Except for the spiffy Hunter rainboots that can cost more than $100 a pair, the fund manager was one with the crowd – farmers and industry folk in a muddy cornfield in the heart of U.S. grain country.
Hedge fund officials are making their way to fields in the midwestern United States in record numbers to get a firsthand view of the crops – and their investments – which have been inundated by excessive rains and scorched by above-normal temperatures.
“It’s important to see the crop,” said Adam Tepper, a commodities analyst with ag-focused investment company Arlon Group.
“It’s also just as important to gauge consensus expectations as it is to see the yields themselves.”
Hedge fund interest has helped drive grain and oilseed prices higher but also increased price volatility by moving in and out of the markets, often shifting prices by the daily trading limits.
Corn prices have risen 223 per cent in the last five years, hitting an all-time high of $7.99-3/4 a bushel in June. Burgeoning global demand from the livestock and ethanol sectors has contributed to the rally but many also view speculators as being responsible, particularly in 2008 when corn futures surged to a then-record $7.65 despite a U.S. harvest of 12.1 billion bushels, the second largest in history at the time.
Tepper brought along his iPad this year on the tour, which projects corn yields and counts soybean pods, and used its GPS capabilities to help keep his group which had reps from nine funds on its proper route through gravel roads in rural Ohio.
The fund representatives, who now account for about 10 per cent of the crop scouts on the tour, say the tour can provide valuable lessons about how factors such as drought and flooding affect the commodities that they usually see only as prices on a trading screen.
“There are many parts of the ag industry that have used the crop tour as a training ground,” said Chip Flory, editor ofPro Farmernewsletter, which hosted the tour.
“We are more than happy to be a part of filling that role of educating people who are truly interested in learning what they need to know about the ag industry.”
Many of the fund representatives admitted they had never been in a corn, soybean or wheat field before.