Why Wheat is the World's Most Exciting Market Right Now

Joe Weisenthal (0:09)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:14)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

You know, Tracy, I think we talked a few weeks ago, on maybe a month ago, I lose track of the time, about how there wasn't very much volatility in markets these days, and it was kind of a source of frustration for markets journalists.

Tracy Alloway (0:30)

Yeah, we talk about that a lot, I feel.

Joe Weisenthal (0:32)

Yeah, we're always talking about it internally. I forget which episode it brought it up on.

Maybe there's a little bit of market volatility picked up, but it's still kind of a big issue that, where is the volatility?

Tracy Alloway (0:44)

It's very boring. Are you gonna tell me that you've actually found some volatility in the market?

Joe Weisenthal (0:48)

Yes, Tracy, I have some great news for you. I have found the volatility in the market.

I have found a corner of the market that is not boring at all, that is thrilling every day. And not only that, it's not even that obscure. It's actually one of the, it's a crucial market for the entire world.

Tracy Alloway (1:08)

Part of me doesn't want to ask because I think it will be really obscure. But okay, what is it?

Joe Weisenthal (1:14)

No, it's not obscure. I'm not going to cite the spread between Norwegian frozen salmon and Norwegian fresh salmon or anything like this.

No, the answer is the grains market.

Tracy Alloway (1:29)

All right, you said it wasn't obscure.

Joe Weisenthal (1:31)

Well, come on, grains are not obscure. I mean, most people eat bread all the time and cereal and, you know, soft agricultural commodities are pretty important to most people.

Tracy Alloway (1:43)

I know they're a big part of life, but I guess when people think about the market, they don't necessarily think about the commodities market, even though I suppose in fairness, a lot of the current financial instruments that we have in markets actually developed from commodities, right? Like futures, I think, were originally commodities oriented.

Joe Weisenthal (2:04)

Every time you read about the history of futures markets, it starts with some made-up story, some fantasy story about the farmer plants the corn and wants to lock up the price and sells it to the speculator. That's the classic description of how commodity futures work.

And guess what? That's exactly what we're going to be talking about today, because the action in grains lately, particularly in wheat, but also soybeans and corn, has been very exciting and volatile. And if you like charts that go up and down very fast, you should be paying attention to grains.

Tracy Alloway (2:43)

All right. Well, I've always had a soft spot for commodities, mostly because I'm amused by the notion of accidentally taking physical delivery of like a bushel of corn or something.

But I'm looking forward to this episode, because as you say, we need a little bit of excitement in markets right now.

Joe Weisenthal (3:00)

Exactly. And so today on the Odd Lots podcast, we are going to be talking to Tommy Grisafi. He is a risk manager at Advance Trading, which is a firm that helps players in the agricultural space, farmers, grain elevator operators, hedge and manage their risk. So basically, right in this whole story of why the futures market exists. And in addition to that, he trades these futures himself.

Tommy, thank you very much for joining us.

Tommy Grisafi (3:40)

Thank you, thank you, Joe. It's a pleasure to be here. And what an exciting time in the agricultural space. I was listening before, and yes, it's a very boring time in commodities, and it's been a rough go for commodity traders the last few years. Someone who trades gold or crude oil, it's just not sexy like it used to be when I first met you on Twitter in 809

Joe Weisenthal (4:01)

Yeah, those were the good old days.

Tommy Grisafi (4:03)

And I'd say, corn's limit down, and think about when the Fukushima accident happened in Japan, how crazy we were. And it's just changed. And there's a lot of reasons why it's changed. But let's move forward.

You can't look back. All we have is where we are today, right?

Joe Weisenthal (4:18)

Right. And what we have today, as you said, is a lot of the markets aren't very sexy right now from a volatility perspective.

But one market that is very sexy is the wheat market. And that's been going absolutely wildly.

Tracy Alloway (4:34)

For those of us who haven't been following the wheat market as much as we should, Tommy, can you give us a sort of high level overview of what's been happening?