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"The video quickly went viral: a Nebraska farmer, clad in a life jacket and blue jeans, skimming across his uncle’s flooded field on a wakeboard. Quentin Connealy’s watery ride last month became a minor sensation on social media. It also added a data point about a soggy start to the growing season in the US midwest. Grain traders took notice. A new transparency is taking hold in agricultural markets, once an opaque realm. From farmers’ Twitter posts to weather maps, shipping data, satellite photos of fields and online grain marketplaces, it is chipping away at the insider advantages of international grain companies. Analysts are debating whether the rapid spread of information means structurally lower profits for the trading arms of a grain industry led by the “ABCD” companies — Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus. “There’s less information arbitrage. That was one of the core elements of their edge,” says Alex Keane, a former trader for Cargill who helps run Pathway Agriculture, a Geneva-based investment manager. Broadly speaking, insider trading is an essential feature of commodities markets. A farmer who observes good weather and heavy corn seedings by his neighbours might hasten to sell his corn crop before prices decline. Grain companies have traditionally multiplied the farmer’s powers of observation through global networks of warehouse and port managers, in-house meteorologists and agronomists and central communications...“The gap has narrowed significantly,” says a former Cargill employee who now trades for a hedge fund. “The amount of information we have access to or can get our hands on is very, very similar to what a Cargill or ADM or Bunge or Dreyfus had.” The transparency starts in the wifi-enabled cabs of modern tractors. There, farmers outfitted with as many screens as a Wall Street trader can monitor weather maps, track government reports on acreage or crop production, execute sales to the local silo complex or trade agricultural futures. Multitasking is easy because the tractors can steer themselves. “They’re running mini-hedge funds out of their cabs,” says Farha Aslam, food and agriculture analyst at Stephens, an investment bank...A fire hose of information is no guarantee of quality. Even the best-informed traders make mistakes, as shown by high-profile losses in soyabeans last year. But it’s nevertheless changing the economics of agricultural trading. “The arbitrage power that a lot of the big trading houses had,” says Rajiv Singh, a senior executive at Rabobank, “is clearly getting eroded by the transparency and availability of data.”"

Posted June 15th, 2017
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