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Issue 30 |
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Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association. |
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Taming the Bulls and Bears: Retiring Grain Exchange president Jim Lindau's parting thoughts on grain futures, online trading, and cottonseed in Minneapolis By Tracy Sayler No more margin call managing for
James Lindau: On May 31, Lindau retires as president and CEO of the Minneapolis Grain Exchange, a post he's held since 1988. Under Lindau's leadership, futures trading volume increased dramatically, and the Exchange has been profitable without any member assessments. At one of
the smallest exchanges, where the challenge to grow and gain market share is difficult, he directed focus to the flagship hard red spring wheat contract, emphasizing that
contract specifications closely follow the value of wheat grown by farmers in the Upper Midwest. Lindau encouraged new markets at the Exchange as well, overseeing the
introduction of several new contracts including white wheat, durum wheat, Twin Cities electricity, black and white tiger shrimp, and beginning in May, cottonseed.
In his twelve years at the Exchange, Lindau encouraged outreach efforts to farmers seeking protection from falling markets, as well as to foreign traders such as the Canadian Wheat Board (CWB) and the Australian
Wheat Board (AWB). He said he is pleased that the CWB has moved from not trading at the MGE to being one of its largest customers. "By using the price discovery tools provided by the Exchange, the CWB
will increase its visible participation in world markets while providing risk management for the Canadian farmers it represents," Lindau says. In addition, Lindau helped the Exchange embrace technology as it pursues
various avenues for Internet trading. Prior to his tenure at the Minneapolis Grain Exchange, Lindau served as mayor of Bloomington, MN, where he was a principal force behind the
development of Bloomington's Mall of America. Before his 11 years as mayor, Lindau was employed by The Pillsbury Company for 23 years, where he rose to become the company's vice president of commodity trading.
Before exiting the trading pit, Lindau participated in a short interview for Prairie Grains: PG: Do you think online grain trading will enhance MGE business or take away from it? Lindau:
Enhance. It will open the marketplace up to people who haven't used it before and become a participant when they want to and need to. I have said jokingly that the day will come when anyone with a zip code and
a credit card can participate in commodity markets. They will need to have some background knowledge to do that obviously, but the point is that it's becoming that easy.
PG: Will individuals be able to buy and sell options and futures on a MGE live web page any time soon? Lindau: "Soon" is too vague, but electronic trading should happen within
2-3 years. Could it replace open outcry? It's possible that the pits may eventually be replaced and I suspect everyone trading in the pits suspects
that as well. Our (trade exchange's) reason for being is to provide risk management and price discovery, and it's important that the relationship
between the underlying cash contract and the futures contract correlate. If that can't be done electronically, then pit trading will continue. PG: Minneapolis is a long way from southern cotton fields; so why
are cottonseed contracts now being offered by the MGE? Lindau: Actually, people came to us and indicated their interest in it, since the Cotton Exchange (New York) is looking at bigger things. The world it
is a shrinking. Location does not control futures markets. The Internet, for example, knows no boundaries. PG: How has the durum contract been working out at the Exchange? Lindau:
It is still developing. Early on it was excellent, but over the last year it has not been a good performer. We have tried to make it more
appealing, but we can't trade it, we can only shape it. We still hope that it will attract more users. PG: Could the durum contract be dropped? Lindau: It could be, but that won't be my decision.
PG: Any thoughts on the Exchange's mainstay spring wheat contract? And do you think the Exchange will ever move from trading in bushels to trading in metric tons? Lindau:
The hard red spring wheat contract has been called the best contract in agriculture. Why? Because it has the best correlation to the cash product, and the best delivery system. This exchange has also been
more sensitive to modify the futures contract to reflect the cash contract. Trading in metric tons could happen, but I don't think that's an important
issue. Actually, this is the first time that question has ever been brought up to me. PG: Do you foresee any new commodities being traded at the MGE soon, or any other changes? Lindau:
Can't say. But if there's logical value, the exchange will consider trading whatever the market demands. There is more international trading involvement. We're seeing it, for example, from flour mills in Asia that will
price with suppliers on our futures contracts. That will increase, but only in the context of free markets. PG: Have grain producer views about the Exchange and use of it
among producers changed any during your 12 years as president? Lindau: Too many producers are still looking to Washington for risk management solutions instead of the Exchange. Change is talked about,
but not obvious. Big producers do use the Exchange more. PG: Should grain producers be concerned about grain conglomerates, fund traders, or the Canadian Wheat Board trading at the MGE? Lindau:
No. They should be delighted by the liquidity they provide, as well as the price transparency. I'm never going to try to make excuses for the uninformed. But if you look at the Exchange, over a million contracts
a year have been traded for several years without a customer complaint. It's available and accessible to anybody. PG: Any sage advice you'll pass on to your successor? Lindau:
Principles still count—stick to them. New and old testament principles can still be applied to business. A deal is a deal. Say what you mean and mean what you say. Don't discriminate between large and small.
PG: What parting words of wisdom would you have for grain producers? Lindau: Write a comprehensive business plan—from analysis of inputs
and costs to production and marketing—and follow it. Keep track of the whole flow from seed to marketplace.
"Taming the Bulls and Bears" is a market education feature of Prairie Grains, made possible by the Minnesota wheat checkoff administered by the Minnesota Wheat Research & Promotion Council. If you have a question or topic you'd like to see addressed in this feature, send it to: MWRPC, 2600 Wheat Drive, Red Lake Falls, MN, 56750. Phone: 1-800-242-6118. Email: mnwheat@gvtel.com |
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