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Corn market historical trivia question


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Corn market historical trivia question

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  #1 (permalink)
st. louis missouri
 
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I have been looking at corn charts today and noticed something on the monthly chart. The last monthly bar in 1997 has a volume of 5.7 million and the next monthly bar in 1998 has a volume of 1.3 million, then the volume stays low for more than 7 years. Open interest dropped by the same percentage. What happened at the end of 1997? Was there some kind of regulation policy change? Is my chart data just screwed up? It either looks like a mistake or there was a major change that effected volume for a big way. What was it?

just checked other grains and the phenomenon is in soybeans as well, but not wheat.


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I guess period of hyper speculation after the big droughts 1995, 1996

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https://www.google.com/url?q=https://www.bls.gov/opub/mlr/1998/08/art1full.pdf&sa=U&ved=2ahUKEwiiidCS3fzdAhXKJVAKHcWBBFIQFjAAegQIBBAB&usg=AOvVaw1jFR0g2J7eLHvYLap2ungE

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I'll read through that but I doubt it will satisfy my curiosity. It was like a light switch from dec '97 to jan '98. I have another pic below to show how odd it looks. I was the lowest volume since the early 70's by far. My weekly chart shows it happening in one week. It's like 60% of the positions got out before Christmas and didn't get back in for ........ 8 years.

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Well the document does explain the increase in price /volume but indeed not the sudden drop

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rlstreet View Post
Well the document does explain the increase in price /volume but indeed not the sudden drop

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yeah. It's talking about an event prior to the volume drop. It was published in August of 98 and probably written several months before. It doesn't address the question I am posing.

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harryguy View Post
yeah. It's talking about an event prior to the volume drop. It was published in August of 98 and probably written several months before. It doesn't address the question I am posing.

I mentioned in my first post "I guess..". So no perfect answer from my side.

And yes it would be nice or better if some one who knew stepped in and gave us the answer right away as I'm very curious myself.

But as long no one steps in I just go out and explore and came up with this document.

The document doesn't give us an answer but does give a clue. It describes the high degree of speculation because of the droughts / scarcety.

Isn't higher volume associated with speculation not an reasonable assumption?

The sudden drop is a mystery. I can only assume that demand was completely gone after period of hyper inflation. Like markets have cycles of expansion and contracting.

Hopefully some knows better



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st. louis missouri
 
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Didn't mean to shoot you down. Thanks for helping me dig for an answer.

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harryguy View Post
I have been looking at corn charts today and noticed something on the monthly chart. The last monthly bar in 1997 has a volume of 5.7 million and the next monthly bar in 1998 has a volume of 1.3 million, then the volume stays low for more than 7 years. Open interest dropped by the same percentage. What happened at the end of 1997? Was there some kind of regulation policy change? Is my chart data just screwed up? It either looks like a mistake or there was a major change that effected volume for a big way. What was it?

just checked other grains and the phenomenon is in soybeans as well, but not wheat.


The below is the comment attached to corn from my data provider CSI.

Prior to 19980101, Volume and Open Interest are given in 1000's of bushels rather than contracts

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It could be a few different things:

1. electronic volume vs pit volume vs combined volume. Depending on your data source, these all might be different

2. The migration of trading moving from pit to electronic

3. Change in what constitutes a "contract." Back in the pit days, when you had to phone in orders, you'd say "Buy 5 Christmas Corn at the market" even though this was 1 contract (5,000 bushels). Maybe - I don't know - they changed from recording volume from 5 for each contract to 1.

4. Maybe the rule for counting volume with spread trades (like calendar spreads) changed.


My guess would be on pit/electronic recording. Note you also see weird volume things with Beans and Wheat, too.

I'd ask the CME, they should be able to explain.

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muttoez View Post
The below is the comment attached to corn from my data provider CSI.

Prior to 19980101, Volume and Open Interest are given in 1000's of bushels rather than contracts


Ah Ha........I knew it would be something like that. The numbers even fit together. Thank you for that!

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