The months-long drama over wrenching changes to the Chicago trading pits may have caused grain traders and hedge funds to miss early signs of the worst Midwest drought in a quarter century, partly explaining the latest ferocious surge in prices.
For veteran analyst Rich Feltes, there is no question that this week's "weather market" - an industry term to describe a period in which grain prices react sharply to volatile Midwest meteorological conditions - is the most frenzied he's seen since the 1980s, when two different U.S. droughts threatened crops.
There are plenty of fundamental reasons to explain the near 20 percent percent surge in December new-crop corn price this week including that soil moisture levels in No. 2 corn producer Illinois are as low as they were during the disastrous drought of 1988.
Now, after a warm winter with little snow; record triple-digit heat is baking the crop just as it pollinates, the period when corn plants start producing grain. A successful pollination is needed as corn inventories are precariously low.
It's even drier in Indiana, the nation's fifth-largest producer of corn last year.
"Indianapolis is on pace for the driest June ever. It is already the driest for June since 1988 and if the area doesn't get any rain by Saturday it will be the driest June on record," said Andy Karst, a meteorologist for World Weather Inc, Kansas City.
TRADERS' ATTENTION HAD BEEN DIVERTED
The abruptness of the corn market rally and its unrelenting nature suggest to many a surprising degree of complacency, with even the smartest players seemingly overlooking the gathering signs of what may become the most damaging drought since 1988.
Hedge funds turned bearish on corn earlier this month for the first time in two years, regulatory data showed.
"The market has been distracted by a lot of other issues," says Feltes, vice president of research for broker R.J. O'Brien LLC and a sage among Chicago traders for more than three decades.
"A lot of analysts, me included, have been dealing with such things as changes in report times and changes in trading hours, so I think a lot of us had gotten complacent."
Instead of watching the weather, much of the grain trading community had been debating, decrying or bemoaning the CME Group's move to extend its trading day for Chicago Board of Trade (CBOT) grains to a continuous 21-hour session, a dramatic change that has roiled the tradition-bound market.
The most disruptive shift since the advent of electronic trading and its hyper-growth in the 21st century was worsened by a series of embarrassing regulatory glitches and unforeseen complications. The longer hours went into effect on May 21, a week later than first planned, but further adjustments are still being made. The settlement period was pushed back to 2 p.m. CDT (1900 GMT) only this week.