This heat wave gripping the Midwest took grain traders by surprise, according to a report from Reuters. Reporter Sam Nelson writes that the recent “whiplash” in corn prices on the Chicago Board of Trade is partly due grain traders and hedge funds missing early signs of the Midwest drought because they were caught up in changes to the Chicago trading pits.

From Reuters:

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 (Rich) 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.

Reuters noted that usually "weather markets" have followed a relatively predictable pattern: A rally one day, a downturn the next. Weather forecasts change slowly, and the damage is rarely done overnight. And like the quick shifting nature of weather, disaster has nearly always been averted.

But this one feels different, veterans say.

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