaker 1: And in the old days, people were selling futures and
Speaker 1: that's where the big nasty story started about did you
Speaker 1: hear about so and so he got caught in the
Speaker 1: futures market, and so that's where the big margin calls
Speaker 1: come from, and all the other legendary stories that we
Speaker 1: hear about. I think it's really interesting you mentioning technology,
Speaker 1: and I'm curious about how it changes the market in
Speaker 1: a couple of ways. So, I mean, I don't think
Speaker 1: people often think about that grands are sort of a
Speaker 1: product of technology, the idea that yields improve over time,
Speaker 1: the idea that, as you said, we can grow corn
Speaker 1: from seed to completion in a shorter period of time.
Speaker 1: That second aspect, the idea of being able to grow
Speaker 1: a crop more quickly, does that mean that supply becomes
Speaker 1: more sensitive to prices? In other words, we see if
Speaker 1: we see a big spike and say corn and soybean
Speaker 1: prices or big drop, that farmers can switch their crop
Speaker 1: to respond to those price signals faster than they could
Speaker 1: have in the old days when the lead time was
Speaker 1: much longer. Absolutely, so, the seed companies are very accommodating that.
Speaker 1: The dot let's talk about that real quick. There's only
Speaker 1: a couple of seed companies left. I mean down Do
Speaker 1: Pontter trying to merge Bear in Monsano, are trying to
Speaker 1: merge China Camp come in and bought some Jenna. I
Speaker 1: notice CRDA Dows spun off part of their seed group
Speaker 1: to a Chinese company. So there's big money in this
Speaker 1: seed business. And if there's one thing that's hurting the
Speaker 1: American farmer, if any farmers are out there listening to
Speaker 1: this podcast, is they've underestimated how much technology has helped them,
Speaker 1: and they're still mentally marketing a crop like it's or
Speaker 1: oh five, and so they're they're thinking they're gonna grow
Speaker 1: a hundred and thirty five bushel corn, and they're on
Speaker 1: a hundred bushell corn. And so the American farmer. If
Speaker 1: you go to a trade show, if you go to
Speaker 1: any egg show, there's the John Deer Tractors, There's this planter,
Speaker 1: there's this fertilizer, there's this seed company. Tens of thousands
Speaker 1: of farmers at these shows. You go to a marketing meeting,
Speaker 1: there's Tommy Grisafi up there on stage talking at eighteen
Speaker 1: farmers in nowhere, North Dakota. They don't want to talk marketing.
Speaker 1: They want Everyone loves production agg it's fun, it's exciting,
Speaker 1: it's sexy, it's fun driving a tractor. If you ever haven't,
Speaker 1: give me a call and we'll set you up with
Speaker 1: one of the customers I have in Pennsylvania and you
Speaker 1: go out there and interview them, and it's fun. It's
Speaker 1: one of the best jobs you can have in America.
Speaker 1: It's not one of the most profitable anymore, but it's
Speaker 1: one of the best jobs you can have. And so technology, Uh,
Speaker 1: there's things like auto Stair. There's a tractor being developed
Speaker 1: by case. I h that's uh, what's the word anonym? Uh?
Speaker 1: It drives itself? What do you You don't ask me
Speaker 1: to spell it. I could barely say that's going to
Speaker 1: ruin one of the best jobs in America. Well, yeah,
Speaker 1: there'll be a guy driving another tractor next to it,
Speaker 1: maybe planting the crop, and and that tractor will be
Speaker 1: tearing up the ground next to it. So there'll be
Speaker 1: someone around with a remote control, almost like flying a drone.
Speaker 1: So technology has changed agricultural agriculture in a big way.
Speaker 1: And so I'm a technology bolt when I do speeches.
Speaker 1: I come from a stock trading background. Uh. But I
Speaker 1: started trading Imani smps when they started on Globex. I
Speaker 1: remember the first day I traded Emeny's the day they
Speaker 1: open the think they traded eighteen thousand contracts. And I
Speaker 1: had a Globe station at my office and a project day,
Speaker 1: and so I was always big on technology. What it
Speaker 1: hit me I went over to Germany and I saw
Speaker 1: that the Boon contract was trading electronic, that London had
Speaker 1: lost it. Joe, I don't even if you know, if
Speaker 1: you're old enough to remember all this stuff. But the
Speaker 1: Boon used to trade in pits in London, and then
Speaker 1: it moved over to the u X Exchange. And uh,
Speaker 1: when I realized there were no pits anymore, it made
Speaker 1: me think when I went back to Chicago, when are
Speaker 1: the pits going to go away in Chicago? And most
Speaker 1: of them are gone now. And so I'm a big
Speaker 1: technology bull and I like to get out there and
Speaker 1: and and educate the farmer. What's funny about the American
Speaker 1: farmer is if you ask them to see their iPhone
Speaker 1: or whatever smart device they use, they have every app.
Speaker 1: They can tell you how much it rained in every field.
Speaker 1: They can tell you how much fertilizer they need. They
Speaker 1: get text and emails to add more fertilizer. Too. Is
Speaker 1: it's almost like a recipe to grow this perfect crop.
Speaker 1: And so if you aren't improving through technology and better marketing,
Speaker 1: your neighbor is and they're gonna pass you up. And
Speaker 1: I'll tell you one other thing. And this should scare people.
Speaker 1: Agriculture is not just an American thing. When I went
Speaker 1: to the John Deeer factory in Waterloo, Iowa, the John
Speaker 1: Deere tractors are going overseas. And so if you you know,
Speaker 1: follow Howard Buffett, follow Warren Buffett Son Howard. He's a
Speaker 1: farmer in central Illinois right next to one of my customers.
Speaker 1: He's going all over the world showing people how to
Speaker 1: grow crops. Technology and agger culture is a world market.
Speaker 1: And although America is still a leader, if they don't
Speaker 1: watch themselves, they're going to get passed up. Tommy, you
Speaker 1: just reminded me that one of our coworkers, and actually
Speaker 1: a previous off Lots guest, Lorcan rosh Kelly, has a
Speaker 1: cow farm and he was telling us once he actually
Speaker 1: has a smartphone app that I think tells him when
Speaker 1: his cows are about to give birth. Uh So, technology
Speaker 1: and in all types of agriculture right now. But I'm
Speaker 1: just wondering when we start to think about technology. Uh
Speaker 1: you know, when Joe and I talked about it every day,
Speaker 1: we usually talk about it in the context of companies
Speaker 1: like Apple or Amazon, and I'm wondering if a similar
Speaker 1: dynamic is present in agriculture where you get these big
Speaker 1: farming companies that essentially develop an edge because they have
Speaker 1: lots of money to spend on tech and that makes
Speaker 1: them more efficient, and then does that mean that they
Speaker 1: go on to become big, big players in the commodities
Speaker 1: trading market as well. I think you're correct the American
Speaker 1: farmers getting bigger, not smaller. They're getting more efficient. It's
Speaker 1: really hard to run any business without adequate capital. I've
Speaker 1: met some incredibly large farmers, and if you're not getting
Speaker 1: with it, you're going behind one thing. You touched on
Speaker 1: something very important, and they want you. It's going to be.
Speaker 1: What I talked about next year in my speaking season
Speaker 1: is that Amazon recently bought Whole Foods, and Amazon might
Speaker 1: single handedly be changing how we shop for food and
Speaker 1: how agriculture is and what products we grow in America.
Speaker 1: I think sometimes there's a pushback against non GMO or
Speaker 1: this thing or that thing, and the American farmer has
Speaker 1: to be listening to what the consumer wants. And Amazon
Speaker 1: knows what the consumer wants because no one has more
Speaker 1: data on what you like to purchase in Amazon. Would
Speaker 1: you guys agree, No question. So watch out for Amazon
Speaker 1: Whole Foods and how that changes agriculture the next five years,
Speaker 1: ten years. The supermarket industry. There's a supermarket in my
Speaker 1: hometown called Stracking Me Until family store for fifty sixty years.
Speaker 1: They filed bankruptcy a week ago. You know, why is
Speaker 1: that happening? What's going on? How could this family mom
Speaker 1: and pop grocery store with change we filing bankruptcy. Things
Speaker 1: are changing and agriculture is changing. But I no doubt
Speaker 1: my mind, the single reason I'm up in South Dakota, Minnesota,
Speaker 1: North Dakota is because technology changed and folks are able
Speaker 1: to grow way more bushels in a shorter time. And
Speaker 1: when that happens with your supply and demand, that makes
Speaker 1: the markets go down. We've talked about how the market works,
Speaker 1: We've talked about some of the big picture changes, the
Speaker 1: role of technology. Now let's get into you know we're
Speaker 1: talking about it in the beginning. This market has been
Speaker 1: pretty volatile lately, if you like exciting markets grains or
Speaker 1: where it's at now. Just weat also some pretty shocking
Speaker 1: action and soybeans lately, which very quickly erased a big downturn.
Speaker 1: What's the big picture of why we're seeing such exciting
Speaker 1: swings right now? Is it all weather? Is it demand
Speaker 1: from overseas? What are the factors? I'll take choice see
Speaker 1: all the above. So China has an insatiable demand for
Speaker 1: our soybeans. Every time the government tells you that we
Speaker 1: have a lot of soybeans, and that would make traders
Speaker 1: and speculators think the price is going to go down
Speaker 1: all of a sudden. At the end of the year,
Speaker 1: our ending stocks are lower. The story in wheat is uh,
Speaker 1: it's more of a world market problems in Australia, Europe, America.
Speaker 1: We had temperatures of degrees and thirty mile winds for
Speaker 1: three days in South Dakota and North Dakota and it
Speaker 1: absolutely stunted the wheat crop. What's interesting about commodities is
Speaker 1: people kind of wait to buy them. So commodities have
Speaker 1: been so cheap for so long that they just go
Speaker 1: hand them out and they just buy them as they
Speaker 1: need them. And then once they start to go up
Speaker 1: and speculation starts, people start the panic. And I think
Speaker 1: we've seen a little bit in commodities and maybe it
Speaker 1: will straighten itself out. Maybe it was just a short
Speaker 1: are and blip. But there was a point where I
Speaker 1: didn't think I really knew how to trade commodities anymore.
Speaker 1: And then after the last three months, I can say
Speaker 1: I didn't forget how to trade. They just weren't busy.
Speaker 1: This is the busiest we've been in years. Years and years,
Speaker 1: and it's a wonderful market to trade. It's very dynamic.
Speaker 1: There's a lot of people in there. Uh. One of
Speaker 1: the things Tracy had asked before was, so you got
Speaker 1: the farmer selling, who's buying? Well, look at Tyson chickens.
Speaker 1: They need X amount of corn and meal every day,
Speaker 1: and so anyone who's feeding an animal needs to be
Speaker 1: buying corn and meal, and anyone who's growing the grain
Speaker 1: needs to be selling it. And then the consumers are
Speaker 1: there NonStop buying it, not only in the US but
Speaker 1: all over the world. And so it's a very dynamic market.
Speaker 1: It's probably a lost art. I have to say. I
Speaker 1: don't know how many humans are left trading these markets.
Speaker 1: I don't know how many tim gersafies are left trading
Speaker 1: at seven o'clock at night, trading at six in the morning,
Speaker 1: watching the weather come out at four thirty. I wish
Speaker 1: I knew it's it's definitely changed and we've lost that
Speaker 1: human element to the market, and I don't know that
Speaker 1: we'll ever get it back. Yeah, Tracy, when I called
Speaker 1: Tommy this morning to sort of lock down the details
Speaker 1: for today's discussion, you know, I knew it was in
Speaker 1: Midwest time zone. So I said, are you up. He's like, oh, yeah,
Speaker 1: I've been up for a while trading the corn. So
Speaker 1: I really I really enjoyed hearing that. You know, Tommy,
Speaker 1: you kind of touched. I wanted on what I wanted
Speaker 1: to ask you next, which is, you know, you mentioned speculation,
Speaker 1: so I guess how much of the trading that we've seen,
Speaker 1: for instance, in wheat, would come from speculation. And you
Speaker 1: also mentioned fewer human traders, So I want to ask
Speaker 1: as well, to what degree do you have sort of
Speaker 1: technology driven momentum traders in the grains market? Nowadays? They're there,
Speaker 1: and so high frequency trading firm might not have been
Speaker 1: trading hard red spring wheat at the Minneapolis Exchange a
Speaker 1: few months ago, but when they see it start to move,
Speaker 1: they get the programmers together with the traders and then
Speaker 1: they go at it and they start making a market
Speaker 1: in it, and both the futures and options, and uh,
Speaker 1: they're very disciplined it and it creates large moves and volatility,
Speaker 1: and anyone who trades knows volatility as your is your friend.
Speaker 1: But there's just just technologies change. Most of the traders
Speaker 1: I know from the border trade either retired because they
Speaker 1: made so much money, or they're driving for Uber now.
Speaker 1: So I do not know of many humans who are
Speaker 1: left trading markets. It's a it's a human working with
Speaker 1: a programmer and a kid who's great in math and there,
Speaker 1: and they have these programs running and they run all
Speaker 1: night and all day, and they're very unemotional. Humans are emotional,
Speaker 1: and that's what makes markets move, and we're missing that.
Speaker 1: Which is interesting because sometimes grains have these many flash crashes,
Speaker 1: just like the stock market did seven years ago. You wonder,
Speaker 1: if there's so many people in line to buy, how
Speaker 1: did we just break x amount of pennies? Or you
Speaker 1: saw it happened in Amazon stock a few weeks ago.
Speaker 1: How does a company like Amazon break ten a few
Speaker 1: minutes and you're seeing it markets all over the world.
Speaker 1: So Tommy kind of thinks in some ways that markets
Speaker 1: aren't as liquid as you think when they get a
Speaker 1: little nuts. When it's a nice, quiet day, there's plenty
Speaker 1: of bids and offers. But when the stuff hits the
Speaker 1: fan where all the people left to trade, that's why
Speaker 1: all the bids and offers disappear. It's a real problem.
Speaker 1: It's a real problem in America. I don't know how
Speaker 1: we straighten it out, because I do think we're the
Speaker 1: the core of all trading in the world. But you
Speaker 1: want to do what's right by the customer, and you
Speaker 1: want to provide that deep liquid market. To sort of
Speaker 1: wrap things up here, one of the things that I
Speaker 1: really like about this conversation is not only our other
Speaker 1: markets have that hasn't really not been very much volatility,
Speaker 1: but it feels like they're all sort of the same story.
Speaker 1: It feels like there's only one market. So whether it's gold,
Speaker 1: whether it's oil, whether it's US treasuries, German boons, the
Speaker 1: Japanese yen, U s tex s docs, everything feels hyper correlated.
Speaker 1: Everything is macro, everything is the FED. When talking to
Speaker 1: you about brains, it really feels like a different story.
Speaker 1: It really feels like a world where it's not all
Speaker 1: about the FED. It's not all about what a drog
Speaker 1: you say today, and it just uh, it's very refreshing. Well,
Speaker 1: it's fun and I wish more people would get involved,
Speaker 1: and if anyone needs education, I'd always put a hand
Speaker 1: out to educate. One thing, Joe, is that when the
Speaker 1: FED says something, or when the Treasury releases bonds because
Speaker 1: I grew up in the thirty year treasury pit at
Speaker 1: the Chicago Border Trade one of the biggest, baddest pits
Speaker 1: in the world. But when a farmer sells grain, there's
Speaker 1: over twenty elevators they sell grain, so they don't get
Speaker 1: to sell grain at the border trade price. You really
Speaker 1: sell grain in your backyard, and that's more important than
Speaker 1: people realize. So there's no central bank, there's just local
Speaker 1: grain elevators and little towns conducting business. And that's that's
Speaker 1: what's amazing about the grain industry. Well, I think that
Speaker 1: is a great place to leave it. And your offer
Speaker 1: to educate people about this space, I hope a lot
Speaker 1: of our listeners will take you up. Me Grossafi of
Speaker 1: advanced Trading, thank you very much. I learned a ton
Speaker 1: in this conversation and Tracy my pleasure. So, Tracy, did
Speaker 1: that deliver on my promise that there is an exciting
Speaker 1: area of the markets that's not boring. Yeah, it absolutely
Speaker 1: did it. Also, it kind of warms my heart to
Speaker 1: think about trading in an actual physical commodity and one
Speaker 1: that's so I guess emotionally attached to our daily lives,
Speaker 1: right like we all sit down and eat cereal or
Speaker 1: bread on a daily basis. So it's fun to think
Speaker 1: about the trading that goes on around those commodities. Yeah,
Speaker 1: there's just so much going on here in terms of
Speaker 1: the intersecting stories, and it just feels, you know, if
Speaker 1: you think about like buying a you know, a tenure
Speaker 1: treasury or future or even a share of stock, just
Speaker 1: like you look at a spreadsheet and you plug in
Speaker 1: a series of numbers. So the idea that there is
Speaker 1: still this market where Tommy is still traveling from his
Speaker 1: home in Indiana to his apartment in North Dakota explaining
Speaker 1: to farmers how the market works. They're getting their bids
Speaker 1: from the local grain elevator. The grain elevator is obviously
Speaker 1: reacting to the demand from people who need to feed
Speaker 1: cows or perhaps not not so dis in future, the
Speaker 1: demands from Amazon and Whole Food for what kind of
Speaker 1: food they want to stock for obvious reasons. There's a
Speaker 1: certain refreshing reality to it. Yeah, and the Amazon angle
Speaker 1: and the technology angle is really interesting too, because I
Speaker 1: think that's where it all starts to feed into the
Speaker 1: global economy in the sense that you know, when we
Speaker 1: think about inflation and the fact that we haven't had
Speaker 1: much of it um for the past almost a decade. Now,
Speaker 1: A lot of people tend to think about consumer goods
Speaker 1: and the idea that those are getting cheaper because technology
Speaker 1: is developing. Not many people, I don't think it just yet.
Speaker 1: Think that there's a new tractor model out and that's
Speaker 1: making the growing of crops much more efficient, and so
Speaker 1: the price of flour is falling, and that's feeding into
Speaker 1: prices as well. So that's another important angle here. I think, yeah,
Speaker 1: so much, so much good stuff. You know this last
Speaker 1: few weeks if it's as super exciting from the grains market,
Speaker 1: But even when things quiet down, I think I'm gonna
Speaker 1: start paying attention in this world more because it just
Speaker 1: feels that it just feels different than everything else. You
Speaker 1: need to buy yourself a little farm and do some
Speaker 1: some corn trading, you know what. Actually, when I retire,
Speaker 1: what I want my part time retirement job. I want
Speaker 1: to get like a job like at a radio station
Speaker 1: in Iowa doing the local grain report. I think retirement jobs.
Speaker 1: I think you'd be good at it. Joe. Thank you, Tracy.
Speaker 1: This has been another episode of the Odd Lots podcast.
Speaker 1: I'm Joe Wise, though. You can follow me on Twitter
Speaker 1: at the Stalwart and I'm Tracy Alloway. I'm on Twitter
Speaker 1: at Tracy Alloway. And you can find Tommy on Twitter
Speaker 1: at Indiana Grainco. Remember to reach out to him and
Speaker 1: he'll teach you about the market. And our producer, Sarah
Speaker 1: Patterson follow her Sarah patt with two Teas. Thanks for listening.