• Skip to primary navigation
  • Skip to main content
  • Skip to footer
Daniels Trading

Independent. Objective. Reliable.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Careers
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • DanielsAg Mobile App
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Hedging Videos
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • The Swine Times
      • Technical Ag Knowledge
      • This Week in Grain
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
    • Webinars
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • GAIN Capital Futures
    • StoneX
  • Contact
 

Inside the Grain and Oilseed Markets: A Six Part Series

July 15, 2011 by Trey Morris| Ag Marketing

Part One: The Markets that Spawned an Industry

It is always important to have a good understanding of any market’s unique specifications and its fundamentals before deciding to trade the specific market. However, what is also important, and often gets overlooked, is the specific market’s origin. One key benefit to this information is the added comfort that the trader will gain prior to participating in that market.

In this series, “Inside the Grain and Oilseed markets: a Six Part Series”, I will be discussing the ins and outs of these two major markets. To start us off, we will need to know how this particularly important sector of the commodity markets came to be. So, let’s take a brief look at how it all began.

The Beginning of Grain Futures

Before the system of grain trading we know today, grain was traded by farmers in a less efficient, more risk exposed manner. Prior to the establishment of the Chicago Board of Trade (CBOT), farmers were at the mercy of the market. When harvest time rolled around for farmers in the Midwest and they wanted to sell their grain (mainly wheat and corn), prices were typically low due to the ample supply in the market. Accordingly, when farmers needed to buy grain to plant during growing season, prices were high due to the scarcity of grain that time of year. Both situations caused chaos, sometimes even prompting farmers to burn their grain for fuel instead of selling it for a low price and paying transportation costs.

It was not until April 3, 1848 when 83 individuals, consisting of merchants, businessmen, urban pioneers, industrial visionaries, and other entrepreneurs, established the Chicago Board of Trade. The Board of Trade was established for the purpose of bringing to order the tumultuous Midwestern grain markets. The board allowed farmers to purchase what were known as “futures contracts”. This allowed the farmer to manage his risk against unpredictable price fluctuations in the market. Farmers were now able to protect themselves from paying too much and selling for too little.

Growth

At first, trading was slow due to the limited accessibility to certain markets via the CBOT. Tables turned when the Illinois and Michigan canals opened and allowed access from the Great Lakes to the Mississippi River, opening up new markets accessibility. In 1850, Chicago became the international headquarters for agricultural commodities. It was also self-regulated, meaning that all disputes and conflicts were handled in-house by “gentlemen’s rules”. By the end of the 1850s, the CBOT introduced a new grain grading system that allowed the markets to run more smoothly. The old system inspected a farmer’s grain many times during the selling process. This was to ensure that cleanliness and quality was where it was supposed to be. The new system allowed grain to be graded one time before storage, which was then placed in a bin with only grain of the same quality. Once sold, the farmer was issued a receipt for the amount of grain sold and its quality. This process also allowed for larger volumes of grain to be traded.

Arrival of the Speculator

With the increased volume brought about by the new grading system, the CBOT noticed one major issue that needed to be solved. At times, the market would find itself with more buyers than sellers, or with more demand in the market with no one to meet it. This allowed an opportunity for entrepreneurs to take their own money and act as both the buyer and seller with the hope of making money off the movement in price. The introduction of “market speculators”corrected this imbalance and provided critical market liquidity. These individuals would often get in and get out of trades hundreds of times a day just trying to profit from small moves in the market.

Introduction of New Contracts

After a near halt in trading at the CBOT during the World Wars, corn and wheat contracts had come under government control, denying speculative interest. The only markets that were allowed to be traded were rye and soybeans. Soybean futures trading arrived at the CBOT in 1936 and grew to be one of the CBOT’s most actively traded commodities. By 1950, soybean oil and soybean meal contracts were added. Later on down the road, the CBOT added its first non-grain commodity, iced broilers, which are no longer traded. Next in line were plywood and silver. By 1981, the CBOT had introduced all metals, currencies, bonds, energies, and even stock indices.

Where We Are Today

The grain and oilseed markets are more heavily traded today than ever before. New interest and more uses for wheat, corn, and soybeans have increased the popularity of these markets. Even though the majority of contacts are now traded electronically, the grain markets are still traded on the same fundamental purpose: to manage risk and to provide market liquidity.

There will always be a need for futures trading. Above all, grains pioneered an important marketplace for risk management that is necessary for everyday economic efficiency.

Comprehensive Grain & Oilseed Futures Kit!

Whether you are new to the agricultural commodities industry or a seasoned trader, it is important to have a solid understanding of the markets to assist you and your trading strategies. Through our comprehensive futures kit, you will gain a complete overview of the grain & oilseed markets!

Register Now

Filed Under: Ag Marketing

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

Daniels Trading
100 South Wacker Drive, Suite 1225
Chicago, IL 60606
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot

Copyright © 2021 · Daniels Trading. All rights reserved.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top