Dough Boys

At the Minneapolis Grain Exchange, commodity traders are an endangered species

It's 9:28 a.m. on a Wednesday, and the predators have assembled in the Pit, a sunken octagon of wooden steps perhaps 30 feet in diameter. It's an anxious crowd of no more than three dozen. They are mostly men, dressed in brightly colored jackets with large front pockets. Their eyes dart back and forth between a digital clock on the wall and their competition.

"Five seconds!" comes a cry from the Pit. At exactly 9:30 a buzzer sounds. Pandemonium ensues. The men begin screaming at one another, barking out an irregular cadence of months, numbers, and unintelligible phrases. "Four July!" screams one man. "Two July!" shouts another. They gesticulate wildly with their hands, like over-caffeinated traffic cops. Occasionally someone will pull back from the fray and pump both fists in the air, his face beaming in exultation. "Sold! Sold! Sold!" shouts one man with a bushy mustache and a Christmas-red blazer.

The maple wood around the Pit is worn so thin from the worried paces of the men that it can no longer be sanded or refinished. The cause of their angst? Grain. Or, more specifically, hard red spring wheat, a high-protein crop grown in the upper Midwest and Canada, used in bagels, cereals, and other foods. "Two July," in this morning's grain-trading parlance, simply means that a trader is looking to sell a contract, or 5,000 bushels of wheat--priced at $3.3225 a bushel--to be delivered in July. If the cadence is reversed (i.e., "July two"), then someone is looking to buy at that price.

Wheat traders feverishly work the Pit at the Minneapolis Grain Exchange
Tony Nelson
Wheat traders feverishly work the Pit at the Minneapolis Grain Exchange

Spring wheat accounts for more than 90 percent of the trades at the Minneapolis Grain Exchange, home of the Pit. For 119 years the Grain Exchange has provided a means for farmers, millers, and anyone else interested in purchasing or selling grain to barter for a fair price and a quality product. Every weekday, from 9:30 to 1:15, traders gather at the 98-year-old building adjacent to the U.S. District Courthouse in downtown Minneapolis and do business. Last year 1,164,591 contracts of spring wheat were traded.

"Every time you buy a box of cereal, every time you buy a loaf of bread, we're probably involved in that, but you just don't see it," says John Miller, chairman of the Grain Exchange's board of directors. Miller's eighth-floor office at the Grain Exchange overlooks the banks of the Mississippi River, where flour mills not so long ago flourished, providing Minneapolis with the moniker Mill City.

In addition to spring wheat, the Grain Exchange offers contracts on white wheat, durum wheat, and cottonseed, as well as non-grain markets such as black tiger shrimp, white shrimp, and electricity, but there are few traders in these markets.

Despite the continued might of the spring wheat market, however, the Grain Exchange--and the Pit--is an endangered institution; threatened by the advent of online trading. In Europe similar trading pits have vanished and experts such as Bob Wilmouth, president of the National Futures Association, predict a similar fate for their U.S. counterparts. "They'll have a difficult time surviving if they don't go to electronic trading," says Wilmouth, who is also a past president of the Chicago Board of Trade.

On this Wednesday morning, the price of spring red wheat has tanked by 9:50 a.m. July contracts have bottomed out at $3.215 per bushel, down 4.5 cents since the opening bell, setting a new low. The rapid decline (by grain standards anyway) has set off a particularly fervent round of trading.

"Some asshole at four in the morning came out with a new weather forecast and it looks bearish," explains trader Jerry Helfand as he surveys the action from just outside the Pit. The weather gods are calling for more rain, Helfand explains, which means more grain, which in turn means a lower price in the marketplace.

Helfand is a "recovering lawyer" and self-employed grain trader, gambling his own money on the whims of the wheat market. Like all traders in the pit, the 44-year-old is a member of the Grain Exchange, which carries an entrance fee of about $15,000 (seats on the 402-member exchange are auctioned off to the highest bidder, so the exact cost can vary from day to day). Helfand was drawn into the game by the prospect of testing his financial mettle against the market. "You're your own boss, and you're responsible for your own success or failure," he notes.

Helfand is dressed in a turquoise mesh jacket adorned with stars and planets. The outfit was picked out by Helfand's eight-year-old son. In his defense, Helfand points out that he is not the only one in the Pit with a tenuous grasp of style. "Rich has got vegetables on his jacket," Helfand notes, pointing to another trader. "Charlie's got that yellow checkerboard over there. I have the solar system." The loud attire is a smirking acknowledgment of a long-standing rule requiring sportcoats on the trading floor.

Inside the Pit a portly, disheveled man in a gray jacket screams out "two July!", inciting another frenzy of activity, and Helfand re-enters the fray. By 10:06, though, the crowd loses its vigor. Barely a half-hour has elapsed since the opening bell and half of the day's buying and selling has already been completed. Most of the traders now stand around idly, staring up at the board to see what's happening in Chicago or Kansas City, the only other active grain markets in the country.

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