(00:00:01) Thank you. Don Miguel D. Good morning everyone. Welcome to midday, which is Don mentioned is coming to you live from the Minneapolis Grain Exchange for about the next hour and a half in news headlines at this our sixth district Congressman. Richard Nolan has announced that he will try to draft Edward Kennedy for the 1980 presidential nomination. Israel continues raids in Lebanon against suspected Palestinian camps, California has begun a gas rationing program and US and Soviet officials say once again, they are close to a strategics arms limitation agreement. Those are headlines will be getting news details in just a moment in about 15 minutes. We'll be back at the Minneapolis Grain Exchange for conversations with grain Traders inspectors and others who work here as we described the business of Futures Trading and the cash grain market with me today as NPR's Rich demon will be getting a description of the cash grain market later in midday. Also helping us is Tommy Richmond who will give us some idea of the mechanics of the activity on the exchange floor. Especially in the Futures Trading pit we'll talk with the president of the Grain Exchange Merlin Mills and with the country elevator manager Lyle filleth of try mom who trades on the exchange will get to all of that after hearing the news from mpr's Allen Cyril at our studios in st. Paul. (00:01:15) Thank you, Dan and good morning everyone. I look at the radar summary at this hour shows that a line of very heavy thunderstorms continue over portions of Northeastern and East Central Minnesota the thunderstorms extend in a line from Buffalo Northeast through Hinckley and from Moose Lake to just north of Duluth during the past hour in increase in aerial coverage and intensity was noticed as the Thunders tonight in the mid to upper 30s cloudy Tuesday with a chance of rain or rain and snow mixed the high Tuesday mid 40s to lower 50s. That's 4K C cm and ksjn R4 the Ws CD listening area considerable cloudiness this afternoon through Tuesday scattered showers and a few thunderstorms through tonight and a chance of showers or rain and snow showers on Tuesday highs this afternoon. In the Northeast and Northern Wisconsin mostly in the 40s lows tonight the mid 30s to the lower 40s the highs Tuesday in the mid 40s to lower 50s for que él se and Care SW listeners variable cloudiness through Tuesday with a chance of showers and thundershowers this afternoon tonight and tomorrow highs this afternoon in the upper 50s to the lower 70s lows tonight across southern Minnesota the upper 30s to the mid 40s and the highs Tuesday in the mid 50's to lower 60s for the Twin Cities. It's much much the same variable cloudiness through Tuesday with a chance of showers and thundershowers highs this afternoon in the metro area the upper 60s to the middle 70s lows tonight upper 40s highs Tuesday in the 60s. It's 15 minutes before twelve o'clock. And now we re joined an Olsen at the Minneapolis Grain Exchange Dan. (00:02:44) Thank you Alan. Well as we hear from the weather report, it's going to be awhile before Northern Minnesota Farmers get into the field at least. It is late this year, but the planting season is one of the surest signs we have of the Region's most important business and that is agriculture what happens The farm is the most visible sign of agriculture's importance in our area, but it certainly doesn't show us the entire picture The Next Step. The marketing part of the procedure is at least as important but marketing activities aren't as obvious. We can see trucks and box cars carrying the Grain and livestock from to from the farm to the market but the transactions that help determine the destination or more importantly the price occur in places similar to the one we are at today Minneapolis Grain Exchange. There are two important but little understood parts to the Grain Exchange that is the Futures Trading market and the cash grain market will learn more about the cash grain market later in midday from mpr's Rich diekman. We're in about the middle of the trading day here at the Minneapolis Grain Exchange. If I am correct in my numbers the trading day opens at about 10:30 in the morning and closes at about 115. I'll get more on that in just a moment from the president of the exchange Merlin wills. And right now there is a bit of Lull in the activity. We are sitting about 30 yards, I would say from the Futures Trading pit were located in the visitors Gallery at the Grain Exchange about 50 yards away from us are the grain tables for the cash grain market where the grain is sampled and graded and that helps determine the price more on that later. The Futures Market is viewed by its Advocates as an orderly way of bringing buyers and sellers together for a business transaction and it is a way The Advocates say of diminishing the risky nature of some business ventures detractors. Say Futures contracts are nothing more than a form of legalized gambling that speculators who trade in Futures are taking money that would otherwise be returned to the farmers who raise the agricultural produce that is sold. Well Merlin Mills is vice president for ATM Grain Company Archer Daniels Midland, and he is the 86th president of the Minneapolis Grain Exchange and Merlin. Thanks for joining us today as part of midday at The Exchange. You represent Futures Trading and you have about 30 years of experience in the grain industry. We've been president of the Omaha Grain Exchange and mr. Mill's. I wonder if you'd explain what the Futures Trading part Minneapolis Grain Exchange is about. (00:05:14) Well, I think to sum it up. We do trade five delivery months and the Minneapolis Grain Exchange pit our current delivery months our September December March made or July. Perhaps you'd like an explanation of trading in the (00:05:35) bed. Yeah, I think so because in the background we can hear the Traders shouting out some of the bits and so on and we'll be getting more on the jargon that they use in a few minutes. But yeah, we should know about what they're saying (00:05:47) in the pit individuals are buying and selling contracts for spring wheat the contract according to the Grain Exchange rule states the quality which is number two Northern spring wheat 1350 protein as I mentioned the delivery months are September December, March May or July the wheat will be delivered in a terminal in Minneapolis. St. Paul or Duluth superior. Each contract is for 5,000 bushels. So a buyer steps into the pit and says I want to buy a week delivered in the month of July. I'll buy ten thousand bushels and I'll pay three dollars and 32 cents per bushel. If someone wants to sell under those terms they will say sold and the contract has been made the buyer and the seller have entered into a legal binding contract that must be honored either by delivery of spring wheat in July or by taking an opposite position in the future spit and settling the contract for (00:06:53) cakes and they haven't traded any pieces of paper as such that will be done later (00:06:57) only a card that notes the trade the month and the (00:07:02) price and that has been the basis of trading for as long as the exchange has been operation in operation. Is that right that word of mouth sort of (00:07:09) transaction, correct. Now, what is to oversee (00:07:12) that the Traders are good on their word? What is the enforcement mechanism? Mr. (00:07:16) Mill's at the end of the day? All trades are reported to the touring Department of the Minneapolis Grain Exchange who balances all of the trades so that they are even the buys and the cells and all prices are correct. (00:07:31) And once again, these traitors aren't selling or buying a car loads of grain that they will take possession of at the end of the day. This is in the future. These are Futures. Now, we have a lot of background activity including telephones down below us that are ringing away and they're ringing away in cubicles that a number of the Traders occupy. What is happening down there? Why are the telephones ringing (00:07:55) telephones near the trading pit are generally from commission firms and they are taking orders to buy or sell Commodities Futures. (00:08:04) And then as we move away from the cubicles and go across the trading floor towards the pit itself there perhaps half a dozen people standing in the pit right now and most of their eyes are cast on the electronic trading board. What are they? (00:08:18) They're watching the quotations for not only Minneapolis wheat are watching for Kansas City Wheat Chicago wheat corn oats soybeans Neil oil. We also have quotations on cattle Hogs frozen pork bellies silver and gold (00:08:35) who do most of these Traders represent Berlin. Are they from the large grain companies? Are they independent (00:08:40) people? Are you speaking of the pit Traders? Yes, we have individuals. We have those from large corporations and we have some from the smaller firms. (00:08:51) Would you say most of them are from the major grain companies? (00:08:56) At the present time it looks like most of them in the pit are from the larger grain coming. (00:09:00) Yeah, how does one become a member of the Minneapolis Grain (00:09:03) Exchange you would have to apply to the Minneapolis Grain Exchange for membership. And the major qualifications are to be of a good moral character and the Meet The Exchange Financial requirements. (00:09:17) And in reality. The membership can be quite expensive that is to say a membership might trade for well over six thousand dollars in right? I (00:09:27) believe the last freed of Minneapolis Grain Exchange membership was about $5,500. I think the current offering price is about (00:09:35) 6,000 and these memberships they can be bought and sold that is to say a Trader who decides to (00:09:41) leave the Futures pit in the Minneapolis exchange could sell his or her membership and take off. Yes, (00:09:46) and somebody else who's willing to pay the price can buy it. Yes. So theoretically anyone can become a member of the Minneapolis Grain (00:09:53) Exchange Meeting those two qualifications. I mentioned yes, what is the enforcement (00:09:57) policy for people who in some way break a rule? (00:10:01) Well the Grain Exchange has A system of self-imposed rules and regulations that all buyers and sellers in the market are treated equally we also have a system of arbitration to facilitate the settlement of any disputes (00:10:21) and that system of arbitration is all a part of the Grain Exchange, which is a corporation. That's correct. And the Traders are the stockholders in the corporation. That's great. Oh Merlin Mills. Thanks very much for talking with us. Merlin is the 86th president of the Minneapolis Grain Exchange and has 30 years of experience in the grain industry. We appreciate your comments as part of midday as we've mentioned were stationed in the visitors balcony at the Grain Exchange in will soon be going to the other end of the trading floor to hear from mpr's Rich deacon at the cash grain market tables at this end of the over the room directly below us. In fact is the Futures pitch where you can hear Traders shouting bids and prices mpr's Tom Mir Osman out a little closer. The action at the pit and prepared this report about what Traders shout to each other. At 9:30 every business morning a bell sounds the beginning of another trading day at the Minneapolis Grain Exchange buyers and sellers of Minneapolis wheat move around a hardwood (00:11:27) octagonal pit shouting prices and quantities for futures (00:11:30) contracts wheat to be delivered in March May July September or December transactions in the Futures pit are conducted by a system known as open (00:11:40) outcry seller shalt the month first followed by the last cent or (00:11:44) fraction of a cent of the price per bushel. (00:11:52) quite 106 July 8 (00:11:58) 6 5 March at 6 means a Trader is (00:12:01) trying to sell 5,000 bushels of March wheat at three dollars and 46 cents per bushel buyers on the other hand. Shout a price first (00:12:10) followed by the month of (00:12:11) delivery. (00:12:20) Three quarters for a hundred July means the trader wants to buy a hundred thousand bushels of July wheat at three dollars forty six and three quarter cents per bushel as buyers and sellers come together in the pit. They make oral agreements that are legally binding. Part of the open outcry system are the market observers a team stationed in a Pulpit above the pit. They supervise floor activity record all transactions in a ledger and announce any price changes to a typist who immediately transfers the new information through a computer to the electronic price board (00:13:19) what made trade and (00:13:26) The trading day ends at 115 after contracts for between 10 and 15 million bushels of wheat have changed hands that (00:13:33) day. I'm Tommy Richmond. The (00:13:53) time now is about four minutes before twelve o'clock. You're listening to mid-day live from the Minneapolis Grain Exchange. Well, as we mentioned there are many people interested in the activities of the Minneapolis Grain Exchange. Not just the traders in the Futures pit. We might add among the people who are interested Farmers rural elevator operators an elevator operator is on the line with us right now is part of midday. Lyle Phillip is manager at the Tremont Cooperative elevator in southern Minnesota and has been active in elevator management for many years. Good morning to you Lyle running. Well, what is the reason that elevator managers are interested in trading on the Futures Exchange? (00:14:33) Our managers use it as (00:14:35) hedging their grain elevator by see waiting for a basis to develop. He will sell the option on the Cog or Minneapolis Board of Trade waiting for a better basis to develop. When you use that (00:14:52) word basis Lyle, what do you (00:14:54) mean the difference between the cash price at a given market and in the corresponding Chicago Board of Trade or Minneapolis Board of Trade option at the present time. We're trading corn were buying and selling corn on the July option on the Chicago Board of Trade. The apples price is probably 20 to 25 cents under that twenty to twenty five senses the cash basis. (00:15:21) And so when you make a trade on the Minneapolis Grain Exchange, for example, or when you authorize your broker to trade for you, but you're working to do is work in the best interests of your farmer customers and try to minimize any potential loss or enhance any potential profit is that right? (00:15:38) Trying to merchandise that are former members at the best possible price without without speculation. We are most Co-op articles and bylaws not allow for speculation and Many times in the Minneapolis paper of what happens to elevators that do. (00:15:57) Why is it Lyle that many Cooperative elevators think that speculation is to be avoided. (00:16:05) Because it is a Gamble and if a person was smart enough to know for sure which way soybeans or corn we're going to go they would be in such fantastic Demand with because of their knowledge or foresight an elevator can't afford to risk their entire business on which way the market is going to (00:16:25) go. Why do you think some elevator managers do not trade on the Futures (00:16:31) exchange basically probably because they do not understand it or they are afraid of it or in some cases their their farmer board of directors. That will not authorize them. Trade Co-op elevator manager especially does have to have Board of director approval and his transactions are sent to one of the board members so that on (00:16:56) do you know Lyle of many farmers who trade through their Brokers on the exchange? (00:17:01) More and more Farmers trading On The Board of Trade with a lot of storage space on the farm with Farmers getting extremely large in having a lot of green to merchandise farmers are doing it more and more there. They have their own Consulting broker and expert and are trying to figure out the best time to Market their grain and probably doing it more on a speculative on an overall flat price deal in what an elevator is a good elevator operator is strictly speculating on the basis only and using the Board of Trade to protect himself against a movement in the (00:17:46) option mile. How does your employer Farmers Union Grain Terminal Association Stack Up in importance against some of the major grain companies bunge Cargill PV and so on. (00:17:58) Well, I don't know exactly as far as we basically provide the same the same Services GTA is a regional Co-op owned by the by the local coops who they who they do business for and our profits then are at the end of the year. I returned back to our members on a on a bushel basis where the the independence of course our star have stockholders and the money is returned on on an investment basis of coop the trying to members on a patronage (00:18:36) basis. Do you find Lyle that your ability to trade through a broker on the Minneapolis Grain Exchange helps keep your elevator operations strong and withstand the competition from some of the private crane operations, or do you feel that the competition from the major grain companies is so intense that it is endangering the future existence of the Operative movement, (00:18:59) right? I believe at that the elevator manager the future is going to have to be able to utilize the Board of Trade to to maximize his profits without without having his next bout on a speculative speculative basis. I think it's going to be sensuality that he is able to do this in the future. (00:19:23) Well, I'll thanks much for joining us as part of midday here at the Grain Exchange in good luck in your future trades (00:19:28) you very much. (00:19:29) Right I've been talking with Lyle Philip who is manager at the tram uncooperative elevator and Southern Minnesota. He's an employee of the Farmers Union Grain Terminal Association. We'll check the Traders clock and we see it as about two minutes after 12 o'clock. We'll be back at the Minneapolis Grain Exchange in a few minutes. We will pause to identify these stations and remind you that today's programming on Minnesota Public Radio is sponsored in part by an anonymous friend in honor of the birthday of William. Avadhi. Alan Searle is standing by at our Saint Paul Studios with news headlines the back at the Grain Exchange after that with conversation with a grain Trader followed by conversation over at the cash. Grain tables were mpr's Rich diekman will be talking with state inspection people and cash grain market Representatives about that operation. All of that is coming up on Minnesota Public Radio a listener supported (00:20:22) service. State line. That's a band from Elkton to just west of Brandt South Dakota the regional weather forecast calls for considerable cloudiness in northern Minnesota today variable cloudiness elsewhere showers and a few thunderstorms will move across the state from west to east today and tonight rain will be mixed with snow in Northwestern Minnesota and Eastern North Dakota on Tuesday high temperatures today across the region the 40s to the north to the mid 70s in the South lows tonight in the mid 30s to the upper 40s and Tuesday's highs will be generally in the upper 40s to the middle 60s for the Twin Cities variable cloudiness through Tuesday a chance of showers and thunderstorms through tomorrow highs this afternoon about 68 degrees low tonight about 50 and high tomorrow 65 degrees. It's 13 minutes after 12. We now rejoin Dan Olson at the Grain (00:21:11) Exchange. Thank you Alan. Well, as you were giving the weather forecast we were just observing that while no one is happy that farmers are delayed in getting into the field. It does make trading activity in the Futures pit quite interesting and one of the people who can tell us more about that is Bob McWhite senior of McWhite Grain Company and Bob you're a traitor and you work in the Futures, but here at the Minneapolis Grain Exchange wider Traders like to see activity. (00:21:38) Well, actually the more activity there is and the wider the swings in the market the more opportunities. There are of course for for profits along with the more opportunity to unwind a very bad trade if you're on the wrong side of a market generally our success or failure is pretty much predicated primarily on our own judgment, but it becomes exacerbated somewhat if we're in a narrow trading range where there isn't any activity (00:22:06) curious about how you decide which factors you will use to determine your It's and I have my back to it, but you can see the electronic board Bob. I think May hard red spring wheat Futures contracts opened at about 340 this morning on the Minneapolis Grain (00:22:22) Exchange, the it opened at the May contract open at 3:42 and a half the July contract opened on a range from 340 and a quarter to three forty and a half. (00:22:34) Now that price of three dollars forty sensor. So is up considerably from even two weeks ago, isn't it? I'll (00:22:39) certainly what is that telling us? Why is the price going up so high? Well, actually what we've had is in the spring wheat areas where our in the spring crop areas and this is in the United States North Dakota South Dakota Montana Etc are all having problems now with because of weather. This is also true in some of the foreign countries. Russia is one. There's rumors that your China is having trouble with their Spring plantings. So all of these things have caused concern in the marketplace. And as I took that concern has been absolutely indicated by a higher price. (00:23:16) Well as you decide which trades you're going to make Bob on a given day. What factors do you give most weight? (00:23:22) Well, actually we're speculators and we're in fact, we hopefully our judgment tells us to do something on his right and that's the way we make or lose money if we're right why we make money from me for long we lose money and we just go with the factors that everybody else has to look at generally you get them from various news Services. We contact people throughout the country who can give us a little better insight into their local situation and was this information. We enter the marketplace and decide what we're going to do either by herself. (00:23:59) I'm glad you mentioned your speculators because to some people's way of thinking speculators do not have a good name probably because the role of speculators is not widely understood in Grain Exchange such as Any apples Grain Exchange now the quite Grain Company is not one of the five major grain companies in the world. You're not a multinational (00:24:16) corporation. We certainly are one of the smallest grain (00:24:19) companies in the world. And in fact you and your two sons are the Makai green come that is true. (00:24:24) Now, why are you considered speculators? Well, because what we do is actually enter the marketplace with the idea of either owning something or committing ourselves to a sale of something with the idea that we hope are right and make money on that. But the thing that we do provide for to the marketplace is the fluidity viability so that the commercials and the producers and others who have a legitimate hedging function in the fit have a better chance of filling those hedging (00:24:59) orders in another in other words about you're willing to take the risk that somebody else might not be willing to (00:25:04) that's right. We assume actual ownership as we own it and we give up on her ship if we if we sell it so We it isn't the throw of the die. It's actual ownership. And if we end up owning it we have to (00:25:16) pay know. I've been told that there are fewer speculators in the Minneapolis Grain Exchange in there are people who want to take a hedge position. That's right. Why is (00:25:23) that for the main and simple reason that the Minneapolis Market does not have as many opportunities as say the Board of Trade in Chicago, they have something like 40 options or 40 different things. They trade we trade one primarily, although we do have a Durham contract here and we're thinking of getting into a oilseed contract a sunflower seed contract and this of course would if we could make them work with make the market more attractive to speculators. (00:25:51) What would you say Bob is speculation profitable can one make a great deal of money at grain (00:25:57) speculation. Generally not I would say that the legitimate speculators are really just trying to take a little bit out of the market each day. And it's it's a nice goal, but it doesn't always work out. That way sometimes you leave more in there on a day. Then you were to take take (00:26:14) out. I remember reading a while ago. This was years ago and ecology economics course about the old days on in Futures Trading in this country the turn of the century, for example where some people could actually Corner a market that is where they could control the fate of a commodity that was not yet harvested recently. We heard news stories about the (00:26:35) attempt to corner of wheat Market on the Chicago Board of Trade is cornering the market something you can still be done cornering the market. I think in most your major Commodities and I speak of wheat corn soy beans Etc is practically impossible. What is cornering the market while cornering means that you in fact have got proportionately larger and proportionate share of all that grain that's being treated either in either own it or you sold it short and as a result why they Is a lack of liquidity because too much of the action is in one person saying that is practice that is impossible in my estimation to do that and what they refer to as a corner in the Chicago wheat Market wasn't a corner at all, but we don't want to get into the debate. That's for the Commodities Futures Trading trash. But generally I would say that it is it is impossible. There are limits on positions that people major people major speculators can take or that major companies can take in the speculative position and all of this has tended to make it impossible for any kind of a corner. (00:27:48) Well Bob appreciate your dropping by to talk with us and perhaps if activity permits you were one of your son's can join us a bit later on just before 1 o'clock to talk about a few other (00:27:58) things Futures trade (00:28:00) we've been talking with Bob McWhite senior who is from the McWhite Grain Company and who trades in the future spit on the Minneapolis Grain Exchange. Time now is about 20 minutes after 12 o'clock. The building. We're located in is an Historic Landmark and the site at 4th Street and 4th Avenue South in Downtown. Minneapolis has been the center of grain trading in this area since the turn of the century. Mpr's Tom, Mir Osman went into the background of the Minneapolis Grain Exchange building and he looked into its history. And also how the building has changed over the years, especially in the areas of communications and transportation and he prepared this report. The Grain Exchange building was built for the (00:28:41) Minneapolis Grain Exchange, then called the Minneapolis Chamber of Commerce between 1900 and 1902. The building was designed by The Firm keys and Colburn and was one of the first in the area to use a riveted steel framework covered with poured reinforced concrete the building's exterior its Lobby and the trading area exhibit elaborate Stone and plaster work that have caused the building to be listed on the national register of historic places and to be marked as a historic site on both state and local. Levels the Grain Exchange has always been a private office building except for the trading floor which occupies a three-story portion of the building and measure 75 feet wide by a hundred and thirty feet long member firms rent cash green tables and boosts on the floor and Traders watch for price changes on a huge electronic board capable of listing prices for 84 different commodity months Dustin Myrick assistant secretary for the Minneapolis. Grain Exchange is responsible for the communication systems within the building. The board is computer controlled and displays prices from of course Minneapolis. Also the Kansas City Board of Trade and Kansas City the Chicago Board of Trade which are most of the Grain and grain products and the board the Chicago Mercantile Exchange, which has the livestock. Futures displayed on the board and also some prices from the Winnipeg commodity exchange. These prices are all fed into a central computer here in the building and then the information is outputted to the board. It's pretty easy to see from the balcony or from the visitors balcony. There's telephones ringing the room. There's some teletype machines and there's course the giant electronic board what other perhaps invisible communication systems are there that are linking this room with other parts of the city and the state probably the most important link with the outside world as we put it is the Minneapolis Grain Exchange ticker Network. This is the network which Supplies price information from the trading floor to anyone who wishes on the outside world. Our Network extends all over the United States and most of Western Europe. As trades occur in our futures pit they are instantly transmitted over this network in our either print it out on a ticker machine or they are fed into a computer and displayed on a wide variety of boards or television screens. This this network is also used for the distribution of cash prices at the end of the day the USDA Agricultural Marketing service has a individual on the floor that gathers price information on the cash traits that are made and this information is also transmitted over that Network and is used by country elevators to base the the price that they will pay the farmer for his product. The individual firms that rent space on the trading floor also have their own Communications networks. He the telephone is has basically taken over from the telegraph system at one time the Western Union Telegraph people had a large booth on the floor. It was probably a square 30 by 30 and they would have 10 or 15 operators in there and then many many Runners on the floor these Runners were responsible for taking the incoming messages and going around on the floor and delivering them to the member that they were for the early markers for the boards were supplied by the telegraph company because they were the only ones that could listen to and translate the Sounders which were mounted up on the blackboards. So The trades were reported from the other markets the telegraph supplied board markers. Would Mark the board's how else might this be different today than it was in the past or there are other things that come to mind. I'm wondering years ago for instance if this was more crowded or less crowded, what was it like to be here 25 years ago. Do you think well, I don't know about 25 years ago. I can go back to the 20s and 30s and say from things that I've read that there were probably many many more people on the trading floor then than there are now methods of getting grain in from the country have changed considerably roads have been updated so much of our grain comes in by truck know where rail at one time was the one of the only ways to get it in. Also just the the size of the the cars that come in have increased greatly from the old old box cars that were used in Grain service. Now, we have jumbo Hopper cars which can be loaded and unloaded very quickly at elevators the barge traffic that goes up and down the Mississippi from Oh end of March beginning April sometime in there until end of November beginning of December to pending on the weather a barge can hold 50 thousand bushels of wheat. This is a lot. This is probably 11 rail cars. We also have seen the closing of the Duluth Board of Trade and much of the grain that passes through Duluth or Superior is traded here on this exchange. And of course the Duluth Board of Trade was finally closed in the last year. The only Services they were providing up there in recent years where the weighing and sampling Services of outbound inbound and outbound grain. And this was taken over by the federal grain inspection service just this last year. So there was really no reason for the Duluth Board of Trade to continue in existence. We have taken over many of the statistical functions that they were providing up there and much of the grain that was traded over there floor is now traded here in Minneapolis over our form Dustin Myrick assistant secretary for the Minneapolis Grain Exchange. I'm Tommy Roseman. (00:36:17) The time now is 1228. We're live from the Minneapolis Grain Exchange in Downtown Minneapolis. As we mentioned earlier in midday. There are two parts to the Grain Exchange Futures Trading Market, which we've heard a bit about already today and the cash grain market about which we are to learn more here is mpr's Rich diekman with more on that rich. Thank you very much Dan. I'm down here on the cash grain market side of the trading floor standing in the middle of about 30 some heavy wooden tables about 10 feet long and about three or four feet wide and on most of the tables. There are little Panza silver pans that have in them samples of grain and cards that go with those samples and on top of the chair up on top of the tables. There are little hat tree sort of Affairs, but instead of hats on them, there are lights of various colors and they go on and off as the telephones at the various desks and tables ring. I have three people down here with me on the cash grain market and we're going to talk A couple of merchants who trade grain here and we're also going to talk to somebody from the State grain Inspection Division of the agriculture Department first, we're going to talk to Kay Ralph who works for the PV company and K. Tell us a little bit about what the cash grain market is and how it's different from the Futures Market. Well a very simple explanation is what we do is take the grain that's raised out in the country handled through the local elevators and it's bought and sold in here on the trading floor on a daily on a daily basis. How does it come to you? And and what are these little tin pans or stainless steel pans that you have in front of you? It shipped to us basically in rail cars some of it and trucks these pans here represent samples of a car that will be traded today and the tickets in them are the grades that are from that sample what they represent is what we are guaranteeing that that Railcar will unload. It its destination like sample. So unlike the future. Side where there is no grain in hand where the Traders over there have nothing but slips of paper. You actually have a sample from the Railcar that you're dealing with. Yes we have. First item in that car the trading of the atmosphere over here is a little bit more easygoing than it is over in the Futures pit. Why is that? Well, it's time actually, I mean you can take all day to trade one car where maybe they have more of a time element up there and they're dealing with maybe larger amounts. Also where one car is only 2000 bushel and they could do one transaction. That might be a hundred thousand when you take a look at a sample that comes up here after it's been graded as we have in front of us here. There's a sample of barley. What what do you look for? Well when you're looking at the sample, you're looking for things that maybe don't show up on a grade. Maybe they say skin and broken is not quite what the grade would show or maybe there's fungus in it that doesn't show on the greater something that a buyer would be more apt to spot than maybe the gray doesn't show tell me a little bit about this sample. That's right in front of us here right now that has come from a railcar. Do you know where it's come from? And can you tell me a little bit about it? The sample we have in front of us now is a car spring wheat from Barry Minnesota this car sitting at the elevator and bury its 1490 protein what we are saying Is with this sample right here. This car one comes into a terminal or a meal will unload a to Northern 1490 protein and it's your job to find a buyer for this grain and make the transaction right. Now. We've had this car since 9:30 this morning. We've had various bids on it. And then it's our job to come up with the best bid for this company. Thanks very much key Ralph of the PV company. Let's talk next with Wilfred Fisher. Who is the assistant director for the Minnesota Department of Agriculture. Grain Inspection Division. Mr. Fisher. Good afternoon. Good afternoon. Now, it's your job and the job of your department here at the green exchange to put a grade on the grain that comes in from various places around the state and to then send it up here to the the buyers or the sellers who have requested your grading talk a little bit about what goes into the inspection process what you and your colleagues look for. (00:40:35) We received the sample from the railroad yards sampled by State of Minnesota Department of Agriculture Grant Inspection Division and the samples brought in to be inspected looking for the factors that determine the grade from there on the grade is then given to the tradespeople in the grain inspection at the Grain Exchange and they liked what was mentioned before determine if this is correct and also from it determine whether a re-inspection should be called if the grade is not satisfactory. This is the role we play as a neutral party to the sale of the green. (00:41:23) So it's your job to take a look at the grain. That's first of all a company comes to you and asks you we have a car and Barry Minnesota and we'd like it sampled and graded and you go through with that and then send the sample up here to the floor where the buyers and sellers then (00:41:38) inspected. That is correct. (00:41:40) Okay, and we were talking earlier this morning when I was down in your office that this is a beginning to look like a very busy time of year for you that the river is opened up late. The Mississippi's opened up late and that's causing some some problems down there. You're getting quite a bit of demand is that right? (00:41:57) That's right most places are putting on two shifts and we are prepared for one shift at this time. So naturally it causes us to work (00:42:06) over. Okay, and one more question that is who sets the standards for the grading of the grain does the state do that or does the federal (00:42:14) government the federal government? We are designated in this area as the inspection agency by the federal graded and inspection service the US (00:42:25) government. Thanks very much. Wilfred Fisher who is the assistant director of the Minnesota agriculture's grain Inspection Division here at the Grain Exchange. Finally with me. The ascent this afternoon is Roger Johnson who is grain Merchants with Atwood Larson company and mr. Johnson. Tell us a little bit about what it is that your job is here at the green Exchange in the cash grain market. Well Atwood Larson companies a grain commission firm, we represent the many elevators in the country that are affiliated with us. We provide financing for the country elevators and in turn the do business with us at this end. In other words one green is loaded out in the country. They forward a sample to us either through one of the outside inspection agencies, or which are located at Minot Jamestown Grand Forks Aberdeen and Fargo Plus. Minnesota state inspection agency here in Minneapolis. When we receive these samples as Kay mentioned earlier, we display them on the trading floor and we work those cars to the best ability that we have getting the best price for these Shepherds. How do you determine a price? What are some of the factors that go into it when you're standing around a table here and you have a sample in front of you? What are the kinds of things that are involved in setting a price for that car lot of grain? Well number one would probably be the protein content all cars of wheat are sold basis a certain protein the state lab and Minneapolis runs proteins on all the cards that they inspect and this is usually a good premium the higher the protein the more premium for the wheat as far as a mill is concerned. They want a good dark hard damage free product so that they can Mill this into good flour, which is going to make a good loaf of bread. So is it primarily bread that the grain that comes through here will end up as well. Majority of the wheat will go into the spring wheat I'm talking about now, which is what we mainly handle we do have winter wheat in this market also and we handled Durham the Durham goes into the pasta products, but the spring wheat is primarily for bread wheat, so it's primarily primarily protein content. It's my understanding from talking to mr. Fisher earlier that the protein content is now determined in a laboratory. What was it like before there were chemical tests? What kind of things did merchants do to determine things like protein content? And therefore the price of grain that goes well beyond my day, but you hear stories of the old-timers used to pick up a sample of we'd put it in their mouth and chew it and walk away pretty soon. They come by and they'd either buy it or rejected on the basis of how the grain reacted in their mouth. That doesn't go on anymore today. Not that I know of. Okay. Thanks very much Roger Johnson of Atwood Larson. And that's a very brief. Look at the cash grain market side of the Grain Exchange Dan back to you. Well, thanks very much rich and I know your guests can't hear us, but I just wanted to mention to you rich that if they have the time we're here in the visitors gallery and we sure would enjoy having them stop by the visitors Gallery because there are a few more questions. I think that we could cover and we appreciate that overview of the cash grain market. So if they would like to join us in the visitors Gallery encourage them to do so we are at about as I checked the Traders clock. I think it's 21 minutes are 22 minutes or so before one o'clock. You're listening to midday on Minnesota Public Radio. We're broadcasting live from the Minneapolis Grain Exchange today. We have talked so far with the president of the exchange Merlin Mills who's explained the operation in the Futures Trading pit and also joining us today. Lyle filleth manager of the Try Mont Cooperative elevator and Southern Minnesota. We had a private grain trade firm the McWhite Grain Company and Bob McWhite senior the head of that firm join us and talk a little bit about the activity as you have been hearing. There are really two areas of activity at the Minneapolis Grain Exchange activity. We just came from where mpr's rich deep man was standing. Where's the cash grain market area. The floor of the Grain Exchange is about equally divided into two parts in the visitors Gallery where we are located we were directly above the cubicles used by the Futures Traders cubicles that are just that really there about five feet by 7 feet. Each cubicle has at least one telephone often to telephones with perhaps as many as four to five lines on each phone one is red. One is white and they have the Hat stands or the lights on top of each cubicle that indicate if a telephone is ringing the market or the futures. Activity closes at 1:15 on the floor of the exchange and we are about oh half an hour away from that or so activity is not great for perhaps as long as 10 to 15 minutes in the Futures Trading pit, then all of a sudden there will be a burst of activity in the background you're hearing the voices of the traders who are in the Futures pit. They're talking they're looking at the electronic price quotation board and as they are viewing that board they are listening to the bids being offered by other Futures Traders and they have in their hands lead pencils, usually with slips of paper marking down the quotes the bids and the trade is consummated by a nod of the head an indication that it is accepted and that's all at the end of the closing day. The books are balanced but it is the word of the traders that operates here on the Minneapolis Grain Exchange the will be having news headlines just before 1 o'clock as usual as part of midday. And we'll be getting more weather information to John Chardy and a word in your ear will not be heard as part of midday today. We have our visitors Gallery location, which is the site where most of the visitors to the Grain Exchange are taken to and the visitors Gallery is something that many of you might not be aware of that is for your use really you can check with the Minneapolis Grain Exchange make arrangements for a tour and you can come to the visitors gallery and look over the operation and there are panels describing the operation on the floor. So you won't be without some guide you'll have the operation on the floor to view as you look at the panels to get some explanation of what is going on all the guests from the cash grain part of the Minneapolis. Grain Exchange have joined us. Mr. Wilbur Fisher who is with the grain Inspection Services part of the Minnesota Department of Agriculture Wilbur. Thanks for joining us as part of. Midday. I was listening to the explanation of how grain is tested and I found that quite interesting. For program went on the air today, Rich was telling me that this is a very busy time of year for (00:49:21) you. Yes, it is. All of our persons are out working some of them as much as two shifts to handle the situation because we were unaware of this movement coming at this time what precipitated all the movement do you think balance to delay that has taken place due to the weather situation high water in the river. And then naturally the sales overseas. (00:49:53) It's been an especially active time for that is we heard earlier from some of the Futures Traders. The inspections part of the Minnesota Department of Agriculture is taxpayer supported and there used to be Federal inspection of grain in Minnesota. Is that (00:50:06) right? There still is federal inspection. We are the designated agency of the federal grain inspection service here in Minneapolis were designated in Duluth were delegated. The grain is inspected and has to be before it is exported out of the country. There are not (00:50:35) there are in some parts of the country. I understand private grain inspectors that is to say there are not always enough public grain inspectors to go around so they must hire private crane inspectors. Is (00:50:46) that right? That's right. (00:50:47) And how does that work? Are they do the grain companies hire them to inspect the Grain and arrive at prices. No, (00:50:54) they do not they are they have to bid for this request for the agency to act for the grain inspection service federal grain inspection service to your way of (00:51:10) thinking what's the stronger system the public form of inspection or private inspection and bidding for the (00:51:15) inspection services. Well in a larger larger area a public inspection would be a stronger position. (00:51:28) The cash grain that (00:51:31) we the activity that we (00:51:32) have seen in that section of the Grain Exchange is bustling as you mentioned earlier and this is a seasonal operation. I presume so that it slows down in some part of the Year (00:51:42) doesn't usually after the shipping season when the grain is taken from the sample. (00:51:51) Some of the grain is taken to the labs in the labs. As you pointed out are in this (00:51:56) building is yes, (00:51:58) and besides the protein test what are some of the other tests that you conduct on the grains and (00:52:04) we establish. How much dockage is in the car dokic being what is what is the material that's removable by Machine that's required to be run over by the inspection service rules and regulations. (00:52:21) What would you say well were about the quality of grain that you've been seeing over the past few years. It's getting better. (00:52:27) Well, it would depend upon the weather situation. The quality of the grain is determined by the climatic conditions that exist through the period of the growing season. (00:52:49) Especially important with barley for example, nesting barley. What is the distinction between malting barley and Rye barley for feed grain? (00:52:57) Well malting barley is probably a better quality in the eyes of the mall stir in that it's probably not skin and broken as much and this is one of the factors that is related to the inspection and Grading at the grain. Let me jump in here for a moment gentleman and ask you a question. Mr. Fisher. We were talking earlier this morning when you gave me a brief tour of the inspection lab downstairs that the samples come to you in a number of ways from a number of points around the state either from sightings in western and Northwestern Minnesota or right here in the Twin Cities and you were mentioning that one of the ways you get them here quickly is via a newspaper delivery trucks. This is true the trucks that deliver the papers out to horbas. Various locations in the country returned from pickup points that we have established to this office early in the morning. So the brain can be graded prior to the closing of the market so they cars are not held in position. So as to cause the demurrage either further Shepherd and making use of the car shortage situation that now exists. So there's a bit of pressure on your staff sometimes to not tie up railroad cars. It might come to that. Well, this is true because the ICC does check with us in if we do use any time such as delaying cars by not picking up these cars but many times we not are not informed as to where the exact location is, which requires an amount of time of hours to pick up these cards (00:54:45) and a lot of dollars in And that's hang on this that's intense pressure on the state surface. Well Wilbur Fisher, thank you very much for joining us and giving us that explanation of the state's role cash grain market on the Minneapolis Grain Exchange. Appreciate you spending time with us today as part of midday. (00:55:01) All right. Thank you (00:55:03) back with us. Again is Bob McWhite senior of McWhite Grain Company and Bob we've been hearing in the background all throughout this broadcast the voices from the pit when we talk with you about 20 minutes ago. There was not much activity there seems to be a bit more. So it was a few minutes ago. What what are the traitors (00:55:22) doing? Well, actually it appears that the market is backing off a little bit. It went down after the opening and then rallied back and now we're having a further late setback and generally the the Traders are watching all grains of beans seem to be having some trouble Chicago wheat being seems to I was in trouble so it gives them the idea that we might possibly sell a little lower here from the present levels. And of course the only thing many times it happens that speculators like myself end up short and have to come in and cover at the clothes and that's what we call a short covering rally now there it's my opinion that the people in the pit are perhaps a little long at this time and would like to even up so we could look for a little further sell off here from this point (00:56:17) long. Meaning that there are contracts being held at they us (00:56:20) right now. That's right. Now, what would you say? (00:56:23) How would you compare Bob the position of the major grain companies as to your position as a small independent brain trading for (00:56:31) what are their goals compared to your goals? Well, their goal is primarily to protect their cash inventories in the relative to price. So they use this our futures in the other Futures as a as a Jean agency or an insurance agency where they do protect part of their price risk in inventories or in sales that they've made whereas in my particular instance is one of these speculators in the pit. I am either outright long or outright short at any time and don't pretend to hedge anything. It's just an outright speculative ownership where they use this as a definite insurance and price protection for their functions. Now you are of a Speculator and (00:57:15) your private grain trade firm in the Minneapolis Grain Exchange do trade on other (00:57:19) exchanges the Chicago Board of Trade. Yes, we do. Now, how do you accomplish that you're physically here? How are you we trade we trade through commission houses and other other exchanges and they have direct communication with the other markets so that our orders are put in and and in a matter of seconds, they're transmitted to the particular Market we want to trade (00:57:45) in and besides Keeping track of your position here. Then you're watching your position. Perhaps on (00:57:49) three or four other markets, right? The there is a market in Winnipeg and exchange in Winter, right? How active is the Winnipeg exchange? I would say out of all the exchanges it most likely is one of the least active active all with (00:58:05) Chicago New York being (00:58:06) perhaps I think Chicago the Chicago Board of Trade is the most active and I would say that Chicago Mercantile as an about a par with it then in New York exchanges that (00:58:21) finally by we don't want to keep you much longer but earlier it was mentioned that sunflower and sunflower oil may be one of the new Commodities coming into the exchange rate of other sorts of Commodities. Can we expect we saw a few years ago (00:58:32) pork bellies for example entering the exchange? Well, I don't pretend to speak for the exchange but I would say that sunflower seed since good part of the production happens. B&R particular area is something that could really be justified in might have a chance of working here. I think that there's a possibility we may once again trade in oats, and I think this is Justified because we do have a tremendous production of Oaks in this area. There's a possibility we might try trading and rye and barley again, but for the time being I would say that sunflowers seeds and oats appear to be the two that I think they are considering at this time and hopefully they'll work out to point where we will be trading them. It was strange to you. Thanks to Bob and quite senior of Makai green company for talking with us today pleasure. (00:59:27) Well that just about wraps it up from the Minneapolis Grain Exchange. And we want to thank Rich deepen and Tommy Richmond for helping out. We'll be back in a few minutes to wrap it up here with news headlines. However is Alan Cyril (00:59:40) Thank you, Dan and good afternoon. Everyone scattered heavy thunderstorms continue over Northeastern Minnesota and Northwestern Wisconsin, Minnesota to the mid 70s in the South lows tonight in the mid-30s to upper 40s in the high Tuesday in the mid 40s to the middle 60s across the state for the Twin Cities variable cloudiness through Tuesday with a chance of showers and thunderstorms this afternoon and tonight highs this afternoon about 70 degrees lows tonight 50 and the high Tuesday in the Twin Cities somewhere in the 60s. It's two minutes. Now before one o'clock. That's our look at news and we return now to Dan (01:00:13) Olsen. Well, thank you Alain soral for doing double duty today not only as part of the morning program, but for Midday newscasts, and we also want to thank all of our guests who joined us as part of our live broadcast from Minneapolis Grain Exchange in Downtown Minneapolis, Roger Johnson of Atwood Larson Company K Ralph of PV company who talked about the cash grain market thanks to Merlin Mills the president of the Minneapolis Grain Exchange. Also thanks to Wilfred Fisher of the grain Inspection Services part of Minnesota Department of Agriculture. Thanks are due to Dave's Arkin of the Minneapolis Grain Exchange for helping arrange our location here in the visitors gallery and also thanks to Lyle filleth manager of the Tremont Cooperative elevator Bob McWhite senior of McWhite Grain Company, one of the trading companies in the Futures Market our technical staff Linda Marie here on our visitors Gallery site at the gallery site. Only green exchange floor Buzz Emperor in our st. Paul Studios, and we want to remind you that tomorrow is part of midday will take you to the National Press Club in Washington DC where Colorado Senator Gary Hart will address members of the national Press Club our live coverage to begin just after noon tomorrow as part of midday stay tuned now for an update of the events calendar followed by music from our Studios at st. John's University at five o'clock this afternoon more news and information on all things considered. This is Minnesota Public Radio a listener-supported service.