Floods Bring `Insider Trading' On Futures Market -- Weather Forecasters Drawn To High-Risk Commodities Trade

KANSAS CITY, Mo. - About the only thing more mercurial than the weather might be the grain and soybeans futures market.

Put the two together - weather forecasts and future crop prices - and you've got a recipe for a high-risk, high-stakes game that's irresistible to some meteorologists.

Sometimes it pays off. Dave Dusik, meteorologist at WDAF-TV in Kansas City, says he's made a 250 percent return on his bet that soybean prices would soar because of relentless rains in the Midwest.

Dave Relihan, chief weatherman at WIBW-TV in Topeka, Kan., missed the upswing in prices caused by flood conditions. But he's poised to jump into the market at the first sign the rains might cease.

"A meteorologist needs to know more than just the forecast," Relihan said. "He also needs to know the psychology of the market or else he's going to get burned. And if he doesn't understand agriculture, he's going to get burned."

Commodities trading by weather forecasters, farmers or anyone else with an edge about crop performance is perfectly legal, said Dave Gary, a spokesman for the Commodities Futures Trading Commission.

"The concept is entirely different than in securities, where someone might get advance information about a company's performance," he said. "Insider information is not a violation of the Commodities Exchange Act."

A meteorologist who thinks the price of soybeans will go up because damaging weather is on the way might buy a soybean futures contract. The contract specifies delivery at a certain date and price. If the futures price rises, the contract can be sold for a profit.

The gamble isn't for everyone. Some meteorologists say they know just enough about weather and agriculture to stay clear of any trading pits.

"My father's a commodities broker out of Topeka," said Cory Barron at KWCH-TV in Wichita, Kan. "I don't mess with it because it's too risky. You can lose a lot of money in a hurry."

He and other meteorologists have access to computerized forecasts as well as satellite data showing weather patterns with likely trouble spots. When a pattern begins to emerge, he says, it can be tempting to bet a crop might go sour because of bad weather.

But another credo helps temper that desire: "When you are certain about a forecast, that's a pretty good sign it's not going to happen," Barron said, only half-joking. "Those aren't good enough odds to play in the commodities market in my book."