With the recent events in the Middle East we’re all aware of the power of Twitter as an agent of change. I must admit, initially, my personal use of Twitter was limited. Recent disasters like earthquakes, blizzards and Charlie Sheen have me monitoring Twitter more frequently. Mainstream news sources just can’t seem to keep up with such fast developing events. Twitter gives me a sense of what’s happening in real-time. But using Twitter to help analyze commodity futures trading? Fascinating!
I came across an article on CNBC.com that profiled corn farmers use of Twitter to gauge crop yields. Two farmers from Nebraska received Tweets from their peers, complimenting them on the quality of their crop compared to others in the area. Knowing that their yield would be sub-par, the farmers speculated that crop yields for the season would be lower than normal. They waited to price their crop and were able to get a price per bushel 50% higher than if they had priced it shortly after harvest. This netted them $200,000 in additional profit. Nice!
Now that the secret is out, commodity traders will be scouring Twitter for the handles of corn farmers, soybean farmers, coffee growers, gold miners, workers on oil rigs. They’ll be looking for any hints of changes in yields or problems with production to help them analyze trades.
This isn’t trading on inside information by definition, but it’s darn close. Who better to get your information from than the pig farmer if you’re trading pork bellies?
This brings back memories from one of my favorite movies: Trading Places with Eddie Murphy and Dan Aykroyd. One plot line was all about stealing the crop report for oranges to corner the market in frozen concentrated OJ to exact revenge. Why wait for a crop report when you can intercept tweets from the growers directly? Oh, how times have changed.