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Commodity Futures Trading Commission 

CEA CASES 

NAME: CARGILL, INCORPORATED V. THE BOARD OF TRADE OF THE CITY OF CHICAGO 

DOCKET NUMBER: 6 

DATE: AUGUST 16, 1940 

DOCUMENT TYPE: DECISION AND ORDER 

UNITED STATES OF AMERICA 

BEFORE THE SECRETARY OF AGRICULTURE, THE 

SECRETARY OF COMMERCE, AND THE ATTORNEY 

GENERAL, SITTING AS A COMMISSION PURSUANT 

TO SECTION 6(a) OF THE COMMODITY EXCHANGE ACT 

COMMODITY EXCHANGE ADMINISTRATION DOCKET No.6. 

In re: Cargill, Incorporated, Complainant, v. The Board of Trade of the City of 

Chicago, Respondent, 

ORDER 

The referee in the above-entitled proceeding has referred to this Commission 

the respondent's motion to dismiss, filed on June 5, 1939, together with the 

referee's report thereon, consisting of proposed findings of fact, conclusions 

of law, and recommended order. 

This case originated with a complaint by Cargill, Incorporated, against The 

Board of Trade of the City of Chicago, filed February 10, 1938, under Section 

6(a) of the Commodity Exchange Act, in which it is charged that The Board of 

Trade of the City of Chicago, a "contract market" designated as such by the 

Secretary of Agriculture under the provisions of the Commodity Exchange Act, 

violated Section 5(a) (5) of said Act. 

The alleged violation consisted of the issuance of an order providing for the 

delivery of notices of intention to deliver relating to September 1936 futures 

continuously on Tuesday, September 29, 1936, up to eight o'clock,p.m., the last 

day for delivery on this future being September 30. 

The complaint further charges that The Board of Trade of the City of Chicago 

violated Section 5(d) of the Commodity Exchange Act. The Board of Trade is 

alleged to have violated this section in that both in 1936 and in September of 

1937 the governing board thereof, being the Board of Directors, did not provide 

for the prevention of manipulation of prices but, to the contrary, permitted the 

so-called Business Conduct Committee of the Board of Trade of the City of 

Chicago to aid and abot manipulation of prices downward. Said Business Conduct 

Committee issued orders, made known to short sellers, upon holders of futures 

contracts for purchase of corn for September, 1937, delivery to dispose of their 

commitments without any equivalent orders to holders of futures contracts for 

sale of corn for September delivery either to buy in their contracts or to 

refrain from further extending their short position. The same unauthorized 

demands made upon holders of futures contracts in 1937 were also made in 1936 by 

the Business Conduct Committee of the Board of Trade of the City of Chicago to 

holders of futures contracts for purchase of wheat and corn for December 

delivery. These several actions constituted downward market manipulation by 

said Business Conduct Committee which was permitted by the governing body (Board 
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of Directors) of the Board of Trade of the City of Chicago in direct violation 

of the Commodity Exchange Act. 

The Board of Trade of the City of Chicago filed an answer to the complaint on 

April 1, 1938, in which it denies that it violated the Commodity Exchange Act, 

and affirmatively alleges that the orders complained of were issued to prevent 

Cargill, Incorporated, from manipulating prices and attempting to corner the 

market in December of 1936 and September of 1937, in violation of the Commodity 

Exchange Act and that the order of September 1936 was an emergency measure 

justified by the conditions existing at that time. 

The respondent incorporated in its answer a motion to dismiss the complaint. 

On May 16, 1938, hearing was had before the Commission on the respondent's 

motion to dismiss. On September 27, 1938, the Commission denied said motion, 

named a referee and sot a date for hearing. On October 1, 1938, the Commission 

modified its previous order by appointing the referee who presided at the 

hearings in this proceeding and set the case down for hearing on October 26, 

1938. On October 26, 1938, all pending motions wore hoard and disposed of by 

the referee and the taking of testimony began on November 28, 1938, in the City 

of Washington, D.C., and continued with occasional recesses to June 5, 1939, in 

the City of Chicago, Illinois. The complainant rested on June 5, 1939, at which 

time the record consisted of 12,450 pages, and the respondent at that time filed 

a motion to dismiss. 

Proposed findings of fact, conclusions, and orders were filed with the 

referee by both the complainant and the respondent, and, in addition thereto, a 

brief was filed by the respondent. Thereafter, each of the parties filed 

exceptions to the other party's proposed findings, and oral argument was had 

before the referee between July 24, and August 9, 1939, said oral argument being 

reported at pages 12,462 to 14,199,inclusive, consisting of 1,738 pages. The 

referee served upon the parties a tentative report, and the complainant filed 

exceptions to the findings of fact and conclusions contained therein. No 

exceptions were filed by the respondent. 

On April 3, 1940, the referee submitted to the Commission his proposed 

findings of fact, conclusions of law, and recommended order, together with the 

record of the proceedings theretofore had, including all matters filed by either 

party. 

Copies of the referee's report was served upon the attorneys for the parties, 

and the complainant has filed exceptions to the proposed findings of fact and 

conclusions contained in the referee's report. The respondent has filed no 

exceptions to the referee's report, and both parties have waived an oral 

argument before the Commission. 

Based upon the record of these proceedings, the referee's report and the 

exceptions thereto filed by the complainant, it is found that the complainant's 

exceptions to certain proposed findings of the referee should be sustained in 

whole or in part by changes in the proposed findings, as follows: 

Finding No. 24 by striking out the second sentence thereof, beginning "This 

was evidently considered" and ending "required by Rule 282." 

Finding No. 25 by striking out the words in brackets, "who was chairman of 

the Law Committee" which appear after "Director McCarthy". 

Finding No. 29 by striking out the last sentence thereof, beginning "This 

regulation" and ending "required by law." 

Finding No.30 by striking out the first sentence, beginning "Complainant 

contended" and ending "or their customers." 

Finding No.34 by striking out the entire finding. 

Finding No. 36 by striking out the entire finding. 
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Finding No.37 by striking out the entire finding. 

Finding No. 38 by striking out the entire finding. 

Finding No. 66 by striking out the first sentence in the third paragraph 

thereof, beginning "Complainant contended" and ending "the record shows:". 

Finding No. 67 by changing the figure following the word "Oats", which now 

reads "2,412,101 bushels", to road "3,412,101 bushels", and by changing the 

number of bushels of vacant regular elevator space 

from "3,957,056" to road "3,975,060". 

Finding No.70 by striking out the sentence beginning on the sixteenth line 

thereof with the words "There was no proof" and ending with the words "available 

export personnel", and by striking from the last sentence thereof the part 

beginning with the words "hence it is to be" and ending with the words 

"deliverable corn." 

Finding No.71 to road as follows: "The complainant offered to accept 

deliveries of Chicago 1936 December corn at places other than Chicago, either 

for spot or deferred delivery, at price differentials, but did not advise the 

respondent or its Business Conduct Committee what price differentials would be 

acceptable to the complainant, and the respondent's Business Conduct Committee 

refused to accept the complainant's offer." 

Finding No. 72 to read as follows: "On December 8, 1936, it would have been 

impossible for actual deliveries to have been made on the total open interest in 

Chicago December 1936 corn and wheat futures, and it would have been impossible 

for deliveries to have been made on Cargill's total open interest of Chicago 

December 1936 corn and wheat futures without violently disturbing the market, 

even though the other longs had only stood for normal ratio 

of delivery to the total open interest, the other longs having approximately 

17,000,000 bushels of the open interest in December 1936 corn and wheat futures, 

the normal ratio of which would be between 1,000,000 and 2,000,000 bushels. 

Cargill had expressed its intention of standing for much more than normal or 

expected deliveries." 

Finding No.87 by striking out the entire finding. 

Finding No.91 by striking out the entire finding. 

Finding No.96 by striking out the first two sentences thereof, beginning 

"Cargill charged" and ending "reference to December corn and wheat." 

Finding No. 97 to read as follows: "The record fails to disclose any 

substantial evidence to the effect that the cease and desist orders of the 

Business Conduct Committee of December 8 and 10, 1936, were made known to the 

shorts." 

Finding No. 98 by striking out the entire finding. 

Finding No. 101 by striking out the fourth sentence of the fourth paragraph 

thereof, beginning "The Chicago supervisor" and ending "prior to September 1.", 

and striking from the last sentence of the same paragraph the words "or the 

Commodity Exchange Administration, or its representatives". 

Finding No.103 by striking out the second sentence thereof, beginning "It was 

testified" and ending "between Continental and Cargill," and substituting 

therefor "This 
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made it possible for these September and December corn futures to be hold 

without the necessity of placing margin money with the clearing-house at the 

time the transfers were made." 

Finding No.104 by adding. ",000" after the figure "60,571" appearing in the 

last line of the first paragraph, and by striking from the second sentence of 

the fourth paragraph the words "from the books and records of Cargill" and 

substituting therefor the words "from the record". 

Finding No. 108 by striking from the third sentence thereof the words "the 

expert witness, Professor Vaile," and substituting therefor the words "it is", 

and by striking out the fourth sentence, and by substituting in the fifth 

sentence the words "it was estimated" for the words "he estimated". By striking 

from the sixth sentence the words "On cross-examination Vaile admitted:" and 

substituting the words "It is further found:", and striking from subdivision (a) 

the words "by him", and subdivision (c) the word "that" is changed to "than", 

and subdivision (h) is stricken in its entirety. 

Finding No. 110 by striking out the third paragraph thereof and substituting 

therefor the following: "A considerable quantity of corn would be required for 

finishing off cattle in September, October, and 

November for marketing in the fall of 1937 in the six states." 

Finding No. 111 by striking out the second paragraph thereof and submitting 

therefor the following: "The spring litter is larger than the fall litter, and a 

number of millions of bushels of corn would be required to finish off the litter 

being finished in September, October, and November." 

Finding No. 113 by striking out the last sentence thereof. 

Finding No. 115 by striking out the last sentence thereof, beginning 

"Professor Vaile" and ending "this period." 

Finding No, 116 by striking from the second paragraph thereof the first four 

words and substituting therefor the word "Cargill's", and by substituting for 

the word "is", in the second line of the fourth paragraph, the word "if", and by 

striking out the third word in the sixth paragraph. 

Finding No, 118 by striking out, in the eighth line from the bottom of page 

90, the words "buying all the corn obtainable" and substituting therefor the 

words "acquiring a large percentage of the corn obtainable by moans of its 

aggressive buying". 

Finding No. 120 by substituting for the word "officers", in the first 

sentence, the word "offices". 

Finding No. 138 by striking out the first 

sentence of the first paragraph thereof, and by striking out the second 

paragraph in its entirety. 

Finding No. 139 to road as follows: "There was no syndicate of shorts 

operating in opposition to Cargill in September corn futures, the short interest 

being widely scattered among a great many people in various parts of the 

country, the largest shorts being Daniel F. Rice and Daniel F. Riece & Company, 

who delivered all except 30,000 bushels of a short position and settled on the 

balance, and the Farmers National Grain Corporation, a farmers' cooperative 

association whose long position in cash corn stocks and forward purchases 

exceeded its short position in September corn futures, although part of its cash 

corn position consisted of Argentine corn. Neither of these shorts had 

positions of a size comparable with Cargill's long position. 
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"There was no substantial evidence that the cease and desist order of the 

Business Conduct Committee of September 24, 1937, was made known to the shorts." 

Finding No. 140 by striking out the entire finding. 

Finding No. 141 by striking out the first three lines thereof and 

substituting therefor the following: "The following action was taken with 

respect to shorts 

 

In September 1937 corn:". 

Finding No. 142 to road as follows: "Cargill's officials, during the 

September 1937 corn market proposed to the Business Conduct Committee that the 

Chief or Assistant Chief of the Commodity Exchange Administration be asked to 

arbitrate their differences. This proposal was rejected by the Business Conduct 

Committee. The officials named advised Cargill's officials that they would 

consider a request to arbitrate if made by both parties." 

In addition to the exceptions taken to specific proposed findings contained 

in the Referee's report, the complainant's exceptions include general exceptions 

based on the Referee's failing to include in his proposed findings certain 

findings which were proposed by the complainant. The exceptions of this nature 

have been considered, and the proposed findings of the complainant which have 

been determined to be relevant, material and supported by the record are 

included in the Commission's findings of fact, either in whole or in substance. 

The complainant's exceptions to the Referee's proposed findings of fact and 

the complainant's proposed findings of fact have boon carefully considered with 

a view to giving the complainant the benefit of consideration of all substantial 

evidence, whether of slight materiality or relevancy to the issue or not. The 

exceptions which have not been approved, either in whole or in part, by the 

changes in the Referee's proposed findings of fact herein indicated or by the 

findings of fact which are made by this Commission, have been disapproved 

because the record fails to support the conclusions sot forth in these 

exceptions or the factual matter covered thereby was included in the proposed 

findings in substance or was determined to be either immaterial, irrelevant, not 

supported by substantial evidence or in the nature of conclusions and not 

findings of fact. 

On the record of those proceedings, the Commission makes findings of fact as 

follows: 

FINDINGS OF FACT 

Preliminary 

1. Cargill, Incorporated, the complainant herein, is a Delaware corporation 

having its principal office and place of business in the Chamber of Commerce 

Building, Minneapolis, Minnesota. It and its predecessors in interest have been 

cash grain merchants since the business was founded in 1865 by W. W. Cargill. 

2. On or about November 30, 1936, and for many years prior thereto, Cargill 

Grain Company, a Minnesota corporation, predecessor in interest to 

Cargill,Incorporated, was a registered member of the Board of Trade of the City 

of Chicago. 

3. On or about November 30, 1936, and thereafter until March, 1938, Cargill 

Grain Company of Illinois, an Illinois corporation and a wholly-owned subsidiary 

of Cargill,Incorporated, was a registered member of the Board of Trade of the 

City of Chicago. 
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4. During 1936 and 1937 and for many years prior thereto, Cargill, 

Incorporated, and its predecessors, and during 1936 and 1937 Cargill Grain 

Company of Illinois wore engaged in the cash grain business and in this 

connection used the facilities of and were affected by operations of the Board 

of Trade of the City of Chicago. 

5. In 1936 and 1937 Cargill distributed in volume approximately two per cent 

of all the grain raised by American farmers and between ten and twelve per cent 

of the grain produced by American farmers which was actually marketed. 

6. Cargill is and was during 1936 and 1937 one of the largest and most active 

North American cash grain firms, having distributed throughout the United States 

and abroad during the last few years 100,000,000 bushels or more of grain 

annually, and having distributed as much as 150,000,000 bushels of grain in a 

single year. 

7. Cargill has, and had during 1936 and 1937, branch offices for the purpose 

of buying and selling grain in all of the important grain centers and surplus 

grain raising areas in the United States. 

8. Cargill during 1936 and 1937 operated approximately two hundred country 

elevators throughout the grain producing areas of the United States. 

9. Cargill during 1936 and 1937 operated eighteen terminal elevators, the 

total capacity of which exceeded 50,000,000 bushels, principally on the Great 

Lakes and on canals and rivers. 

10. Cargill did during 1936 and 1937 and at other times distribute grain from 

almost every grain surplus producing country in the world to other parts of the 

world where grain is needed and participated to a substantial extent in the 

world grain trade through its offices in Genoa, Italy, Rotterdam, Holland, 

London, England, Buenos Aires,Argentina, Montreal, Quebec, Winnipeg, Manitoba 

and other places. 

11. Cargill opened its Chicago office in 1931 and in 1935 leased from the 

Chicago and North Western Railroad Company the North Western Terminal Elevator 

which is the largest grain elevator in the Chicago district, having a capacity 

of 10,000,000 bushels. 

12. The Board of Trade of the City of Chicago, respondent herein, is a 

corporation organized by Special Act of the General Assembly of the State of 

Illinois on February 18, 1859, and continuously since that date has been a 

corporation in good standing of the State of Illinois and is a contract market 

designated as such by the Secretary of Agriculture under the provisions of the 

Commodity Exchange Act, being the Act of Congress of September 21, 1922, as 

amended by the Act of Juno 15, 1936. 

EMERGENCY ORDER OF SEPTEMBER 1936 

Delivery Notices 

13. In Early July, 1936, Cargill surveyed conditions with respect to supplies 

of corn in the United States and prospects for the 1936-1937 corn crop which 

under normal circumstances could not be expected to move in quantity until about 

November 15, and determined that in view of the conditions which it found to 

exist there would be a scarcity of corn for commercial consumption during 

October and November. Cargill decided that for the period from July to the 

latter part of September it would rely upon the cash market for supplies of 

domestic cash corn for the needs of its customers; that from thenceforward until 

about the middle of November it would rely upon the Chicago September corn 

futures for the supply of corn which it estimated on the basis of past 

experience, current conditions and contacts with its customers, that its 

customers would need during that period, for the reason that Cargill felt that 

the Chicago September futures market afforded a substantially cheaper source of 
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supply for that period than any cash market; that it would contract for 

Argentine corn to be shipped to the United States by late fall. 

14. Both on July 1, 1936, and on October 1, 1936, supplies of corn on farms 

in the United States were only slightly below the previous ton-year average. On 

those dates, however, the "visible supply", in the United States was very 

substantially below the previous ten-year average. (Definitions of "visible 

supply" and "open interest" are set out in Appendix A.) 

15. During July, August and September 1936, Cargill purchased substantial 

amounts of Argentine corn which must be contracted for three months in advance 

of arrival and could not be expected to arrive in the United States in quantity 

prior to the movement of the 1936-37 corn crop. As fast as this corn was 

contracted for, it was sold to Cargill's customers for forward delivery. 

16. July 16, 1936, Cargill began to accumulate a long position in the Chicago 

September 1936 corn futures. On the basis of past experience, existing 

conditions and information received from its customers, it estimated that its 

customers would require approximately 5,000,000 bushels of corn during the 

period from the latter part of September until about the middle of November, 

1936. By August 12, 1936, it had acquired 4,200,000 bushels of Chicago 

September corn futures but from that time forward until the close of trading in 

the September futures its line constantly decreased until it had boon reduced to 

780,000 bushels at the close of trading on September 26. 

17. Cash corn in Chicago and the Middle West generally sold at a premium over 

the Chicago September corn futures throughout July, August and until the latter 

part of September, 1936. 

18. By the latter part of August, 1936, Cargill decided to and later did. 

(a) Exchange a portion of its Chicago September corn futures for cash corn; 

(b) Transfer some of its Chicago September corn futures forward to Chicago 

December corn futures; 

(c) Stand for delivery on loss than its total line of Chicago September corn 

futures. 

19. During September, 1936, on several occasions, officials of Cargill were 

summoned before the Business Conduct Committee of the Board of Trade, the 

members of which expressed concern over the possibility that Cargill's line of 

long September corn futures would be a danger to the market and urged Cargill to 

liquidate a part of its line even if it were necessary for Cargill to make some 

sacrifices to that end. At no time during September, 1936, did the Business 

Conduct Committee issue any orders to Cargill, and the September corn futures 

expired without any undue price fluctuations. 

20. On September 26, the Business Conduct Committee of the Board of Trade 

communicated with Cargill and expressed its appreciation for Cargill's 

cooperation in connection with the September corn futures. 

21. On either the 27th or 28th of September, 1936, an official of the Board 

of Trade asked Cargill, which was the largest long standing for delivery on 

September corn futures, if it would waive the requirement, which the Commodity 

Exchange Act provided the Board of Trade should enforce, that persons making 

delivery of commodities on futures contracts furnish the persons obligated under 

the contracts to accept delivery, written notice of the date of delivery at 

least one business day prior to the date of delivery. Cargill's answer was in 

the negative. 

22. The Commodity Exchange Act was signed by the President Juno 15, 1936, and 

went into effect September 13, 1936 (Sec.13,C.E.A.); September, 1936, was the 

first delivery month governed by that Act. It is provided therein: 
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"Sec. 5a. Each contract market shall -- (5) require the party making delivery 

of any commodity on any contract of sale of such commodity for future delivery 

to furnish the party obligated under the contract to accept delivery, written 

notice of the day of delivery at least one business day prior to such date of 

delivery." 

At and before this time, respondent had provided by Rule 259-a for the 

cessation of futures trading on the last three business days of the delivery 

month. Respondent's Rule 285 in effect during September,1936, provided for 

notice of delivery as follows: 

"Notices of the delivery of grain must be issued and delivered to the 

Clearing House before twelve o'clock noon on the business day preceding the day 

of delivery, except during the last three business days of the month during 

which deliveries may be made without notice given the preceding day." 

There was a discrepancy between section 5a (5) of the Commodity Exchange Act 

and Respondent's Rule 285 in that Section 5a (5) did not except the furnishing 

of notices of delivery in the last three days of a delivery month. The 

provisions of the Commodity Exchange Act are written into respondent's rules and 

supersede them under Rule 603. 

"603. GRAIN FUTURES ACT. Members are required to comply with all lawful 

provisions of the Grain Futures Act and regulations thereunder lawfully 

promulgated by the Secretary of Agriculture. These Rules and Regulations shall 

be construed to conform thereto. The Board may adopt such Regulations as may be 

necessary to make such act effective." 

And under Regulation 1828 as follows: 

"1828. THE GRAIN FUTURES ACT (U.S.C. 1934 Edition, Title 7, Secs. 1-17) as 

amended by the act of June 15,1936 (Public No.675,74th Congress) may be cited as 

the Commodity Exchange Act and Rule 603 shall be so road." 

23. Another discrepancy between Section 5a (5) of the Commodity Exchange Act 

and a specific rule of respondent seemed to exist in respect of notice of track 

deliveries under respondent's Rule 282(a), (b), (c) and (d) as follows: 

"282. GRAIN IN CARS. During the last three business days in the month 

regular deliveries of contract grades of grain on contracts for future delivery 

may be made in cars on track subject to the following: 

"(a) Cars must be within the Chicago District, in a railroad yard, where 

samples are taken by the Illinois State Grain Inspection Department. 

"(b) Cars must be consigned or ordered to a regular warehouse unless all 

regular storage space is filled or otherwise unobtainable. 

"(c) The grain must be inspected within such three-day period by the Illinois 

State Grain Inspection Department and approved for storage during the same 

period by the Grain Sampling Department of the Association. 

"(d) Deliveries in cars shall be made by the tender of delivery notices based 

on shippers' certificates of weight (if attached thereto), or railroad weights, 

or, in the absence of such weights, the marked capacity of the cars, and 

certificate showing approval by Grain Sampling Department for storage must be 

attached to delivery notice." 

Under this Rule notices of delivery on track can only be given when cars are 

on track, have been inspected and certified, and the delivery notice must 

contain detailed information; but such notices under Rule 285 could be given on 

the last day. Section 5a (5) of the Act requires no such detailed description 

but merely notice of intent to deliver. 
Page 9 

24. Respondent's Clearing Corporation issued a notice on September 26, 1936, 

informing members that notice of delivery, as required by the Commodity Exchange 

Act, was necessary and was applicable to the September 1936 deliveries. 

25. On September 29, 1936, at 11:00 o'clock, A.M., respondent's Board of 

Directors at a special mooting took the following action: 

"Chicago, September 29, 1936. 

"A Special Mooting of the Board of Directors of the Board of Trade of the 

City of Chicago Was Hold This day at 11:00 o'clock A.M. 

Present: 

President Boylan, Vice Presidents Templeton and Harris and Directors Coe, 

Dowso, Hayes, Kay, Lipsey, Mansfield, Mayor, McCarthy, Perrin, 

Prindiville,Smart, Tanner and White (16) 

Mr. Howard Ellis, of Kirkland,Fleming,Green,Martin & Ellis, was present; also 

Mr. Karl Rohnberg, Manager of the Clearing House. 

"The President stated that the meeting had been called for the consideration 

of notice which will be delivered to the Clearing House so that deliveries may 

be effected before the end of the month. 

"Director McCarthy suggested that the following action be taken: 

"Acting under the provisions of Rules 251 and 287 the Directors hereby 

declare that notices of intention to deliver may be delivered to the Clearing 

House continuously on Tuesday, September 29,1936, up to 8 o'clock P.M., and that 

payment shall be made on such deliveries prior to 2 o'clock,P.M.,on 

Wednesday,September 30,1936. Such notices may consist of statement of intention 

to deliver and the customary documents shall be made available to the buyer at 

the time payment is made. 

"On motion duly made and seconded, it was unanimously voted that the 

foregoing be and hereby is adopted. 

"On motion duly made and seconded, the meeting then adjourned." 

FRED H. CLUTTON, 

Secretary. 

For the Committee on Minutes 

ALEX W. KAY." 

This resolution applied to notices of deliveries of all grains, not to corn 

alone. 

26. At 2:30 o'clock P.M., September 29, 1936, at a regular meeting of the 

Board of Directors the following telegram was read and no action thereon taken: 

"September 29, 1936. 

"Fred H. Clutton Secretary 

Board of Trade, Chicago,Ill. 

"We are just advised of the action of the Board of Directors in deferring 

requirements for notice of intention to deliver until eight o'clock this 

evening. We invite your attention to Section 5A5 of the Commodity Exchange Act 

requiring that notice of delivery must be given at least one business day prior 

to the date of such delivery. Please accept this as notice on our part that we 

do not intend to waive any legal rights we may have under this Statute. 

CARGILL GRAIN CO. 

By John MacMillan,Jr., 
Page 10 

Vice President and General Manager." 

27. The following are the delivery notices as to Chicago September 1936 corn 

which the Clearing Corporation transmitted after 2:00 P.M.,until 5:18 P.M.,on 

September 29, 1936, for delivery on September 30, 1936: 

Delivering Member Principal Delivery Notice No. Amount 

(Bushels) 

D. F. Rice & Co. D. F. Rico & Co. 62 5,000

D. F. Rice & Co. D. F. Rice & Co. 63 5,000

D. F. Rice & Co. D. F. Rice & Co. 64 5,000

D. F. Rice & Co. D. F. Rice & Co. 65 5,000

McCarthy & Scovillo James A. Cavaney 18 5,000

 

Delivering Member Principal Delivery 

Notice No. Amount 

(Bushels) 

Hemphill, Noyes & Co. Sydney Metzel 1-9inc. 45,000

 Lamson Bros. & Co. Piper Gr.&Mlg.Co. 301 1,000

 Lamson Bros. & Co. Piper Gr.& Mlg.Co. 302 1,000

 * Lamson Bros. & Co. Cedar Rapids Gr.Co. 201 5,000

 * Lamson Bros. & Co. Piper Gr.& Mlg.Co. 202 5,000

 * Lamson Bros. & Co. Greene & Brock 203-209 35,000

 * Lamson Bros. & Co. Bastian Grain Co. 210-219 50,000

 Norris Grain Co. Norris Grain Co. DG-9) Norris Grain Co. Norris Grain Co. D477-D484) 115,000

 Norris Grain Co. Norris Grain Co. D506-D516) Stratton Grain Co. Stratton Grain Co. 45-61 85,000

 F. S. Lewis Unknown 307, 8, 10,11 20,000

 Faroll Bros. Fraser,Smith & Co. 9 5,000

392,000

* Office Deliveries 

(Compl's Ex. 20, Rec.,1036) 

28. Complainant again protested against the aforesaid action of respondent by 

having its lawyers send a letter dated September 29, 1936. 

Complainant accepted the aforesaid notices of delivery and the deliveries 

covered thereby to the amount of approximately 300,000 bushels and did not bring 

any action whatsoever against any person whomsoever on account thereof until the 

present Complaint was filed in February, 1938. 

29. The Regulations of the Secretary of Agriculture, effective August 2, 

1937, provide as follows: 

"Business day. -- This term means any day other than a Sunday or holiday. In 

all notices required by the act or by these rules and regulations to be given in 

terms of business days the rule for computing time shall be to exclude the day 

on which notice is given and include the day on which shall take place the act 

of which notice is given." 

30. The directors who voted unanimously for the so-called "emergency order" 

of September 29, 1936, were as follows: 

1. President Robert P. Boylan -- Clement,Curtis & Co. 

2. Vice-President Kenneth S. Templeton - J. S. Templeton's Sons 

3. Siebel C. Harris (deceased) - Harris, Burrews & Hicks. 

4. Orrin S. Dowse - Stratton Grain Co. 

5. Frank G. Coo (deceased) -- Parker & Graff. 
Page 11 

6. Archer E. Hayes -- Hately Bros. Co. 

7. Alex W. Kay -- Hales & Hunter Co. 

8. David Howard Lipsey -- Norris Grain Co. 

9. Richard I. Mansfield -- Bartlett Frazier Co. 

10. Simon Mayer -- Continental Grain Company. 

11. John G. McCarthy -- McCarthy & Scoville. 

12. Leslie N. Perrin -- Star Grain Co. 

13. James A. Prindiville -- Thomson & McKinnon. 

14. Gale Smart -- R. H. Smart & Co. 

15. George H. Tanner (deceased) -- Harris,Upham & Co. 

16. James A. White -- Lamson Bros. & Co. 

31. The Directors present at the special and/or regular meeting of September 

29 whose firms gave delivery notices on Chicago September 1936 corn which were 

passed on by the Board of Trade Clearing Corporation after 2:00 P.M., on 

September 29, 1936, were the following: 

No. of Bu. Board of Trade Covered For AcDirectors His Firm by Notice count of 

John G. McCarthy McCarthy & Scoville 5,000 Customer -- 

James A. 

Caveney. 

David Howard Lipsey * Norris Grain Co. 115,000 Norris 

Grain Co. 

Orrin S. Dowse Stratton Grain Co. 85,000 Stratton 

Grain Co. 

James A. White Lamson Bros. & Co. 97,000 Various customers 

Barnett Faroll ** Faroll Bros. 5,000 CustomerFraser,Smith 

Total 307,000 

* present only at special meeting of September 29, 1936. 

** present only at regular meeting of September 29, 1936. 

32. Total number of bushels covered by delivery notices on Chicago September 

1936 corn which were passed on by clearing Corporation after 2:00 P.M., on 

September 29, 1936, for delivery on September 30, 1936 -- 392,000 bushels. 

33. The trading in Chicago September 1936 corn futures terminated at noon, 

Saturday, September 26. The closing price on that day was 

 

$ 1.16 1/2-1.16. Thereafter September futures could not be closed out in the 

pit, but the shorts were obligated to make and the longs were obligated to take 

delivery. Prices of deliverable grades of cash corn at Chicago on the last 

three days of the delivery month were as follows: 

Monday, September 28. 

No.2 Yellow Corn $ 1.12-5/8 (18-18-3/4 cents over December future. 

This grade is deliverable at 1/2 cents 

premium over the price of the 

Contract.) 

No.3 Yellow Corn $ 1.11-5/8 (17-18 cents over December futures. 

This grade is deliverable at 
Page 12 

2 cents discount from the price of the 

Contract.) 

No.2 Mixed Corn $ 1.11-5/8 (17 cents over December future. This 

grade is deliverable at the 

straight contract price.) 

No.3 Mixed Corn $ 1.10-5/8 (16 cents over December future. This 

grade is deliverable at 2 1/2 cents discount 

from the contract price.) 

Tuesday, September 29. 

No. 2 Yellow Corn $ 1.15-1/8 (20 to 22 1/2 cents over December 

future.) 

No. 3 Yellow Corn $ 1.14-1/8 (19 to 21 cents over December future.) 

No. 2 Mixed Corn No data 

No. 3 Mixed Corn No data 

Wednesday, September 30 

No. 2 Yellow Corn $ 1.06-3/4 (13 to 16 1/2 cents over December future.) 

No. 3 Yellow Corn $ 1.06-3/4 (13 to 15 1/2 cents over December future.) 

No. 2 Mixed Corn $ 1.08-3/4 (15 cents over December future.) 

No.3 Mixed Corn No data. 

(Figures from the Daily Chicago Trade Bulletin of the same dates as listed.) 

On the date of the emergency order, September 29, the price of cash corn was 

in excess of the cash price on the 28th and of the cash price on September 30. 

34. There is no evidence in the record as to "business hours" or as to a 

"business day" in Chicago in 1936. 

DECEMBER 1936 MARKET 

Corn 

35. Cargill began accumulating a long line of December 1936 corn futures the 

latter part of July,1936. (The entire positions and the transactions of Cargill 

in the December 1936 corn market are as set out in Appendix B.) 

36. Cargill's purchases of foreign cash corn by delivery times in the latter 

part of the year 1936, as shown by Complainant's Exhibit were as follows: 

Bushels 

First Half September Unloading 6,635 Last Half September Unloading 8,929 

First Half October Unloading 292,250 Last Half October Unloading 143,178 First Half November Unloading 1,684,660 

Last Half November Unloading 869,455 Last Half November for Deferred Shipment 472,000 (After Dec.31)

First Half December Unloading 1,726,639 

First Half December for Deferred Shipment 4,035,976 (After Dec. 31)

Last Half December Unloading 2,410,173 

Last Half December for Deferred Shipment 2,479,000 (After Dec. 31)

14,128,895 

37. Cargill was an aggressive purchaser of domestic cash corn in the fall of 

1936, although not as aggressive as in September, 1937. Cargill's purchases of 

domestic cash corn during September, October, November and December, 1936, as 

shown by Complainant's Exhibit were as follows: 

Domestic Cash Corn Purchases 

Bushels 
Page 13 

 Bushels 

September 1,073,000

October 1,294,000

November 677,000

December 2,911,000

Total 5,955,000

38. At the time Cargill acquired its Chicago December 1936 corn futures,it 

intended under then current conditions to stand for delivery and it so informed 

the Business Conduct Committee of the Board of Trade early in November,1936, 

when the Committee for the first time discussed with Cargill its holdings of 

December 1936 corn futures, and examined Cargill's books and records. 

39. Early in November,1936, cash corn in Chicago was approximately ten cents 

more expensive than the Chicago December 1936 corn futures. 

40. On November 30, Cargill officials met with the Business Conduct Committee 

and informed than that Cargill wanted the corn which it expected to acquire on 

its December 1936 corn futures, that the price of the December futures was too 

low, that an advance of a few cents would bring substantial quantities of corn 

from American farms; that Cargill was having difficulty purchasing enough cash 

corn to fill its current sales. 

41. The United States corn crop for the crop year 1936-37 was 1,507,069,000 

bushels, one of the shortest crops on record, of which amount, 1,253,766,000 

bushels were harvested as grain. The visible supplies in Chicago and the United 

States, from October 31,weekly, to December 26,1936, as shown on Complainant's 

Exhibit were as follows: 

Date Visible Supplies

(1936) Chicago U.S.Total 

October 31 290,000 3,398,000

November 7 442,000 3,929,000

14 895,000 4,688,000

21 939,000 5,801,000

28 1,315,000 7,097,000

December 5 1,875,000 8,205,000

12 2,595,000 9,083,000

19 3,637,000 10,592,000

26 4,395,000 12,093,000 

On October 1, 1936, the United States visible supply of corn was 3,773,000 

bushels as compared with the ten-year average on such date of 18,754,300 

bushels. 

42. The total open interest in Chicago December 1936 corn futures, at 

selected dates during November, 1936, and daily from December 1 to December 15, 

1936, Cargill's long position on such dates and the percentage of Cargill's long 

line to the total open interest on such dates, is shown by the following table 

compiled from the Complainant's Exhibit. 

Date Total Cargill's Cargill's 

(1936) Open Interest Long Position Per Cent of Total

(Bushels) Open Interest 

November 2 28,743,000 7,830,000 27.2

9 25,410,000 8,055,000 31.7

16 24,182,000 8,105,000 33.6

23 21,196,000 8,035,000 37.9

30 19,548,000 7,910,000 40.5

December 1 18,533,000 7,875,000 42.5

2 17,129,000 7,470,000 43.6

3 16,333,000 7,070,000 43.3

4 15,610,000 6,905,000 44.2

5 15,213,000 6,755,000 44.4

7 14,356,000 6,640,000 46.3
Page 14 

Date Total Cargill's Cargill's 

(1936) Open Interest Long Position Per Cent of Total

 (Bushels) Open Interest 

8 13,087,000 6,505,000 49.7

9 12,726,000 6,425,000 50.5

10 12,049,000 6,175,000 51.2

11 11,374,000 6,005,000 52.8

12 10,790,000 5,550,000 51.4

14 10,151,000 5,300,000 52.2

15 9,138,000 4,645,000 50.8

43. The closing price of the Chicago December 1936 corn future at selected 

dates in November, 1936, and daily during December, 1936, is shown by the 

following table compiled from Complainant's Exhibit: 

Date (1936) Closing Price 

November 2 $ .94 3/4-7/8

9 1.03 1/8-1/4

16 1.03 5/8-3/4

23 1.05 5/8-3/4

30 1.05 1/8-1/4

December 1 1.09 7/8-1/4

2 1.08 1/4-1/8

3 1.07 1/2-5/8

4 1.07 5/8-3/4

 

Date 

(1936) Closing Price 

December 5 $ 1.07 3/8-1/2

7 1.09 -1/8

8 1.08 3/4-7/8

9 1.09 1/2-5/8

10 1.09 5/8-3/4

11 1.07 5/8-3/4

12 1.06 1/2-3/4

14 1.09 3/4-7/8

15 1.07 7/8-08

16 1.07 7/8-08

17 1.08 3/8-1/4

18 1.08 1/2-3/8

19 1.08 7/8-09

21 1.09 3/4-3/8

22 1.08 1/4-1/8

23 1.08 3/8-1/4

24 1.09 1/4-1/2

26 1.10 -1/8

28 1.09 1/2-1/4

44. A high percentage of cash corn receipts in Chicago during December, 1936, 

were of high moisture content and would have to be dried to be made of 

deliverable grade. From the actual reported Chicago receipts of corn during 

December,1936, it appeared that 80 per cent graded No.4 and No.5 and needed 

drying before delivery; that out of 2,800 cars of yellow, only 34 graded No.1 

and No.2, and that out of 1,100 cars of white corn, only 13 graded No.1 and 

No.2. 

Track deliveries on futures contracts cannot be made of high moisture content 

corn, such as No.4 and No. 5 corn, because there are no facilities for drying it 

on track. The drying capacity of Chicago elevators was variously estimated: 

MacMillan said that a very limited number of elevators had a drying capacity of 

more than a few hundred bushels of corn per hour;Professor Vaile (Cargill's 

expert) testified that complainant's North Western elevator at Chicago could dry 

9,000 bushels per hour of No. 4 corn to make it grade No.3 corn, which would be 
Page 15 

200,000 bushels per day of twenty-four hours; that the North Western elevator 

had half the drying capacity of Chicago; that working full time of twenty-four 

hours a day, for twenty days, the 

 

drying capacity was 8,000,000 bushels (idom). Under the Rules of respondent 

track deliveries can only be made during the last three days of a delivery 

month. 

45. On December 8, 1936, Cargill's stocks of foreign cash corn, including 

open purchases, were 7,166,000 bushels, its open sales of foreign cash corn were 

5,048,000 bushels, and its net long position in foreign cash corn was 2,118,000 

bushels. On the same day its domestic stocks of cash corn, including open 

purchases, were 1,355,000 bushels, its open forward sales of domestic cash corn 

were 430,000 bushels, and its net long domestic cash corn was 925,000 bushels. 

46. The United States production of corn in the years 1925-1926 to 1936-1937, 

with 10 and 12-year averages, are as follows: 

Year Bushels 

1925-26 2,798,367,000

1926-27 2,548,972,000

1927-28 2,616,120,000

1928-29 2,665,516,000

1929-30 2,521,032,000

1930-31 2,080,421,000

1931-32 2,575,611,000

1932-33 2,931,281,000

1933-34 2,399,632,000

1934-35 1,461,123,000

10-YEAR AVERAGE 2,459,607,500

1935-36 2,303,747,000

1936-37 1,507,089,000

12 YEAR AVERAGE 2,267,242,583 

47. The United States stocks of corn on farms as of October 1, the United 

States "visible supplies" on the Saturday nearest October 1, and the combined 

stocks and "visible supplies" on October 1, from 1927 to 1936, inclusive, with 

averages, are as follows: 

U. S. Stocks of Corn U. S. Visible Supplies Combined Farm 

on Farms as of of corn Saturday nearest Stocks and 

October 1st. October 1st. Visible Supplies

October 1st. 

Bu. Bu. Bu. 

1927 192,369,000 23,687,000 216,056,000

1928 85,306,000 6,791,000 92,097,000

1929 143,919,000 4,197,000 148,116,000

1930 131,477,000 4,684,000 136,161,000

1931 162,185,000 5,362,000 167,547,000

1932 251,628,000 18,458,000 270,086,000

1933 326,530,000 57,303,000 383,833,000

1934 273,287,000 60,073,000 333,360,000

1935 61,655,000 3,215,000 64,870,000

1936 175,222,000 3,773,000 178,995,000

Average 180,357,800 18,754,300 199,112,100

48. The closing prices of Chicago No. 2 Yellow corn and the Chicago July, 

September and December 1936 corn futures, weekly from May 29, to October 30, 

1936, are as follows: 

1936 Spot 
Page 16 

Date No. 2 Y.C. July September December 

May 29 61 1/2 59 1/2-5/8 57 1/2-5/8 52 3/4 

June 5 63 1/4 60 3/4-7/8 57 3/4-7/8 52 1/2 

12 63 5/8 61 1/4-1/8 58 1/4 52 7/8 

19 67 1/4 65 1/4 63 3/8-1/2 59 3/8-5/8 

26 67 3/4 66 1/4 64 5/8-1/2 60 5/8-1/2 

 July 3 73 5/8 72 1/8 71 1/8-1/4 66 1/8-1/4 

10 88 3/8 85 5/8 82 7/8 77 1/2 

17 94 1/4 92 3/4-7/8 89 3/4-7/8 83 3/4-7/8 

24 92 1/8 90 7/8 87 1/8-1/2 80 1/4-3/8 

31 106 7/8 101 3/8-5/8 93 1/8-3/8 Aug. 7 109 1/8 104 7/8-5/8 93-92 7/8 

14 112 5/8 107 5/8-3/4 94 5/8-3/4 

21 116 112 5/8-1/2 97 3/4-5/8 

28 110 106 1/2 92 3/8-5/8 

 

Sept. 4 112 1/2 111-11 1/2 96 1/8-3/8 

11 113 1/4 112 5/8-1/4 95-95-1/8 

18 117 116 96-95 7/8 

25 115 3/4 115 3/4-16 95 1/4-3/8 

Oct. 2 107 7/8 94 3/8-1/2 

9 109 1/4 96 1/4-3/8 

16 108 3/8 94-93 7/8 

23 108 5/8 94 1/8-1/4 

30 105 7/8 94-93 7/8 

49. Cargill's purchases of domestic cash corn by weeks from September 5 to 

December 25, 1936, including corn taken on delivery in the September and 

December 1936 corn futures, arc as follows: 

Week Ending Bushels 

September 5 118,000

September 12 165,000

September 19 157,000

September 28 633,000

October 3 833,000

October 10 77,000

October 17 92,000

October 24 130,000

October 31 162,000

November 7 120,000

November 14 164,000

November 21 165,000

November 28 228,000

December 5 645,000

December 12 902,000

December 19 828,000

December 26 536,000

Total 5,955,000

50. The weekly receipts of cash corn at Chicago from November 6 to 

 

December 25, 1936, together with the previous fifteen-year average, are as 

follows: 

1936 15 Year Average

Week Ending Bushels Bushels 

November 6 830,000 1.845,000

November 13 1,217,000 1,750,000

November 20 1,548,000 1,585,000
Page 17 

1936 15 Year Average

Week Ending Bushels Bushels 

November 27 1,523,000 1,660,000

December 4 1,577,000 2,063,000

December 11 1,560,000 2,372,000

December 18 2,057,000 2,472,000

December 25 1,532,000 2,235,000

51. The weekly supply of cash corn at Chicago from November 7 to December 26, 

1936, together with the previous fifteen-year average is as follows: 

VISIBLE SUPPLY OF CASH CORN AT CHICAGO 

1936 15 Year Average

Week Ending Bushels Bushels 

November 7 442,000 6,068,000

November 14 895,000 6,191,000

November 21 939,000 6,268,000

November 28 1,315,000 6,131,000

December 5 1,875,000 6,256,000

December 12 2,595,000 6,850,000

December 19 3,637,000 7,462,000

December 26 4,395,000 8,142,000

52. Cargill's purchases of domestic and foreign cash corn, including corn 

taken on delivery in the December 1936 corn futures, weekly from November 7 to 

December 26, 1936, are as follows: 

Domestic Corn Foreign Corn

Week Ending Bushels Bushels 

November 7 120,000 690,000

November 14 164,000 748,000

November 21 165,000 4,684,000

November 28 228,000 39,000

December 5 645,000 2,191,000

December 12 902,000 1,032,000

December 19 828,000 2,385,000

December 26 536,000 587,000

 TOTAL 3,588,000 12,356,000

 

53. The total volume of trading in all grain futures combined on all contract 

markets for the year ending June 30, 1937, together with the relation of the 

volume on each contract market to the total volume of all contract markets and 

the total storage capacity, the regular storage capacity and the percentage of 

the total that is regular in Chicago, Minneapolis and Kansas City, during 1936, 

are as follows: 

Total Volume of Trading in All Grain 

Futures Combined on the Contract Markets, 

Fiscal Year Ended June 30, 1937. 

(In thousands of bushels, i.e., 000 omitted) 

All Grains 

Market Quantity Percentage

Chicago Board of Trade 14,631,387 88.3

Chicago Open Board 215,120 1.3

Kansas City 940,872 5.7

Minneapolis 733,294 4.4

Duluth 12,190 .1

Milwaukee 38,224 .2

St. Louis 2,567 n1 

Seattle 1, 923 n1 

Portland 679 n1 

Hutchinson n2 395 n1 
Page 18 

All Grains 

Market Quantity Percentage

San Francisco 120 n1 

Los Angeles 232 n1 

New York n1 

Total 16,577,003 100.0

n1 Less than 0.1 per cent. 

n2 Trading in grain futures was officially terminated at Hutchinson, 

Kansas, September 12, 1936. 

That the volume of trading during the fiscal year 1936-37 was fairly 

representative is shown by the fact that the ten-year (1927-36) average volume 

of trading in grains for all contract markets amounts to 16,970,000,000 bushels, 

compared with the 1936-37 volume of 16,577,003,000 bushels. 

Total Bushels Regular Bushels % Regular

Chicago 55,364,000 12,068,000 21.8

n1 Minneapolis 93,635,050 63,625,700 68.0

Kansas City 58,782,000 42,030,000 71.5

n1 In addition to "Regular" space at Minneapolis, there is a total of 

25,150,000 bushels storage capacity located at Duluth-Superior which is 

"Regular" under Minneapolis Chamber of Commerce Rules. 

54. The daily high, low and closing prices of Chicago December corn futures, 

the weekly receipts of cash corn at Chicago and at primary markets, and the 

weekly "visible supply" of corn at Chicago and in the United States, during 

November and December, 1936, and their relationship are as follows: 

CORN RECEIPTS VISIBLE SUPPLIES 

CHICAGO PRIMARY MARKETS CHICAGO U. S. TOTAL

Oct. 31 879 2,514 290 3,398

Nov. 7 830 2,917 442 3,929

14 1,217 3,739 895 4,688

21 1,548 5,295 939 5,801

28 1,523 4,893 1,315 7,097

Dec. 5 1,577 4,289 1,875 8,205

12 1,560 4,592 2,595 9,083

19 2,057 4,999 3,637 10,592

26 1,532 3,600 4,395 12,093

Jan. 2 681 2,152 4,995 13,142

CHICAGO DECEMBER CORN 

DAILY HIGH, LOW AND CLOSING PRICES OF FUTURE 

NOVEMBER AND DECEMBER, 1936 

Date High Low Closing 

NOV. 

Sunday 2 94 7/8 94 3/8 94 3/4-7/8

Holiday 

4 95 5/8 94 3/4 95 3/8-1/2

5 98 1/8 95 5/8 97 7/8-98 1/8

6 100 1/4 98 3/8 100-1/8

7 104 1/8 101 1/4 102 3/4-03

Sunday 

9 104 1/4 102 7/8 103 1/8-1/4

10 102 7/8 101 3/8 101 7/8-3/4 
Page 19 

Date High Low Closing 

Holiday 12 102 3/8 100 5/8 102 1/8-02 

13 103 1/8 102 1/4 102 3/8-1/2 

14 102 5/8 101 3/4 102 3/8-1/2 

Sunday 16 103 3/4 101 3/4 103 5/8-3/4 

17 106 103 7/8 105 7/8-06 

18 107 7/8 105 5/8 105 7/8-5/8 

19 106 104 1/4 104 1/4-3/8 

20 106 1/4 103 5/8 106 1/8-1/4 

21 107 3/8 105 1/4 105 3/4-7/8 

Sunday 23 106 3/8 104 7/8 105 5/8-3/4 

24 106 7/8 105 1/2 105 7/8-06 

25 106 1/8 104 7/8 105 1/8-1/4 

Holiday 27 106 103 7/8 104 1/8-04 

28 105 1/4 103 5/8 104 3/4-5/8 

Sunday 30 105 3/4 105 105 1/8-1/4 

DEC. 

1 109 7/8 104 3/4 109 7/8-1/4 

2 110 3/4 108 1/8 108 1/4-1/8 

3 108 3/4 107 1/8 107 1/2-5/8 

4 108 5/8 107 1/4 107 5/8-3/4 

5 107 5/4 107 107 3/8-1/2 

Sunday 

7 109 3/8 107 3/4 109-1/8 

8 110 108 3/8 108 3/4-7/8 

9 109 5/8 108 1/4 109 1/2-5/8 

10 110 3/4 109 109 5/8-3/4 

11 109 107 1/4 107 5/8-3/4 

12 107 3/4 106 3/8 106 1/2-3/4 

Sunday 14 110 1/4 107 1/2 109 3/4-7/8 

15 109 1/8 107 1/4 107 7/8-08 

16 108 1/2 106 7/8 107 7/8-09 

17 109 107 1/2 108 3/4-1/4 

18 109 3/4 108 3/8 108 3/8-1/4 

19 109 3/4 108 108 7/8-09 

Sunday 

21 110 7/8 108 1/2 109 3/8-1/2 

22 109 1/2 108 108 1/4-1/8 

23 109 108 1/4 108 3/8-1/4 

24 109 3/4 108 1/2 109 1/4-1/2 

Holiday 26 110 1/2 109 110-1/8 

Sunday 

28 111 5/8 109 1/4 109 1/2- 1/4 

29 - - - 

30 - - - 

31 - - - 

55. The ten-year comparison of the "open interest" in all Chicago December 

grain futures as of the close of the last business day in November, and the 

deliveries on all Chicago December grain futures, the Chicago elevator capacity, 

Chicago "visible supplies",and Chicago receipts of all grains during the month 

of December,1928 to 1937, inclusive, is as sot forth on Complainant's Exhibit 

No.215 (12270). 
Page 20 

56. The total deliveries of all grains on Chicago December 1936 futures and 

the amounts received by Cargill are as follows: 

DELIVERIES ON FUTURES CONTRACTS - 

BOARD OF TRADE OF THE CITY OF CHICAGO 

December 1936 Wheat Total Deliveries 1,499,000

Cargill received delivery of 726,000

December 1936 Corn Total deliveries 930,000

Cargill received delivery of 740,000

December 1936 Oats Total deliveries 2,473,000

December 1936 Rye 

Total deliveries 512,000

December 1936 Barley 

Total deliveries 5,000

Total deliveries of all grains 5,419,000

Cargill's open interest as of 12/8/36 

December 1936 wheat 8511000

" 1936 corn 6,495,000

Cargill's total open interest 15,006,000 Cargill received total 

 deliveries 1,466,000

 Difference 13,540,000

 Plus total deliver- 5,419,000

 ies 

Total that would have to be delivered had Cargill stood for delivery on their 

entire lines as of 12/8/36 - 18,959,000 

57. On December 8, 1936, the Business Conduct Committee of the Board of Trade 

issued an order to John H. MacMillan, Jr., and Philip C. Sayles, whose 

memberships on the Board of Trade were at that time registered for Cargill of 

Illinois, and to Cargill of Illinois, requiring them to sell 1,799,000 bushels 

of December 1936 corn futures in six trading days, one of which was a short 

Saturday session. 

58. On December 9 and 10, 1936, the Business Conduct Committee of the Board 

of Trade refused to make any change in the terms of the order of December 8, 

insofar as it related to December 1936 corn futures. 

59. Neither on December 8, 1936, nor at any other time did the Business 

Conduct Committee issue any orders to the holders of short contracts in the 

December 1936 corn futures requiring them to buy in their commitments or 

forbidding them from acquiring further short contracts. 

60. The high, low, and closing prices, the "open interest," and the volume of 

trading, daily during the period from June to December, inclusive, in the 

Chicago 1936 December corn futures are as set forth in Complainant's Exhibit 

No.28g. 

61. During the period when Cargill of Illinois had been ordered to liquidate 

December 1936 corn futures, the volume of trading in the December 1936 corn 

futures had decreased considerably from its normal peak earlier in the life of 

the future. 

62. The offers of the officials of Cargill of Illinois to accept multiple or 

late deliveries on Cargill's December 1936 corn futures at price differentials 

which were not named and their request to the Board of Trade for arbitration by 

officials of the Commodity Exchange Administration in Washington were not 

accepted. 
Page 21 

63. The Board of Trade raised no question with Cargill about the acquisition 

of its Chicago December 1936 corn futures, either 

 

at the time those futures were acquired or on September 23, 1936, when for the 

first time Cargill's long line exceeded 5,000,000 bushels, or at any other time 

prior to early November, when the Business Conduct Committee first approached 

Cargill regarding its December corn futures. 

64. The receipts of cash corn at primary markets weekly from August 21 to 

October 30, 1936, together with the fifteen-year average, are as set forth in 

Complainant's Exhibit No. 21. 

65. The price of Chicago, Minneapolis, and Kansas City No.2 yellow corn and 

the price of the Chicago December 1936 corn futures and the Chicago May 1937 

futures, daily during November and December 1936, and the relationship between 

these prices is as sot forth in Complainant's Exhibit No.28-B. 

66. On October 30, 1936, L. A. Fitz, the Chicago representative of the 

Commodity Exchange Administration, communicated with the Business Conduct 

Committee of the Board of Trade, stating that there was a large "open interest" 

in December 1936 wheat futures, December 1936 corn futures, and December 1936 

oat futures, but that the only one of those that conditions indicated might 

cause the Commodity Exchange Administration and the Board of Trade any concern 

was the large "open interest" in December 1936 corn futures. 

WHEAT 

67. The net positions of complainant in Chicago December 1936 wheat futures, 

from November 2 to December 31, 1936, were as follows: 

Date Not Position 

(1936) Long Short 

(Bushels) 

November 2 7,206,000

4 7,221,000

5 7,311,000

6 7,491,000

7 7,501,000

9 7,651,000

10 7,681,000

12 7,706,000

13 7,726,000

14 7,726,000

16 7,751,000

17 7,816,000

18 7,901,000

19 8,136,000

20 8,241,000

21 8,451,000

23 8,531,000

24 8,561,000

25 8,606,000

27 8,676,000

28 9,341,000

30 9,356,000

December 1 9,356,000

2 8,616,000

3 8,426,000

4 8,446,000

5 8,446,000

7 8,546,000

8 8,511,000

9 8,486,000
Page 22 

Date Not Position 

(1936) Long Short 

 (Bushels) 

10 7,991,000

11 7,621,000

12 7,276,000

14 6,011,000

15 5,441,000

16 4,966,000

17 4,811,000

18 3,651,000

19 3,026,000

21 2,181,000

22 1,421,000

23 1,331,000

24 1,301,000

26 762,000

28 84,000

29 84,000

30 35,000

31 --

For the period from June 22 through August 26, Cargill was short Chicago 

December 1936 wheat futures in varying amounts ranging up to as much as 

5,247,000 bushels on August 13. It started acquiring its long position on 

August 27. Cargill acquired this long line of wheat futures in pursuance 

 

of its estimated customer requirements of 10,000,000 bushels during the winter 

and spring months. 

68. The visible supplies of wheat in the United States and in Chicago, from 

October 3, weekly, to December 5, 1936, are shown by the following table: 

Date Visible Supplies 

(1936) Chicago U.S.Total 

October 3 10,694,000 75,799,000

 10 10,255,000 74,033,000

 17 9,840,000 72,902,000

 24 9,548,000 71,470,000

 31 9,499,000 70,459,000

November 7 9,388,000 69,634,000

 14 9,264,000 68,516,000

 21 8,707,000 66,330,000

 28 7,525,000 65,383,000

December 5 7,406,000 62,459,000

69. The stocks of deliverable grades of wheat in public elevators at Chicago 

for the period from October 3, weekly, to November 28, 1936, are shown by the 

following table: 

Date 

(1936) Bushels 

October 3 3,733,137

 10 3,566,613

 17 3,622,966

 24 3,538,330

 31 3,426,062

November 7 3,236,415

 14 3,296,780

 21 3,113,626

 28 2,671,630

Both of the foregoing tables include Cargill- owned wheat, the amounts of 

which are not in evidence. 
Page 23 

70. The total open interest in Chicago December 1936 wheat futures at 

selected dates during November, 1936, and daily during December to December 15, 

1936, Cargill's long position on such dates, and the percentage of Cargill's 

long line to the total open interest, is shown 

 

by the following table: 

Date Total Cargill's Cargill's Per 

(1936) Open Interest (Bushels) Long Position Cent of Total 

Open Interest 

November 2 46,331.000 7,206,000 15.5

 9 43,534,000 7,651,000 17.6

16 40,712,000 7,751,000 19.0

23 31,053,000 8,531,000 27.5

30 23,381,000 9,356,000 40.0

December 1 21,506,000 9,356,000 43.5

 2 18,298,000 8,616,000 47.1

 3 17,329,000 8,426,000 48.6

 4 16,390,000 8,446,000 51.5

 5 16,254,000 8,446,000 52.0

 7 15,860,000 8,546,000 54.0

 8 15,323,000 8,511,000 55.6

 9 14,670,000 8,486,000 57.8

10 13,762,000 7,991,000 58.0

11 13,051,000 7,621,000 58.4

12 12,004,000 7,276,000 60.6

14 11,909,000 6,011,000 54.2

15 9,511,000 5,441,000 57.2

71. The closing price of the Chicago December wheat future, weekly during 

November, and daily during December, 1936, is shown by the following table: 

Date (1936) Closing Price 

November 2 $ 1,14

 9 1.15 1/8

16 1.18 1/8

23 1.16 7/8

30 1.20 1/8

December 1 1.23 1/2

 2 1.24 1/8

 3 1.25 1/4

 4 1.24 3/4

 5 1.24 3/4

 7 1.25 7/8

 8 1.25 3/4

 9 1.28

10 1.28 3/8

11 1.27 1/2

12 1.28 5/8

14 1.35

15 1.33 3/4

16 1.34 1/4

17 1.35 1/4 

Date 

(1936) Closing Price 

December 18 1.39 3/8

19 1.38 1/2

21 1.38 1/4

22 1.35 1/4

23 1.35 7/8
Page 24 

Date 

(1936) Closing Price 

24 1.39 1/4

26 1.41 3/4

28 1.37 1/4

72. On or about December 5, 1936, the total capacity of regular warehouse 

space in Chicago; under the rules of the Chicago Board of Trade, was 12,068,000 

bushels. Receipts for grain in regular houses are deliverable on Chicago 

futures contracts. Also deliverable on futures contracts are warehouse receipts 

for grain in store in Federally licensed warehouses. There was only one 

Federally licensed house in Chicago on December 5, 1936, the Rock Island "C" 

elevator (owned by Farmers National Grain Corporation) with a total capacity of 

approximately 4,000,000 bushels. 

On or about December 5, 1936, the total capacity of Chicago warehouse space 

other than space declared regular by the Chicago Board of Trade, was 43,296,000 

bushels. (This includes Rock Island, with a total capacity of 4,000,000 

bushels.) This makes a total deliverable elevator capacity of 16,068,000 bushels 

and private or non-deliverable elevator capacity of 39,296,000 bushels, or a 

total of deliverable and non-deliverable capacity of 55,364,000 bushels. 

Many of the non-deliverable warehouses were private houses owned by 

processors, such as Corn Products, etc. 

Many of the non-deliverable private houses were not located on water, which 

is an essential for delivery purposes. 

The Board of Trade cannot force the owner of a house to take out a Federal 

license or to obtain a Certificate of Convenience and Necessity from the 

Illinois Commerce Commission to become a public elevator. It is against the 

Illinois law for a private house to issue warehouse receipts deliverable on 

futures contracts. 

In December, 1936, there was no way as far as the evidence discloses, for the 

Board of Trade on its own initiative to increase the number of elevators or the 

elevator capacity of 16,068,000 bushels, the receipts of which are deliverable 

on futures contracts; the owner of the private 

 

elevator must first voluntarily make application to the Illinois Commerce 

Commission to become a public elevator or to the Federal authorities for a 

Federal license. 

73. On December 5, 1936, grain in store in public elevators in Chicago (not 

including grain in store in the Federally licensed elevator, (Rock Island), was 

as follows: 

 Wheat 3,244,622 bushels

 Corn 251,680 "

 Oats 3,412,101 "

 Rye 632,543 "

 Barley 353,192 "

Soy Beans 216,802 "

Total 8,110,940 "

This left the difference between 12,086,000 bushels regular elevator space 

and 8,110,940 bushels in store in regular elevator houses of 3,975,000 bushels 

vacsnt regular elevator space. Inasmuch as grains in the Federally licensed 

elevator, Rock Island, was not separately given in evidence, the vacant capacity 

in regular elevators and the Federal elevator is not directly ascertainable, but 

in no event could the vacant space in delivery houses have exceeded 8,000,000 

bushels. 

74. On December 5, 1936, the Chicago visible supply of grain was as follows: 

 Wheat 7,406,000 bushels

 Corn 1,875,000 "
Page 25 

 Oats 8,828,000 "

 Rye 2,285,000 "

Barley 2,174,000 "

Total 22,568,000 "

75. Inasmuch as the total open interest in corn and wheat futures on December 

5, 1936, was 31,467,000 bushels, supra, and inasmuch as Cargill's total open 

interest in corn and wheat futures was 15,201,000 bushels, supra, it is apparent 

that there was insufficient vacant capacity in regular houses or in delivery 

houses (i.e., public elevators plus Rock Island elevator) to take care either of 

the total open interest in corn and wheat or Cargill's open interest in corn 

 

and wheat. 

Furthermore, the vacant capacity of Chicago elevators on this date was 

further circumscribed by the following considerations: 

First. The total open interest in other grains (oats, rye, barley) on 

December 5 amounted to 3,738,000 bushels. 

Second. The capacity of elevators in which different grains are stored cannot 

be taken at the full amount because 10 to 12 percent of the capacity must be 

left vacant for turnover and leeway purposes. 

76. In addition to deliveries from elevators regular under the rules of the 

Board of Trade and the single Federal elevator, deliveries may also be made 

under the rules of the Board of Trade during the last three days of the delivery 

month, under certain circumstances, on track. The record is not clear as to the 

capacity of Chicago switch tracks for track deliveries, At one place Professor 

Vailo testified that he never heard of track deliveries of as large an amount as 

7,000,000 bushels. Later his attention was called to an article on the Saturday 

Evening Post in which it was stated that in the year 1921, 11,700,000 bushels 

were delivered on track. Miller testified that a day's total inbound freight in 

Chicago amounted to 75,000 cars, but this includes all cars for all purposes, 

(Rec., 11295) and is not limited to track deliveries of grain. Furthermore, all 

grain delivered on track must be inspected. Furthermore, the corn arriving in 

Chicago in December, 1936, was of such high moisture content (supra) that a 

largo percentage of it could not be delivered without kiln drying (supra). 

Drying can only occur in elevators. 

77. The complainant offered to accept deliveries of Chicago 1936 December 

corn at places other than Chicago, either for spot or deferred delivery, at 

price differentials, but did not advise the respondent or its Business Conduct 

Committee what price differentials would be acceptable to the complainant, and 

the respondent's Business Conduct Committee refused to accept the complainant's 

offer. 

78. On December 8, 1936, it would have been impossible for actual deliveries 

to have been made on the total open interest in Chicago December 1936 corn and 

wheat futures, and it would have been impossible for deliveries to have been 

made on Cargill's total open interest of Chicago December 1936 corn and wheat 

futures without violently disturbing the market, even though the other longs had 

only stood for normal ratio of delivery to the total open interest, the other 

longs having approximately 17,000,000 bushels of the open interest in December 

1936 corn and wheat futures, the normal ratio of which could be between 

1,000,000 and 2,000,000 bushels. Cargill had expressed its intention of 

standing for much more than normal or expected deliveries. 

79. On December 8, 1936, the Business Conduct Committee of the Board of Trade 

issued an order to John H. MacMillan, Jr., and Philip C. Sayles, whose 

memberships on the Board of Trade were registered for Cargill of Illinois, and 

to Cargill of Illinois, requiring them to sell, without regard to price, 
Page 26 

2,897,400 bushels of December 1936 wheat futures in six trading days, one of 

which was a short Saturday session. 

80. On December 10, 1936, the Business Conduct Committee modified its order 

of December 8 so as to require the sale of 1,936,000 bushels of December 1936 

wheat futures, in what remained of the same six trading sessions, and still 

without regard to price. 

81. In compliance with the order of the Business Conduct Committee. Cargill 

sold December 1936 wheat and corn futures under protest. 

82. Neither on December 8th or 10th, 1936, nor at any other time did the 

Business Conduct Committee issue any orders to the holders of short contracts in 

the December 1936 wheat futures requiring them to buy in their commitments or 

forbidding them from acquiring further short contracts. 

83. Cargill's purchases and net positions from December 15, 1936, to December 

31, 1936, were as follows: 

DATE TRANSACTION NET 

POSITION 

1936 Purchases Sales Long Short

Dec. 16 475 4866 17 10 165 4811 

18 5 1165 3651 

19 625 3026 21 65 910 2181 22 760 1421 23 90 1331 24 30 1301 

26 539 762 

28 35 713 84 29 5 5 84 30 49 35 

31 35 -- 

84. The Business Conduct Committee of respondent sat on the December 1936 

wheat and corn situation on the following dates and took the following actions: 

(a) November 4, 1936. A communication of the supervisor in charge of the 

Commodity Exchange Administration in Chicago was read. In this communication he 

pointed out that the large open interest in December corn might cause concern. 

The Committee instructed its chief auditor to make a complete survey of the open 

interest in the December corn futures and to make a trip to Minneapolis to 

obtain facts concerning Cargill's forward sales, cash corn on hand, etc. 

(b) November 9, 1936. The report of the chief auditor was communicated to 

the Committee. 

(c) November 23, 1936. The chief auditor reported on his trip to 

Minneapolis, stating, among other things, that: 

1. As of November 7, Cargill's records indicated that its long position in 

December 1936 corn had been acquired for anticipated needs and that at 

prevailing price differences Cargill would stand for delivery of the total 

amount long. 

2. That MacMillan had informed him that an increase in the spread between 

Chicago December 1936 and May 1936 corn (of which Cargill was short 4,755,000 

bushels) would reduce Cargill's needs, and that if this increase went past some 

certain point Cargill would begin to liquidate its December position. 

3. That MacMillan declined to state at just what price the December corn 

futures would be liquidated. 
Page 27 

4. That in MacMillan's opinion the recent price advance was due to the 

activities of the Business Conduct Committee. 

(d) November 25, 1936. The latest figures on December corn were presented to 

the Committee and it was reported to the Committee that Cargill was buying up 

cash corn. It was decided to request MacMillan and Grimes to meet with the 

Committee on November 30. 

(c) November 30, 1936. MacMillan and Grimes appeared before the Committee 

and stated that at just a modest price advance Cargill would sell its December 

corn futures; that Cargill wanted all of the corn it had bought, both futures 

and cash, but that sinceCargill "did not know where the corn was coming from to 

meet our requirements, we decided to buy futures and let someone else worry 

about where it was coming from." MacMillan and Grimes gave the Committee 

assurance of complete cooperation at all times. The Committee could not agree 

on any course of action. 

(f) December 7, 1936. Cargill's position in both corn and wheat was 

discussed and the Committee requested the Chicago supervisor of the Commodity 

Exchange Administration to call for reports of all accounts having 100,000 

bushels or more of December wheat and 25,000 bushels or more of December corn. 

The chief auditor of the Committee was again instructed to go to Minneapolis and 

examine all books and records of Cargill relating both to wheat and corn. A 

sub-committee was appointed to draft a letter of Cargill regarding its long 

positions in wheat and corn. 

(g) December 8, 1936. The chief auditor of the Business Conduct Committee 

reported to its chairman, over the telephone, that Cargill's position in wheat 

and corn was about the same as before; that MacMillan and Grimes were willing to 

come to Chicago to meet with the Committee, bringing 

 

all papers with them, but preferred not to come until December 14. One member 

of the Committee expressed the opinion that it was time to take immediate action 

when one firm held over one-half of the "open interest" in both corn and wheat, 

especially in view of the limited supplies available for delivery. After a 

lengthy discussion, the following Cease and Desist Order was sent by the 

Committee by mail to MacMillan in Minneapolis, copies of which were delivered to 

Sayles, in Chicago, on December 9: 

"In pursuance of Rule 82, the Business Conduct Committee of this Association 

has investigated the position of your company in December wheat and December 

corn. We find that your open commitments in December wheat and December corn 

aggregate approximately fifty per cent of the total open interest in these 

grains and exceed substantially the amount of these grains available for 

delivery in Chicago on December contracts. Under the circumstances, the 

Committee finds that your conduct in accumulating and maintaining these lines 

under prevailing conditions is detrimental to the best interests of the 

Association; that it is unfair and unjust; and that it may be in violation of 

certain rules of the Association. 

"We, therefore, direct you forthwith and immediately to cease and desist (a) 

from maintaining in this contract market your present net long position in 

December wheat and December corn; (b) from maintaining in this market a net long 

position in December wheat and December corn which will within seven calendar 

days from the receipt of this notice (i. e. the close of business December 15th) 

exceed approximately sixty per cent of the net amount of your open long 

commitments as at the close of business November 30th; (c) from manipulating 

prices and from attempting to corner the market in December wheat and December 

corn; (d) from maintaining in this market a net long position on December wheat 

and December corn which will detrimentally affect non-member customers, the 

public at large, public opinion or the good name of the Association and (e) from 

doing any ether act or acts which will have the effect of manipulating prices or 

of promoting any corner or squeeze in December corn or December wheat. 
Page 28 

"It is the intent of the Committee to notify you that your long lines in 

December corn and December wheat should be substantially reduced, beginning at 

the present time and continuing until your open commitments are no longer a 

threat to the orderly conduct of this market. 

"The Committee also requests that you have available at all times in Chicago, 

for its examination and investigation, complete records showing the details of 

your operations in grains, cash and futures, in this market, or affecting this 

market." 

This Cease and Desist Order required Cargill to sell, by the close of 

business December 15, 40 per cent of its net open commitments in Chicago 

December 1936 corn futures as at the close of business November 30, 1936 and 40 

per cent of its not open commitments in Chicago December 1936 wheat futures as 

at the close of business November 30, 1936. 

(h) December 9, 1936. The Supervisor in Charge of the Commodity Exchange 

Administration at Chicago reported that Norris Grain Company had the largest 

short account in Chicago December wheat, but that it was being reduced rapidly. 

It was reported that MacMillan felt that the Committee was unduly hasty in 

taking the action of the previous day and an appointment was set for December 

10. 

(i) December 10, 1936. The Committee's chief auditor makes a report to the 

Committee regarding Cargill's position in cash corn and cash wheat as of 

December 4, 1936, showing that it had a not long position in cash wheat of 

7,201,000 bushels, and a net long position in cash corn of 2,778,000 bushels. 

It therefore appeared that Cargill's net long position in Chicago December 1936 

wheat futures of 8,446,000 bushels, as of December 4 and of 8,511,000 bushels, 

as of December 8, and its long position in December 1936 corn futures of 

5,905,000 bushels, as of December 4, and 6,505,000 bushels, as of December 8, 

was not a hedge against net short positions in cash wheat and cash corn. 

MacMillan and Grimes appeared before the Committee and protested against the 

action of the Committee. The Committee decided to change its Cease and Desist 

Order as to Chicago December wheat futures so that Cargill would be required to 

dispose of only 30 per cent, instead of 40 per cent, of its wheat futures, as 

previously ordered. 

(j) December 12, 1936. At this meeting of the Business Conduct Committee 

Cargill's letter of December 11 to James A. White, Chairman, was read and 

discussed, which letter was as follows: 

"Reference is made to your letters of December 8th and December 10th, 1936, 

in which you suggest that we should cause our customer and parent company, 

Cargill, Incorporated, to change its long position in futures contracts on the 

Chicago Board of Trade in December wheat and December corn in percentages as 

outlined in your letters. 

"We have heretofore advised you that in our opinion and that of our counsel 

the conduct of Cargill Grain Company of Illinois, which is the member involved, 

and that of Cargill, Incorporated, our customer, is not detrimental to the best 

interests of the Chicago Board of Trade, is not unfair or unjust and is not in 

violation of any rules of the Chicago Board of Trade, nor is it a manipulation 

of prices or an attempt to corner the market or detrimentally to affect nonmember customers, the public at large, public opinion or the good name of the 

Chicago Board of Trade. Although in the list of charges contained in your 

letters the Commodity Exchange Act was not mentioned, you are also advised that 

in our opinion and that of our counsel the conduct of ourselves and of our 

customer, Cargill, Incorporated, is strictly in conformity with the requirements 

of the Commodity Exchange Act, and particularly those in relation to 

manipulation and corners. 
Page 29 

"In conferences between your Committee and our officers, we have expressed 

our willingness and that of Cargill, Incorporated, to cooperate along the lines 

set forth in our conference to relieve the situation of any persons who have 

contracted to deliver December corn or wheat and find themselves unduly 

inconvenienced in fulfilling their contracts. Among other things we express a 

willingness to permit additional time to make deliveries. 

"Cargill, Incorporated, has indicated an unwillingness to comply with your 

suggestions that it proceed to liquidate its long position in such percentages 

as you may from time to time require. It has pointed out to us that as a cash 

grain merchandiser it purchased the December futures with the expectation of 

taking delivery for its regular and normal merchandising purposes and in full 

expectation that we in good faith as broker and the Board of Trade Clearing 

Corporation as principal would see that it obtained deliveries purusant to the 

contracts made. Aside from the possible loss to Cargill, Incorporated, if you 

attempt to excuse performance of contracts, there is also an important public 

interest element. Requiring forced drastic reduction of long position would 

tend when known by short interests to cause manipulation by them and consequent 

sudden artificial depression of the futures price with its inevitable lowering 

of the price of cash grain. 

"You of course recognize that the Commodity Exchange Act provides that an 

exchange designated as a contract market thereunder shall provide for the 

prevention of manipulation upwards and obviously, this applies both to a 

manipulation upwards and downwards. We believe that any requirement that 

 

our customer arbitrarily reduce its long holdings by given percentages would 

have the effect of manipulating prices downward and thus any such requirement 

from your Exchange would be in violation of the Commodity Exchange Act. 

"Since you do not agree with us as to this just as you have not agreed to our 

prior suggestions, we urge that you immediately join with us in requesting Dr. 

J. W. T. Duvel, Chief of the Commodity Exchange Administration, either to act in 

person or to delegate Mr. J. M. Mehl, Assistant Chief, not in their official 

capacity, but informally, to arbitrate the differences between us and to 

determine what action, if any, is required on our part. We agree and are 

authorized to say that our customer, Cargill, Incorporated, agrees to accept any 

determination made in this manner. 

"We believe that you will concur that this suggestion for working out the 

apparent difficulty is a happy one inasmuch as in the last analysis it is the 

duty of those charged with enforcement of the Commodity Exchange Administration 

to determine whether any course of conduct, either on the part of the Chicago 

Board of Trade or on the part of our customer, Cargill, Incorporated, causes or 

does not cause a manipulation or cornering of the market, and we are certain 

that you would not want to do anything which might be detrimental to our 

customer and cause a violent downward fluctuation of the market by permitting 

manipulation by short interests. 

"In view of the time element, we suggest that you join in asking Dr. Duvel to 

arrange the arbitration meeting to be held not later than Monday morning of next 

week, either in Chicago or Washington, depending upon Dr. Duvel's convenience. 

"We should appreciate an immediate response to this letter so that we can 

jointly put the machinery in motion to arrange the conference." 

To this letter the Committee sent the following reply: 

"Answering yours of December 11th, in which you request that Dr. Duvel or Mr. 

Mehl be invited informally to act as arbitrators with respect to the cease and 

desist order issued by this Committee December 8th and modified December 10th. 

"This Committee cannot refer to any arbitration, however respectable it may 

be, the duties and obligations placed upon this Committee by the rules of the 
Page 30 

Board of Trade. The rules give us no authority to refer such matters to 

arbitrators. The duty is imposed upon us and 

 

we intend to exercise it to the best of our ability. We call to your attention 

that Mr. Fitz, Supervisor in Charge, has attended our meetings and has 

undoubtedly informed his superiors, Dr. Duvel and Mr. Mehl, of our action. The 

only body authorized to revise our actions is the Board of Directors of this 

Exchange." 

The chief auditor of the Committee was requested to contact houses carrying 

sizable short lines in December corn and wheat and request them to notify 

customers of present "open interest" and limited supplies available for delivery 

and to ascertain if they were prepared to cover their commitments or make 

delivery. 

(k) December 14, 1936. It was reported that liquidation by Cargill in 

accordance with the foregoing Cease and Desist Order was progressing 

satisfactorily. 

(l) December 18, 1936. The Committee decided to send the following 

communication to Clearing Members: 

"The Business Conduct Committee directs that you communicate with each 

individual customer on your books having a short position in Chicago December 

wheat or corn, and call their attention to the relation between the remaining 

open interest and the stocks in public houses. These figures are tabulated 

below: 

Open Interest Chicago Public 

Chicago Futures Elevator Stocks

December 17th December 12th 

Wheat 8,284,000 2,787,000

Corn 8,019,000 315,000

"Your attention is called to Rule 141,prohibiting intentional default. 

"The last day for trading in December contracts is Monday, December 28th." 

At this meeting the Committee also discussed MacMillan's question concerning 

the eligibility of certain members of the Committee to sit and decided that no 

member had an interest in the market disqualifying him from serving as a member 

of the Committee. 

84. The Cease and Desist Order of December 8, as modified December 10, with 

respect to wheat, required Cargill to liquidate 

 

between December 9 and December 15, 1,961,800 bushels of December wheat futures, 

and 1,759,000 bushels of corn futures. This is shown by the following table: 

Wheat Corn 

Cargill's Position (Bushels) (Bushels) 

November 30, 1936 9,356,000 long 7,910,000 long 

December 8, 1936 8,511,000 " 6,505.000 " 

December 15, 1936 5,441,000 " 4,645,000 " 

Reduction from November 30, 1936 3,915,000 * " 3,265,000 " 

Reduction Required 2,806,800 ** " 3,164,000 ** " 

Excess Liquidation 1,108,200 101,000 

* Of this amount 15,000 bushels resulted from deliveries. 

** Before issuance of the original order Cargill had liquidated on its 

own initiative, 845,000 bushels of December wheat and 1,405,000 bushels of 

December corn. Consequently, the liquidation required by the Cease and 
Page 31 

Desist Order, as modified, was 1,961,800 bushels of wheat futures and 

1,759,000 bushels of corn futures (Rec. 1120, 8522) 

Cargill, during the period from December 7 to December 15, sold 1,108,200 

bushels more Chicago December wheat futures than it was ordered to sell by the 

Business Conduct Committee, and 101,000 bushels more corn futures than required 

by the order of the Business Conduct Committee. 

85. The average liquidation of corn per trading day, as required by the order 

of the Business Conduct Committee from December 8 to December 15, was less than 

300,000 bushels; the complainant voluntarily had been liquidating between 

November 30 and December 8 Chicago December corn futures at the average rate of 

over 200,000 bushels per trading day. 

The average liquidation of wheat per trading day, as required by the order of 

the Business Conduct Committee from December 8 to December 15, was less than 

300,000 bushels; the complainant voluntarily had been liquidating between 

November 30 and December 8 Chicago December wheat futures at the average rate of 

over 100,000 bushels per trading day. 

86. The evidence shows that early in July, 1936, Cargill's studies of 

conditions convinced them that there would be a scarcity of corn during October, 

November and December, 1936. In their brief filed with the Board of Trade in 

September, 1937, and included in the record as Complainant's Exhibit 162, in 

referring to December, 1936, they have 

 

the following statement: 

"As December futures drew nearer and time for performance by the sellers of 

Chicago December futures approached, evidence accumulated which showed that 

nothing like 10,000,000 bushels of corn would be available for actual delivery 

in Chicago during that month. The Business Conduct Committee of the Board of 

Trade in Chicago became alarmed. The Cargill Company was questioned by this 

group." 

87. The closing prices of the Chicago December 1936 wheat futures daily 

during the period from July 1 to December 31, 1936, are set out in Appendix D. 

88. The largest single type of wheat produced in the United States is known 

as "Hard Red Winter Wheat" and is often referred to as "hard winter wheat". It 

is raised principally in the southwestern States of Kansas, Nebraska, Oklahoma 

and Texas. The next largest type of wheat raised in the United States is 

referred to as "Hard Rod Spring Wheat", raised in the northwestern States of 

North Dakota, South Dakota, Montana and Minnesota. The third largest type of 

wheat, known as "Soft Red Winter Wheat", is raised for the most part in States 

near Chicago, such as Indiana, Illinois and Ohio. The fourth largest type of 

wheat produced in the United States is Durum wheat, raised principally in North 

Dakota and South Dakota and is used almost exclusively for feeding purposes. 

89. In August and September, 1936, Cargill officials, on the basis of past 

experience, current conditions and constant contacts with customers, estimated 

that Cargill would need between 10,000,000 and 15,000,000 bushels of wheat for 

the period from December 1, 1936 to June 30, 1937. 

90. Cargill officials during August and September,1936, determined, on the 

basis of current conditions, to acquire 10,000,000 bushels of Chicago December 

1936 wheat futures. Commencing at this time Cargill began to acquire a line of 

long Chicago December 1936 wheat futures, and, 

 

gradually, during September, October and November, purchased Chicago December 

wheat futures until it had acquired its maximum amount of 9,356,000 bushels on 

November 30, 1936. Cargill's not position and daily transactions, and the daily 

volume of trading and open interest in the Chicago December 1936 wheat futures 
Page 32 

are set forth on Complainant's Exhibit No. 36-B and Complainant's Exhibit No. 

160. 

91. In October, 1936, Cargill repeated the investigation that it had made 

with respect to supply conditions of wheat in August and September, 1936, and 

found that there would be a shortage of soft red winter wheat and that in all 

probability hard winter wheat would have to come to Chicago from the Southwest 

to fill Chicago December 1936 wheat futures contracts. No. 2 soft red winter 

wheat and No. 2 hard winter wheat are the two grades of wheat most frequently 

delivered on Chicago wheat futures contracts. Only various grades of hard 

winter wheat are deliverable on futures contracts on the Kansas City Board of 

Trade. Kansas City is the nearest important market to the hard winter wheat 

area, and, generally speaking, hard winter wheat moves to Kansas City first. 

The price of hard winter wheat is generally in the fall of the year, and was in 

the fall of 1936, reflected in the Kansas City Board of Trade December 1936 

wheat futures. 

92. Accordingly, Cargill officials determined that hard winter wheat would 

come to Chicago to fill the Chicago December 1936 wheat futures contracts and 

that the price of Chicago December 1936 wheat futures should rise to a freight 

differential over the price of the Kansas City December 1936 wheat futures. 

This freight differential is approximately 9 cents. 

93. Cargill's offer to the Business Conduct Committee in December, 1936, to 

extend the time in which holders of short contracts in the December wheat 

futures might make delivery, thirty or sixty days, was ignored by the Business 

Conduct Committee. So also did the Business Conduct Committee ignore Cargill's 

offer to permit these holders of short 

 

contracts to make deliveries at places other than Chicago. 

94. On December 17th or 18th, at the request of the Chairman of the Business 

Conduct Committee, a Cargill official conferred with the Chairman of the 

Committee alone and was told that the Committee still was concerned about 

Cargill's line of long December wheat futures. The Chairman of the Committee 

was told that Cargill would be a willing seller when the price of the Chicago 

December wheat futures reached a 9-cent premium over the price of wheat in the 

Southwest. The Chairman thereupon reported to the Committee on December 18, 

1936, stating that the Committee need have no further concern over December 

wheat futures. 

95. Of the total of 1,499,000 bushels of wheat delivered on Chicago December 

1936 wheat futures, Cargill received 726,000 bushels, most of which was No. 2 

hard winter wheat. 

96. The members (and substitute members) of the December 1936 Business 

Conduct Committee, and their firms, were as follows: 

James A. White, Chairman (Lamson Bros. & Co.). 

C. D. Sturtevant (President, Bartlett Frazier Co.). 

M. R. Glaser (V. P., Socy-Treas., Rosenbaum Bros., Inc.). 

J. E. Bennett (James E. Bennett & Co.). 

Lowell Hoit (President, Lowell Hoit & Co.). 

R. F. Uhlmann (Socy. & Treas., Uhlmann Grain Co.). 

A. F. Lindley (Clement, Curtis & Co.). 

The record reveals: 

First: The members of the Business Conduct Committee had no position 

whatsoever for their own account, long or short, in December 1936 corn and 

wheat. 
Page 33 

Second. The wives and children of the members of the Business Conduct 

Committee had no position whatsoever for their own account, long or short, in 

December 1936 corn and wheat. 

Third. The partners in firms with which the members of the Business Conduct 

Committee wore identified or affiliated had no position whatsoever for their own 

account, long or short, in December 1936 corn or wheat. 

Fourth. The corporations and partnerships with which members of the Business 

Conduct Committee were identified or affiliated had no position whatsoever for 

their own account, long or short, in December 1936 corn or wheat except 

Rosenbaum Brothers and Uhlmann Grain Company, both of which had short positions 

as hedges against cash grain owned by them. Uhlmann Grain Company also held 

short positions as follows: 

UHLMANM GRAIN CO. (Identified as Speculative and Spreading) 

Open Contracts in Chicago December 1936 Wheat as Reported November 1, 1936, 

to December 31, 1936. 

(In thousands of bushels) 

Date Open 

Contracts 

Long Short 

Nov. 1 45

Dec. 17 35

26 15

28 Even

Both of these firms made full deliveries on their short position in December 

futures, with the exception of negligible amounts. 

97. The record fails to disclose any substantial evidence to the effect that 

the cease and desist orders of the Business Conduct Committee of December 8 and 

10, 1936, were made known to the shorts. 

98. During substantially all of September 1936, the price of Chicago December 

1936 wheat futures was only a fraction of a cent over the price of the Kansas 

City December 1936 wheat futures. During October and November 1936, this 

premium gradually widened from 1-1/4 cents to 4-7/8 cents. It was not until 

December 19, 1936, that this premium reached 9 cents. The relation of the price 

of the Kansas City December 1936 wheat futures to the Chicago December 1936 

wheat futures, daily through December 1936, is as set forth in Complainant's 

Exhibit No. 36-A. 

99. All during September, October, November, and until the latter part of 

December 1936, the Chicago December 1936 wheat futures remained lower than other 

futures. 

100. During the period from November 30, 1936 to December 7, 1936, prior to 

the time that Cargill had been informed that the Business Conduct Committee was 

interested in its position in Chicago December 1936 wheat futures, Cargill was 

voluntarily reducing its line of long December wheat futures. 

101. Between November 30, 1936, and December 7, 1936, the "open interest" in 

Chicago December wheat futures decreased rapidly. 

102. The volume of trading in the Chicago December 1936 wheat futures was the 

greatest during the month of September, decreased during both October and 

November, and by the first half of December had very materially decreased from 

its September peak. 

103. On December 8, 1936, Cargill's stocks of foreign cash wheat, including 

open purchases, were approximately 6,000,000 bushels, its open sales of foreign 

cash wheat were approximately 2,000,000 bushels, and its net long position in 
Page 34 

foreign cash wheat was approximately 4,000,000 bushels. On this same date 

Cargill's stocks of domestic cash wheat, including open purchases, were 

approximately 6,200,000 bushels, its open sales of domestic cash wheat were 

approximately 2,800,000 bushels, and its net long position in domestic cash 

wheat was approximately 3,400,000 bushels. 

104. The Board of Trade raised no question with Cargill about Cargill's 

acquisition of its Chicago December 1936 wheat futures, either at the time these 

futures were acquired or on October 15, 1936, when for the first time Cargill's 

long line exceeded 5,000,000 bushels, or at any other time prior to December 8. 

105. The estimates of the carry-over of wheat in the United States as of July 

1, 1936, on farms, in country elevators and mills, in commercial stocks, and in 

merchant mills and elevators, together with the carry-over of wheat in the 

United States as of July 1, 1935, and the previous ten-year average, are as set 

forth in Complainant's Exhibit No. 34. 

106. The comparison of cash wheat and cash corn prices at Chicago from August 

15 to December 15, 1936, is as set forth in Complainant's Exhibit No. 34-A. 

107. The stocks of wheat on farms and in interior mills and elevators in 

Ohio, Indiana, Illinois, and Michigan as of October 1, 1935, and as of October 

1, 1936, are as set forth in Complainant's Exhibit No. 37. 

108. The stocks of wheat on farms and in interior mills and elevators in 

Nebraska, Kansas, Oklahoma, and Texas as of October 1, 1935, and as of October 

1, 1936, are as set forth in Complainant's Exhibit No. 38. 

109. The "visible supply" of wheat as of December 5, 1936, at Chicago, 

Illinois; Kansas City, Missouri; Hutchinson, Kansas; Omaha, Nebraska; St. Louis, 

Missouri; St. Joseph, Missouri; Wichita, Kansas; and Sioux City, Iowa; is as set 

forth in Complainant's Exhibit No. 43. 

110. On October 1, 1936, and January 1, 1937, the stocks of wheat on farms 

and in interior mills and elevators in all of the United States and in Illinois, 

Indiana, Iowa, and Missouri, which do not appear in the United States "visible 

supply", are as set forth in Complainant's Exhibit No. 44. 

111. The high, low, and closing prices of the Chicago December 1936 wheat 

futures from December 17 to December 28, 1936, inclusive, are as set forth in 

Complainant's Exhibit No. 47. 

112. The "visible supply"of wheat at Chicago on December 19, 1936, and 

December 26, 1936, is as sot forth in Complainant's Exhibit No. 48. 

113. The ten-year comparison of the "open interest" in all Chicago December 

grain futures as of the close of the last business day in November, and the 

deliveries on all Chicago December grain futures, the Chicago elevator capacity, 

Chicago "visible supplies," and Chicago receipts of all grains during the month 

of December 1928 to 1937 

 

inclusive, is as set forth in Complainant's Exhibit No. 215. 

114. The deliveries on all Chicago December 1936 futures contracts, together 

with the portions thereof received by Cargill, are as set forth in Complainant's 

Exhibit No. 216. 

115. The comparison of the prices of the Chicago December 1936 wheat futures 

with the prices of cash wheat at Chicago, daily during the month of December 

1936, is as set forth in Complainant's Exhibit No. 210. 

1937 SEPTEMBER CORN 
Page 35 

Cease and Desist Order 

116. The net positions of Cargill, Incorporated, in Chicago September 1937 

corn futures from August 9 to September 30, shown on Exhibit 126, were as 

follows: 

Date Net Position

(1937) Long Short 

August 9 8,295,000 bu. 

10 8,442,000 11 8,447,000 

12 8,440,000 13 8,745,000 14 7,145,000 

16 6,385,000 

17 5,745,000 18 5,395,000 19 4,850,000 

20 4,550,000 21 4,277,000 23 3,942,000 24 3,787,000 25 3,507,000 

26 3,415,000 

27 3,225,000 28 2,952,000 30 2,732,000 31 2,237,000 September 1 2,257,000 

2 2,252,000 3 2,227,000 4 2,207,000 7 2,172,000 

8 2,037,000 9 1,987,000 10 1,907,000 

11 1,907,000 13 1,908,000 

14 1,899,000 15 1,819,000 16 1,584,000 17 1,139,000 18 1,149,000 20 947,000 21 712,000 22 93,000 bu. 

23 42,000 

24 3,459,000 25 3,459,000 

Date Net Position

(1937) Long Short 

September 27 3,459,000 bu. 28 689,000 29 674,000 

30 -- 

117. The above positions of Cargill, Incorporated, in Chicago September 1937 

corn futures reflect its positions after the transfer to Continental Grain 

Company and to Uhlmann Grain Company of the following amounts of long corn 

futures on the following dates: 

Continental Grain Company 
Page 36 

1937 

August 13 870,000 bu.

14 430,000

16 400,000

17 400,000

18 150,000

19 230,000

27 150,000

28 100,000

30 225,000

31 505,000

Total 3,460,000

Uhlmann Grain Company 

1937 

August 14 300,000 bu.

16 350,000

17 250,000

18 200,000

19 325,000

20 300,000

21 300,000

23 325,000

24 250,000

25 300,000

26 175,000

27 400,000

28 200,000

Total 3,675,000

The total transfers of Chicago September 1936 corn futures to the two houses 

aforesaid amounted to 7,135,000 bushels. 

118. The foregoing transfers of Chicago September 1937 long corn futures to 

Uhlmann and Continental were in exchange for contracts 

 

on the part of Uhlmann and Continental to sell and deliver to Cargill, 

Incorporated, equal amounts of cash corn in September or the early part of 

October, 1937, i.e., at seller's option not later than October 1st, 3rd, 5th and 

8th. 

Continental did not purchase any cash corn to deliver to Cargill for 

September or early October delivery, but relied upon the long September futures 

so transferred to Continental by Cargill for fulfilling the September or October 

deliveries to Cargill. The same is true of Uhlmann. 

Continental, and it may be assumed the same is true of Uhlmann, was willing 

at any time after the making of said transactions to cancel said cash 

transactions and retransfer the September long futures back to Cargill, provided 

their profit was assured. From and after September 17, 1937, there was an 

understanding between Cargill, respondent's Business Conduct Committee, 

Continental, and Uhlmann, that Continental and Uhlmann would dispose of their 

September long futures, in accordance with instructions from Cargill, upon 

Cargill's cancelling an even amount of their commitments for September or 

October delivery of cash corn. 

The Business Conduct Committee, immediately upon learning of the Uhlmann and 

Continental deals (on August 31, 1937) held that it had not been deprived of 

jurisdiction by reason of the transfer of the aforementioned 7,135,000 bushels 

of long September corn futures to Uhlmann and Continental, but, on the contrary, 

decided at least by September 2, 1937, to and did thereafter treat the 7,135,000 

bushels of long futures in the names of Continental and Uhlmann as controlled by 

Cargill. It learned of the nature of these transactions when Simon Mayer, of 
Page 37 

Continental Grain Company, and Fred and Richard F. Uhlmann, of Uhlmann Grain 

Company, were brought before the Committee on August 31, 1937. Neither 

Continental nor Uhlmann knew of the other's contract 

 

with Cargill at least prior to August 31. No information about these deals was 

given by Cargill, Continental or Uhlmann, or anybody on their behalf, to 

respondent, or any of its committees, until the transactions themselves were 

first discovered as aforesaid. 

The contracts between Uhlmann and Continental, on the one hand, and Cargill, 

on the other, were at certain prices, (i.e., 2 cents over the Chicago September 

corn futures price) for 2 yellow corn "f.o.b. track or care Chicago" which 

insured to Uhlmann and Continental about one-quarter cent a bushel profits if 

they "sat on" the long September futures contracts transferred from Cargill to 

them, took delivery on such futures contracts, and thereafter delivered the 

grain to Cargill in accordance with the terms of the deal. If, however, 

Continental or Uhlmann had been able to buy cash 2 yellow corn at less than two 

cents over the Chicago September futures price, or if Continental or Uhlmann got 

track deliveries on the Chicago September futures under Rule 282 and transferred 

such track deliveries to Cargill without paying elevation charges of one and 

one-quarter cents a bushel, Continental and Uhlmann would have made more than 

one-quarter cent a bushel. 

On September 24, 1937, Uhlmann's contract with Cargill was cancelled at the 

insistence of Uhlmann and the September futures contracts to the extent of 

3,510,000 bushels which had previously been transferred by Cargill to Uhlmann, 

were retransferred from Uhlmann to Cargill. Uhlmann received its profit of a 

quarter cent per bushel. 

MacMillan in testifying admitted that Cargill's officer, Hendel, who made the 

original deal with Uhlmann undoubtedly represented to Uhlmann after August 13 

and prior to September 1, that this transaction had been approved by the 

Commodity Exchange Administration. This was one proven by the evidence. 

119. On August 9, 1937, the long line of Cargill, Incorporated, in Chicago 

September 1937 corn futures was 8,295,000 bushels. Instead 

 

of decreasing as shown above in Finding 116, the combined long lines of Chicago 

September futures of Cargill, Incorporated, Continental Grain Company and 

Uhlmann Grain Company increased, as shown below in this paragraph. For example, 

Finding 116 shows Cargill, Incorporated, was long 2,257,000 bushels on September 

1, but the combined line of Cargill, Continental and Uhlmann was long on that 

date 9,392,000 bushels. Again, Cargill, Incorporated, as shown by Finding 116, 

which is based on Exhibit 126, is short September corn futures on September 22 

to the extent of 93,000 bushels, but the combined lines wore long on September 

22 to the extent of 6,787,000 bushels. Furthermore, throughout theperiod from 

August 9 to September 24, 1937 (on which last date trading in the September corn 

futures ceased by order of the Directors of respondent), the percentage of the 

combined long holdings to the total open interest increased from 41.6 per cent 

on August 9 to 84.2 per cent on September 24. The total open interest, the 

combined long position of Cargill, Incorporated, considering contracts with 

Uhlmann and Continental as positions in futures under the control of Cargill, 

and the percentage of such combined position in relation to the total open 

interest, is shown as follows: 

Cargill's Per 

Date Total Cargill's Combined Cent of Total 

(1937) Open Interest Long Position Open Interest 

August 9 19,917,000 bu. 8,295,000 bu. 41.6 

10 19,605,000 8,442,000 43.1 

11 19,478,900 8,447,000 43.4 

12 19,579,000 8,440,000 43.1 
Page 38 

 Cargill's Per 

Date Total Cargill's Combined Cent of Total 

(1937) Open Interest Long Position Open Interest 

13 19,872,000 8,745,000 44.0 

14 19,839,000 8,745,000 44.0 

16 19,424,000 8,735,000 45.0 

17 19,336,000 8,745,000 45.2 

18 19,156,000 8,745,000 45.6 

19 19,188,000 8,755,000 45.6 

20 18,693,000 8,755,000 46.8 

21 18,453,000 8,782,000 47.6 

23 18,252,000 8,772,000 48.1 

24 18,441,000 8,867,000 48.1 

25 18,579,000 8,887,000 47.8 

26 18,568,000 8,970,000 48.3 

 

Cargill's Per 

Date Total Cargill's Combined Cent of Total 

(1937) Open Interest Long Position Open Interest 

August 27 18,759,000 bu. 9,330,000 bu. 49.8 

28 19,119,000 9,357,000 48.9 

30 19,032,000 9,362,000 49.2 

31 18,580,000 9,372,000 50.4 

September 1 18,502,000 9,392,000 50.8 

2 18,333,000 9,387,000 51.2 

3 18,366,000 9,362,000 51.0 

4 18,365,000 9,342,000 50.0 

7 18,261,000 9,307,000 50.9 

8 18,432,000 9,172,000 49.8 

9 16,045,000 9,122,000 56.9 

10 15,925,000 9,042,000 56.8 

11 15,820,000 9,042,000 57.2 

13 15,754,000 9,043,000 57.4 

14 15,485,000 9,034,000 58.4 

15 15,214,000 8,954,000 58.9 

16 13,447,000 8,719,000 64.8 

17 11,084,000 8,174,000 73.7 

18 10,932,000 8,104,000 74.1 

20 10,642,000 7,902,000 74.3 

21 10,225,000 7,667,000 75.0 

22 8,839,000 6,787,000 76.8 

23 8,400,000 6,753,000 80.4 

24 8,012,000 3,744,000 84.2 

The reduction in Cargill's combined long position during September, above 

show, is due to deliveries received on futures contracts and sales of futures by 

Cargill as cash corn was purchased by it during September. 

120. At the time of each transfer of Chicago long September corn futures to 

Continental, as above set forth, Cargill also transferred to Continental for 

its, Cargill's, account, paying a commission therefor, an exactly equal amount 

of short Chicago December corn futures. This made it possible for these 

September and December corn futures to be held without the necessity of placing 

margin money with the clearing-house at the time the transfers were made. This 

transfer of short December corn futures was from thirteen Chicago futures 

commission firms (from whom the September corn futures also were transferred) to 

Continental and therefore must have cost Cargill two commissions, i.e., 

commissions to the original Chicago commission firms, and commissions to 

Continental. 
Page 39 

121. The corn crop for the crop year 1936-1937 was the second smallest on 

record, amounting to only 1,253,766,000 bushels harvested as grain, compared to 

the lowest production on record of 1,146,684,000 harvested as grain in the crop 

year 1934-35. The intervening crop year 1935-36 was about average. United 

States stocks on farm April 1, 1937, of 409,074,000 bushels, July 1, 1937, of 

155,115,000 bushels, and October 1, 1937, of 60,571,000 bushels, were the lowest 

ever recorded. 

During the period from July 31 to September 25, 1937, the visible supply of 

corn in Chicago and in the United States, respectively, was as follows: 

Date 

(1937) Chicago United States

July 3 1,534,000 5,346,000

31 2,956,000 7,794,000

August 7 2,683,000 7,125,000

14 2,021,000 5,920,000

21 2,025,000 5,798,000

28 1,831,000 5,340,000

Sept. 4 1,498,000 4,330,000

11 983,000 3,719,000

18 1,085,000 3,644,000

25 1,772,000 * 3,864,000

* Including 155,000 afloat 

The visible supply of corn includes stocks of grain in public and private 

warehouses at principal points of accumulation, at lake and seaboard ports and 

in transit by water, as compiled by the Secretary of respondent and published. 

The foregoing figures include foreign and domestic corn, corn of grades which 

are not deliverable on futures contracts, and also corn owned by Cargill on the 

dates mentioned. The amount of Cargill-owned corn in United States visible and 

Chicago visible was not determinable from the record on the dates mentioned. On 

September 13, 1937, however, Cargill owned in its elevator in Chicago 355,000 

bushels, in other elevators in Chicago 65,000 bushels, and had bought 60,000 

bushels more. Cargill's ownership of corn at other points and included in the 

visible supply was not offered in the record. 

122. The total United States visible supply of corn as of Saturday nearest 

July 1, 1937, was, as above stated 5,346,000 bushels, whereas the average for 

the same Saturday for the years 1932-36 was 22,490,400 bushels. The total 

visible supply of corn at Chicago as of the Saturday nearest July 1, 1937, was, 

as above stated, 1534,000 bushels, whereas the average for the same Saturday for 

the years 1932-36 was 7,467,000 bushels. 

123. Commercial stocks of corn, as reported by the United States Department 

of Agriculture, which include corn in store in public and private elevators in 

thirty-nine markets, corn afloat in vessels or barges in harbors of lake and 

seaboard ports, corn not gradable for delivery on Chicago futures contracts, and 

corn owned by Cargill, was for the following months in the year 1937, as 

follows: 

May 6,697,000

June 4,316,000

July 6,264,000

August 7,425,000

September 5,384,000

October 5,651,000

November 5,175,000

December 26,262,000

New corn was included in the October figures. These are the lowest 

commercial stocks on record except as to September in two preceding years, and 
Page 40 

August in three preceding years. Again Cargill-owned corn is not shown although 

it is included in the foregoing figures. 

124. The scarcity of corn in 1937, owing to the two small crops of 1936-37 

and of 1934-35, was the most acute in the history of the Department of 

Agriculture. This was known to complainant. There was "practically no stocks 

on the farms or in visible supply, in Chicago and in the United States, 

comparatively." 

125. On October 1, 1937, there were 60,571,000 bushels of corn on farms in 

the United States. Stocks of corn on farms in the six States of Ohio, Indiana, 

Wisconsin, Illinois, Michigan and Iowa (hereinafter called the "six States"), 

tributary to Chicago, on July 1, 1937, and October 1, 1937, were as follows: 

July 1, 1937 October 1, 1937

Ohio 13,500,000 3,937,000

Indiana 13,924,000 6,897,000

Wisconsin 894,000 550,000

Illinois 24,741,000 11,876,000

Michigan 3,110,000 1,697,000

Iowa 14,146,000 3,152,000 

 Totals 70,315,000 28,109,000

Of the 70,315,000 bushels on farms in the six States July 1, it is estimated 

35,000,000 were on farms in the six States September 1. Of this 35,000,000 

bushels on farms in the six States September 1, it was estimated one-half of it 

could have been available for delivery on the Chicago September futures 

contracts at some price and that 5,000,000 bushels of it could have moved to the 

Chicago market for delivery on Chicago futures contracts at prices between $ 

1.15 and $ 1.20 per bushel. It is further found: 

(a) that a certain proportion of this consists of scraps and remnants 

estimated at 10,000,000 bushels; 

(b) that some of such corn, although not the usual amount, was seed corn; 

(c) that the corn of the 1936-37 crop was of lower merchantable quality than 

usual; 

(d) that a certain proportion of stocks of corn on farms will not move off at 

any price; 

(e) that it would not be profitable for a farmer with, say, 100 bushels of 

corn on his farm to merchandise it, taking into consideration costs of 

merchandising and trouble and expense of substituting feeds; 

(f) that farmers who had retained or bought corn for finishing off cattle and 

hogs would be loath to substitute other feeds because corn is the best grain for 

such purpose; 

(g) that the high prices of corn which prevailed from January to September, 

1937 (as high as $ 1.40 per bushel is May) would have attracted all surplus corn 

from farms except such as was held until released by reason of the early advent 

of the new crop. 

126. On September 1, 1937, there were in the six States well over a million 

farms; the latest census (that of 1935) reports the number of farms in the six 

States as 1,305,673. (U. S Cen. of Agri., 1935 p. xxii, xxiii; Rec., 10858.) Of 

the total number of farms in the six States in 1935, 1,156,070 raised cattle 

(idem xxviii, xxix); 1,083,452 raised corn for all purposes (idem xxxii, 

xxxiii); 912,489 raised corn as grain (idem xxxii, xxxiii); and 842,269 raised 

swine (idem xxviii, xxix; Rec., 10858-9). The total number of farms in the 

United States in 1935 was 6,812,350 (idem xx), of which in 1934, 4,055,986 
Page 41 

raised corn as grain (idem xxxi), and 4,849,724 raised corn for all purposes 

(idem xxxii, xxxiii; Rec. 10860). 

127. The shipment and local slaughter (excluding farm slaughter) of cattle 

and calves in the year 1936 (1937 not given) in the six states, was as follows 

(U. S. Agri. Stat. 1933, table 403, p. 290); 

Cattle Calves 

Head Head 

Ohio 482,000 396,000

Indiana 540,000 330,000

Illinois 1,095,000 465,000

Michigan 288,000 322,000

Wisconsin 459,000 907,000

Iowa 2,139,000 375,000

 Total 5,003,000 2,795,000

Including milk cows and heifers kept for milk, the cattle and calves in the 

six States, on January 1, 1937, totaled 15,398,000 head. (Agri. Stat. 1938, 

Table 396, p. 283; Rec. 11154.) 

The annual slaughter of cattle and calves under Federal inspection, in 1936, 

was 10,972,000, and in 1937, 10,070,000 

 

(Agric.Stat., 1938, Table 406, p. 293, and the receipts of stock and feeder 

shipments at public stockyards in 1937 shows that the largest receipts and 

shipments were in August, September and October (Agri. Stat., 1938, Table 399, 

p. 287) the total receipts in 1937 being 15,135,000 (idem). 

A considerable quantity of corn would be required for finishing off cattle in 

September, October, and November for marketing in the fall of 1937 in the six 

States. 

128. The number of sows farrowed and pigs saved in the spring and fall 

farrows is given in U. S. Agri. Stat., 1938, Tab. 411, P. 299, for the United 

States and the six States as follows: 

Spring 1937 Fall 1937 

Sows Pigs Sows Pigs 

Farrowed Saved Farrowed Saved 

United States 6,202,000 38,654,000 3,778,000 23,375,000 Ohio 327,000 2,168,000 284,000 1,917,000

Indiana 416,000 2,687,000 315,000 2,051,001

Illinois 550,000 3,454,000 305,000 1,958,000

Michigan 95,000 645,000 73,000 496,000

Wisconsin 247,000 1,667,000 121,000 817,000

Iowa 1,351,000 8,457,000 471,000 2,892,000 

Total for 

six States 2,986,000 19,078,000 1,569,000 10,131,000

The spring litter is larger than the fall litter, and a number of millions of 

bushels of corn would be required to finish off the litter being finished in 

September, October, and November 

129. There were on farms in the six states, on January 1, 1937, 121,633,000 

chickens (Agri. Stat., 1930, Table 515, p. 369): and it appears that there are 

raised on farms in each year more chickens than are on the farms January 1 of 

each year over 183,000,000 in the six States in 1935 (idem. p. 370). Corn and 

wheat constitute the best chicken feed, but only 402,757 farms in the six states 

raise wheat (U. S. Cen. of Agri., 1935, pp. xxxii, xxxiii). 
Page 42 

130. There were horses and mules in the six states January 1, 1937, to the 

number of 3,685,000. (Agri. Stat., 1938, Tables 464, 465, pp. 334, 335): 

131. Stocks of corn on farms in Missouri, Minnesota, Nebraska, and Tennessee, 

on July 1, and October 1, 1937, were as follows: 

13697 October 1, 1937

Missouri 2,832,000 1,802,000

Nebraska 2,126,000 912,000

Minnesota 4,664,000 874,000

Tennessee 8,388,000 3,020,000

 Total 18,012,000 6,608,000

If these States be considered as tributary to Chicago, the total stocks of 

corn in these and the six States, on July 1, 1937, would be 88,327,000 bushels, 

and on October 1, 1937, 34,717,000 bushels. Vaile admitted that the farm 

population in the four additional States would not be out of line in comparison 

with stocks of corn on farms in the six States, and that the ratio of feeding 

requirements in the ten States would not differ materially from the ratio of 

feeding requirements in the six States. 

132. Sometime in the early part of September 1937, Cargill entered upon a 

campaign of aggressive buying of cash corn in the Midwest, (i.e., particularly 

through its Chicago office, its Toledo office, its Minneapolis office, and its 

Kansas City office) and later, about September 17, extended its aggressive corn 

buying campaign to Texas and Oklahoma, where there was a very early movement of 

a new crop corn of excellent grade and low moisture content, and of a grade 

deliverable on Chicago September futures contracts, according to Federal 

standards. Coincident with the acquisition of cash corn, Cargill sold an 

approximately equal amount of Chicago September corn futures, thus reducing its 

long line of futures to approximately the same extent as it acquired cash corn 

in the 

 

Midwest and in Texas and Oklahoma. Also, as it sold cash corn, either spot or 

for deferred delivery, it purchased a corresponding amount of the Chicago 

September corn futures. 

During the month of September, 1937, complainant purchased in the Midwest and 

in Texas and Oklahoma 4,813,647 bushels of cash corn, including 804,485 bushels 

taken on delivery in September futures, exclusive of deliveries received by 

Continental. During the same month, complainant sold 458,297 bushels. 

133 Cargill purchased in Texas and Oklahoma, between September 17 and 

September 24, 642,532 bushels of Texas and Oklahoma corn (Rec., 3315), and at 

Toledo, between September 3 and September 30, purchased 179,898 bushels of corn. 

Cargill's total purchase of corn in the Southwest, including Texas and 

Oklahoma, was very much greater than that of all of its competitors during 

September, 1937, and in other parts of the Midwest during the same period it 

purchased approximately the same amount as that purchased by all of its 

competitors. 

Cargill repeatedly wired its Chicago office to keep corn away from Farmers 

National, Rice, and other shorts. 

(Letter "M" indicates the message was sent from Minneapolis to Chicago and 

the letter "C" that the message was sent from Chicago to Minneapolis.) 

Date No. Rec. Message 

9/8/37 M 219 3700 Want to keep corn from Fanny so suggest go back up 

to four over if necessary. Also if have to take IP 

blg but should be able to take this from Fanny at 

3 1/4 to 3 1/2 would think. Wyard 

 9/9/37 M 38 37000 -- 01 Ring GX - Pls continue taking spot corn and want 
Page 43 

Date No. Rec. Message 

to pay just enough to take away from Fanny. Wyard. 

Date No. Rec Message 

9/9/37 M 55 3701 Ring Gx - Will take up to 25,000 at three over 

 and go higher of course if necessary take 

 from Fanny. Wyard 9/10/37 M 152 3711 Ring GX - Pls take the corn away from Nobby if 

have to bid up for it. Wyard 

 9/10/37 M 445 3711 Ring GX - Suggest take up to 25,000 corn TA overnight and then advise if getting more offered. 

Still want to keep this corn from 

Fanny. Wyard 

9/13/37 M 13 3715 Ring GX - Will pay up to 2 over for 2YC WHRS and 

suggest take up 35,000 2YC TA at basis necessary 

take from Fanny. Wyard 

9/13/37 M 227 3716 Ring GX - Suggest raise board bid to 3 1/2 for 

while and see if brings in any more offers and 

continue take away the spot corn best possible. 

 9/14/37 M 303 2999 Wyard Ring GX - We want the to arrive corn so 

for time being we won't call Federal on the 

corn and if necessary raise the basis to take 

it away from Fanny and Nobby. Wyard 

9/14/37 C 505 3001-02 Wyard - Fanny paying 107 1/2 tonight so we have 

booked little at 107 3/4. Ring GX 

9/14/37 M 248 3003 Ring GX - On the old corn Jimmy we want to take 

it away from Fanny so if have to make our 

discounts less Pls do so. We want to get the 

preference over Fanny so do what it takes. 

Wyard. 

9/15/37 M 184 3047 Ring GX - Pls lower our bid on 2YC to 1 1/2 over 

5 days. Pls stay in there and pitch though to keep 

away from Fanny. This good up to 25 cars then go 

to one over for another 25. Wyard 9/16/37 C 102 3017 They bidding 1-3/4 we bidding 2 stop first bunch 

we took this morning was one over Ring GX 

9/16/37 M 82 3018-19 Ring GX - Pls keep 1/4 of a cent above them all the 

time both to arrive and spot. Wyard 

9/16/37 M 151 3019 Ring Sayles GX - Our St. Louis office advises that 

Vehon is now out thru central Illinois bidding for 

Rice on 

 

Date No. Rec Message 

old 2 Yel at 2 over Sept not to country 

dlvd Chgo this weeks shipt. stop suggest 

go to 2-1/2 over if have to take this 

way there//we giving St. Louis the same..Wyard 

9/16/37 C 325 3127 Gol - Crosby offering couple cars old two 
Page 44 

Date No. Rec Message 

YC, do think we should sell to some other 

party and then buy back ourselves, it can 

be done, otherwise must sell to Rice..Sayles 

 9/21/37 C 157 3076 Gol - Fanny just came in mkt at one over 

so we going increase our bid to 1-1/4 over..Ring 

 9/21/37 C 394 3082 Gol - Fanny paid 1-1/2 over to arrive, 

we still bidding 1-1/4 -- Ring 9/21/37 M 243 3082 Ring GX - Pls keep quarter of cent above 

Fanny..Wyard 9/21/37 C 497 3085 Gol - Rice bidding 105-3/4 for corn overnight 

we are bidding 106..Ring GX Date No. Time 

9/21/37 C-540 1:29 Mac Jr - Sayles in Goldsmith's office and 

has all your messages..GX Date No. Rec. 

9/21/37 C 102 3151 Gol - Fanny bidding 2 over Sept dely by 

9/27 we are buying at 1-1/4 over dely 9/29-- 

Ring GX 

 9/22/37 M 67 3151 Ring - Suggest go to 2-1/4 over for dely 

buy 9/27 and 1-1/4 for 9/29 and if 

Fanny go up please keep ahead of them..Wyard 

9/23/37 C-245 3169 Gel - Beefy just came in Market paying one 

over for 2 YC by 29th and half over for 

2 XC. No have been going along at half over.. 

Ring 

9/23/37 M 154 3170. Ring GX - Pls beat Beefy bid by quarter 

cent..Wyard 

Cargill was willing to sell cash corn to feed men or processors if assured 

that the corn would not be placed on the market again so that the shorts might 

obtain it for delivery, 

Date No. Rec. Message 

9/9/37 M 60 3701 Ring GX - If the feed men are taking the 

spot corn let them have it but want to 

be sure they are the ones taking..Wyard 

 9/10/37 M 156 3711 Ring GX - Suggest bid on the spot corn 

just what is necessary to take it from 

elevators don't want to let them get 

 any feed men are OK..Wyard 9/16/37 M 240 3124 Coff GX - I mean any of the corn we have 

billed to CP regardless of where it came 

from, want to know if they reshipping any 

of it to Farmers Natl., ..Gage 

 9/16/37 C 466 3124-25 Gage - Don't think any of those track 

cars were consigned to Farmers Natl by 

CP firms were given instructions late 

yesterday and CP did not know who we got 

cars from. Don't see how they could possibly 

reconsign stop presume you going give instructions on all cars loaded now being 
Page 45 

Date No. Rec. Message 

held on track..Coff GX 9/22/37 C 389 3156 Wyard - Beefy wants to buy 150 two YC 

in store public elevator, asking for 

price and told me it was for customer.. 

Sayles 

 9/22/37 M 250 3156 Sayles - Sorry but we unable offer Beefy 

any 2YC in store public, suggest his customer 

pick it up on tables as we are buying 

ourselves..Wyard 

After respondent's Directors on September 24 closed the market and fixed a 

settlement price of $ 1.10-1/2, Cargill's instructions to its buyers were to bid 

1.11 to $ 1.11-1/4 for No. 2 yellow corn to arrive in Chicago by the 28th. 

Date No. Rec. Message 

9/25/37 C 23 3204 Gol: What about spot offerings pls of 

course shorts can buy the spot and deliver 

to us..Ring GX 

 9/25/37 M 183 3206 Ring GX: Guess you better bid 111 for corn 

to arrive by the 28th for up to 25 cars.. 

Wyard 9/27/37 M 21 3207 Ring GX: Yes thats correct, will pay up to 

1.11-1/4 for spot and arrive if have to but 

you probably won't. In other words will pay 

quarter better than delivery basis if absolutel 

have to, to show our willingness to take -- 

Wyard 

Date No. Rec. Message 

9/27/37 C 78 3208-09 Gol: Looks like will be a lot of spot 

 2 YC for sale/to pay 111 looks like 

 murder what think tread..Sayles GX 

 9/27/37 M 67 3209 Sayles GK: We are willing to pay that for 

 a spot corn. Gol 9/28/37 M 20 3211 Ring GK:-Yeah, sport, continue taking 

 that spot corn at lll-1/4..Wyard 

even over the protest of the Chicago office. 

Date No. Rec. Message 

9/29/37 C 51 3211 Gol: Can't quite understand why we con- 

 tinue take spot do you think price 

 break 25 cents bu if we stopped and not 

 enough left affect our holdings either 

 way..Ring GX 

This was for the purpose of preventing the shorts from obtaining corn with 

which to make delivery on September futures. 

134. The policy of Cargill in selling The September futures as it bought cash 

corn during September, 1937, and purchasing the September futures as it sold 

cash corn, had the effect of causing the shorts in the September corn future to 

cover in the pit rather than to buy cash corn and make delivery. The policy 

"tightened" rather than "loosened" the situation because, when a short makes 

delivery, the delivery frequently passes through several hands and thus 

liquidates more than one account. It also "tightened" the situation because in 

times of shortage as in September, 1937, the price of the future tends to go up 
Page 46 

to the cash and the aggressive buying of cash by complainant tended to keep the 

cash at a premium over the future. 

Cargill's instructions to its buyers "to pay more than Chicago competitors 

were willing to pay for cash corn, "tended to make it financially inadvisable 

for s short to buy cash corn and deliver it; it was more profitable for a short 

to buy in his contract in the pit. It was Cargill's policy throughout the 

country during this time to see that sales of its corn were made to processors 

who intended to use the corn for consumptive purposes; Cargill would not sell to 

the shorts at prices anywhere near these then prevailing if Cargill believed it 

might be delivered by the shorts on September futures contracts. 

135. The complainant must have known that there was not sufficient corn of 

deliverable grade at prices within reason to fulfill its combined long line of 

September futures. This is indicated in part by the following wires between 

Cargill's Minneapolis and Chicago offices: 

(1) Sept. 17, C349, Sayles to Golseth: 

"Bartlett Frazier and M. L. Vehon (Chicago receivers of grain) think they 

have had their last old corn offers and Windy (another Chicago grain receiver) 

did not get any offers today." 

(2) Sept. 17, C607, Ringwald to Golseth: 

"Faroll Brothers (Chicago grain receivers) who has been good seller old corn 

all along says he hasn't had any offer this afternoon. Looks like his stations 

cleaned up." 

(3) Sept. 16, C413, MacMillan, Jr., to J. H. MacMillan:"Sayles tells me their 

to arrive purchases are clearly clean outs and coming in amounts as small as 500 

to 700 bushels. This means the run will soon be over I should think." 

(4) Sept. 17 C254, Sayles to Golseth: 

"Bailey and Combs have just advised me cannot get any more offers out their 

territory all clean up." 

The foregoing was confirmed by: 

(5) Sept. 17, C255, Ringwald to Golseth: 

"E. E. Bailey one of the largest commission houses here say their country 

offices cannot find any corn anywhere. Looks like these all cleaned up." 

To which Wyard, of the home office, replied to Ringwald and Sayles: 

(6) Sept. 17, M17J: 

"Thanks info on Bailey and Combs Boy Oh Boy." 

(7) Sept. 21, C22, Sayles to MacMillan: 

"Very little corn being offered this A.M. Looks like its about ever unless 

market goes up several cents then likely more will come out." 

(8) Sept. 16, C98, Sayles to Golseth: 

"Mac, Jr. ask me to wire stating my ideas are that the run old corn a flash 

in pan and county very bearish and shipping to take advantage of big price." 

(9) Aug. 7, C13, Sayles to Wyard: 

"Bailey made check of 125 country stations in eastern Illinois and finds 

490,000 old corn back in elevators and farmers cribs, but reports would be very 

difficult to got it to move." 

(10) Aug. 11, C497, Creekmore to Wyard: 
Page 47 

"Mr. Younge feels that just before the arrival of new corn the country will 

scrape their bins and that we will see lower prices on old corn." 

(11) Aug. 30, C542, Ringwald to Sayles: 

"* * * Most corn to come to Chicago will come from Northern Illinois north 

from Decatur or sixty to eighty miles south of Chicago. Some to come from 

Watseka; also from Joliet territory * * *" 

(12) Sept. 9, C48, Sayles to MacMillan, Jr.: 

"* * * Bill Drum (a crop statistician in Cargill's employ) * * * says * * * 

in driving 268 miles stopping at various points I made checks on 383 corn cribs. 

Sixty-five were obscured so that I would not toll whether corn was stored 

therein, 300 were empty and 18 had an estimated total of 5,250 bushels. Also 

called at 17 stations and found about 20 cars." 

(13) Sept. 20, C271, MacMillan, Jr., to MacMillan, Sr.,: 

"* * * Looks like the country is about out of cash corn." The demand for cash 

corn during September, 1937, from the processors and industries, was not good as 

the price was too high. Cargill's Chicago office disliked continuing to buy 

cash corn after the market was closed on September 24, as the following wires 

show: 

(14) (a) Sept. 24, C450, Ringwald to Golseth: 

"Understand raining in the corn belt and hope to heavens it don't stop until 

next Michaelmas." 

(b) Sept. 24, C-456, Ringwald to Golsoth: 

"We starting at 110 1/2 hope don't get much. (Meaning starting bids for cash 

corn.) 

(c) Sept. 27, M6, Wyard to Ringwald: 

"Please pay up three fourths over the spot (corn) and TA (to arrive) by 28th 

corn." 

(d) Sept. 27, 011, Ringwald to Wyard: 

"What you mean pls (please) three quarters over Sept. or 111 1/4 for spot 

(corn) and TA (to arrive corn)." 

(e) Sept. 27, M21, Wyard to Ringwald: 

"Yes thats correct. Will pay up to 111-1/4 for spot and arrive if have to 

but you probably wont. In other words will pay quarter better than delivery 

basis if absolutely have to, to show our willingness to take." 

(f) Sept. 27, C78, Sayles to Golseth: 

"Looks like will be a lot of spot 2 YC (yellow corn) for sale and to pay 111 

looks like murder what think tread (reply immediately)." 

(g) Sept. 27, M67, Golseth of Sayles: 

"We are willing to pay that for spot corn." 

(h) Sept. 28, M20, Wyard to Ringwald: 

"Yeah sport continue taking that spot corn at 111-1/4." 

(i) Sept. 29, C51, Ringwald to Golseth: 

"Can't quite understand why we continue take spot do you think price break 25 

cents bu if we stopped and not enough left affect our holdings either way." 

(j) Sept. 30, M141, Golseth to Ringwald: 
Page 48 

"For up to 10 cars pls go to 111 for 2 YC (Yellow Corn) and 108-1/2 for 3 YC 

(Yellow Corn)." 

After complainant had finished acquiring a large percentage of the corn 

octainable by means of its agressive buying in September, 1937, the Chicago 

office of complainant then requested to be allowed to begin merchandising 

thereafter as the following wires show: 

(k) Sept. 30, C411, Ringwald to Golseth: 

"Not that we are looking for trouble but FMI (for my information) when you 

going start mdse (merchandising) corn." 

(l) Sept. 30, M311, Wyard to Ringwald: 

"Think probably will start mdse (merchandising) corn TMW (tomorrow). Have 

you been getting some inquiries I hope." 

(m) Sept. 30, C285, Sayles to Golsoth: 

"I am looking for a fair demand for old corn during next 3 or 4 weeks think 

industries entirely out and cannot see how they will operate on now corn 

entirely." 

(n) October 1, C439, Sayles to Golseth: 

"OK, will not put out any corn quotas but the world knows we have all the 

corn in captivity so cards with price night help our cause." 

(o) October 1, C412, Sayles to Golseth: 

"Ring and I believe quotation cards with price 6 or 7 above selling price 

would kill the effect. I would suggest 34 over on quotation cards as believe we 

want to sell the corn so lets not scare any buyers away as we are competing with 

KC (Kansas City) now 2 YC (Yellow Corn)." 

(p) October 1, M234, Golseth to Styles and Ringwald: 

"OK. Pls. (please) quote 2 YC (Yellow Corn) or 2 WC (White Corn) at 34 over 

Dec. fob.Chgo, with 2 mixed 1 cent less and it is alright to support the spot 

market at 34 ever for not over 3 or 4 cars -- on our quotations take 3 cents 

leeway. Now. pls. (please) use these limits just over the phone and put out 

card quotations 6 or 7 cents higher, what think pls. (please)?" 

(15) October 5, M292, Drum to Sayles: 

"Note your sales of corn out of Chgo. are not running as heavy as we would 

like, cant you take Jimmy off the floor and put him on that work to help 

Creekmore and yourself." 

(16) October 5, C528, Ringwald to Golseth: 

"Trust you are not under impression just because we haven't pepper you with 

corn sales that we haven't been doing our damnedest. Looks like few people need 

the corn but playing waiting game and you can't blame them." 

(18) October 13, C354, Sayles to Wyard: 

"Going to send corn quotations card to all buyers today in hope finding few 

new buyers old corn." 

(19) October 15, C133, Creekmore to Wyard: 

"Just talked with Postum at Battlecreek and they bot little new corn this 

A.M. and prefer it to old corn, say our price Chgo. would have to be about 62 to 

enable them to work our old corn." 
Page 49 

It is also shown by communications between complainant and Transit Grain and 

Commission Company of Fort Worth, Texas (complainant's agent in buying Texas and 

Oklahoma corn), September 17, wire No. 56, Transit Grain to Cargill: 

"Have bought basis 2 white or 2 yellow freight allowed Chicago Number 2 

applying half less 3's 15.5 or less moisture cent less shipment by next Tuesday 

from Texas 1100 bushels 1.13 Stop 4100 bushels 1.13-1/2 Stop 13,300 bushels 1.14 

Stop 11,200 bushels 1.14-1/2 Stop 21,500 bushels 1.15 Stop 35,000 bushels 1.15 

Stop 2200 bushels from Oklahoma 1.14-1/2 Stop We mailing you confirmation from 

us cent higher than above prices this totals 88,400 bushels which added to the 

25,000 previously reported makes total of about 113 bushels Stop It is now 7:30 

o'clock P.M. If I have overlooked a bushel of corn it is surely out in the forks 

of the creek." 

136. The closing prices of the Chicago September 1937 corn future from 

January 4, 1937, to September 24, 1937, and the closing bid prices for Chicago 

cash No. 2 Yellow corn during the month of September, were as follows: 

Date Chgo. Sept. 1937 Closing 

(1937) Corn Futures Bid Prices 

Closing Prices Chgo. Cash Corn

# 2 Yellow

January 4 $ 1.02 1/4-3/8 15 1.02 1/2-3/8 

February 1 .95 15 .97 3/4 March 1 .95 1/2 

15 1.00 1/8-1/4 

April 1 1.08 5/8-3/4 15 1.07 1/2-1/4 

Closing 

Chgo. Sept. 1937 Bid Prices 

Date Corn Futures Chgo. Cash Corn

(1937) Closing Prices # 2 Yellow 

May 1 1.08 7/8-3/4 7 1.09 1/8-.09 14 1.08 3/8-1/4 21 1.09 1/2-3/8 28 1.12 3/4-5/8 

June 4 1.08 1/2-5/8 

11 1.02-1.02-1/8 18 1.02 1/8-1/4 25 1.08 3/8-1/2 

July 2 1.12 1/8-1/4 9 1.14 5/8-7/8 

16 1.13 3/4-5/8 

23 1.02 1/4-3/8 30 .90 7/8-.91 1/8 

August 6 1.00 1/4-1/8 

9 1.03 1/8-1/4 13 .97 5/8-1/2 

18 .99 1/4-3/8 

26 .99 1/2 30 .97 1/4-5/8 31 .97 1/2-.97 

September 1 .95 3/8-1/4 $ 1.00 1/4

2 .95 1/2-5/8 1.00 1/2

3 .95-.06 1/8 1.01 1/2

4 .95 5/8-3/4 1.03 5/8

7 1.01 1/2-1.02 3/8 1.07 1/2

8 1.05 5/8-3/4 1.09 5/8

9 1.06 1/4-1.05 7/8 1.09 7/8
Page 50 

Closing 

Chgo. Sept. 1937 Bid Prices 

Date Corn Futures Chgo. Cash Corn

(1937) Closing Prices # 2 Yellow 

10 1.05-1.05 1/4 1.08 1/2

11 1.02 5/8-1.03 1.06 1/8

13 1.02 1/2-1/8 1.05 5/8

14 1.04-1.03 3/4 1.07 1/4

15 1.05 3/4-1/2 1.08

16 1.10-1.10 1/2 1.12

17 1.13 1/4-1.12 1/4 1.14 1/4

18 1.04 3/4 1.06 1/4

20 1.02 1/4 1.04 1/4

21 1.04 5/8-1/2 1.06 1/2

22 1.12 1/2-3/8 1.14 3/8

23 1.12-1.12 1/8 1.12

24 1.10-1.11 1.10 3/4

137. After September 24, 1937, the price of corn remained the same or a cent 

higher until September 30 and from that date it dropped rapidly and 

substantially as shown by the following telegrams exchanged by Cargill offices 

in Minneapolis and Chicago: 

Cargill telegrams in re: Prices in October 1937 

Cash Corn 

(75-a) 

Date No. Message 

10/1/37 M432 Creek- Thanks E. and D. but best can do is 95 for up to 

20,000 bu. old 2 Yc fob Chgo immediate shipment or will 

sell them like amount new 2 YC 10 days shipment at 88 Chgo. 

Wyard 

 10/2/37 C107 Wyard - E and D say will still take the 20,000 old 2 yc at 

88 Chgo. for immediate shipment but want prompt answer as 

they going buy some corn this A.M. Creek GX 10/2/37 C146 Wyard - E and D say - could not raise their price even 

one C. that 88 best and must accept immediately. Creek 10/4/37 C 95 Wyard: Bob Early says will take 20,000 bu old 2 YC at 88 

but its his best bid Creek GX 10/4/37 M 57 CB - Buy 60 CZ 63 7/8 0B CFC 3/4. - Art. 

 10/4/37 C150 Wyard - Booked E and D 20,000 bu old 2 YC 88 fob Chgo. 

Rail blg. or T M if possible immediate shipment to them 

Indpls. via Penna Stop Not very proud of this but 88 was 

his best and tried make him take 50, no soap. Creek. 

 10/5/37 C131 Wyard: FYI E and D bid us 84 for 30,000 bu old 2 YC Fob 

and told him there was not chance of working at that. 

Creek GX 10/15/37 M254 Ring. GX. Can offer Bastion 25m old 2 yc fob Chgo immediate at 14 over. Wyard 10/15/37 C366 Gol. Best Bastion will do 61C Chgo thought too low to tell 

you about. Sayles 10/15/37 M296 Sayles GX If Bastion will pay 61c fob Chgo any big to 

apply sell him 44 cars 2 mixed now loaded tread. Gol. 
Page 51 

Date No. Message 

 10/15/37 C481 Gol. Booked Bastien 25 loaded cars 2 X 61 cents fob elev. 

Sayles 322 PMV 

138. During June and July, 1937, Cargill's officials on the basis of past 

experience, current conditions and contacts with its customers, estimated that 

during the period from about September 1 to about November 15, 1937, Cargill 

could distribute approximately 10,000,000 bushels of corn to its customers. 

139. During June and July, 1937, Cargill officials set out to accumulate 

Chicago September 1937 corn futures to the extent which they had estimated was 

necessary under current conditions to fill Cargill's customer requirements from 

about September 1 to about November 15, 1937. A substantial portion of the 

September 1937 corn futures purchased by Cargill represented a transfer of a 

long position first from the Chicago May 1937 corn futures into the Chicago July 

1937 corn futures, and thence from the Chicago July 1937 corn futures into the 

Chicago September 1937 corn futures. On June 1, 1937, Cargill's long position 

in September 1937 corn futures was 3,140,000 bushels; on June 16 it was 

5,200,000 bushels; on July 1 it was 6,562,000 bushels; on July 17 it was 

7,541,000 bushels; on August 2 it was 8,067,000 bushels; on August 13 it was 

8,745,000 bushels. 

140. During the first half of June 1937, the price of September 1937 corn 

futures declined rather steadily from about $ 1.11 to about 99 cents. During 

the second half of June 1937, the price rose rather steadily to $ 1.14 7/8. 

During the first half of July the price rose somewhat, reaching a high of $ 1.16 

1/2. During the latter part of July the price declined very precipitately to 

about 90 cents. During the first ten days in August the price rose steadily to 

about $ 1.05 and then fluctuated somewhat erratically during the balance of the 

month between $ 1.01 and 92 cents. During the first ten days of September the 

price rose from 94 cents to $ 1.09. In the next two or three days the price 

declined to $ 1.00 and then rose to $ 1.16 3/4 on September 17. Between 

September 17 and September 20 the price declined 16 cents to 

 

less than $ 1.00, dropping over 12 cents during the last part of the trading 

session on Saturday, September 18, and the first few minutes of the trading 

session on Monday, September 20. By September 22 the price had climbed back to 

$ 1.12 1/2, and the closing price on the last day of trading was $ 1.10-1.11. 

The high, low and closing prices of the September 1937 corn futures daily 

throughout the life of the futures are as set forth in Complainant's Exhibit No. 

156. The minute-to-minute price fluctuations of the September 1937 corn futures 

daily during August and September, 1937, and the "open interest" and volume of 

trading are as set forth in Complainant's Exhibits Nos. 203 and 204. 

141. Under the Rules and Regulations of the Chicago Board of Trade, as they 

existed in July, August and September, 1937, the maximum daily fluctuation in 

the price of the September 1937 corn futures during July and August was 4 cents 

up or down from the previous close, and during September was 8 cents up or down 

from the previous close. 

142. All during July, August and September, 1937, Cargill reported its 

position in Chicago September 1937 corn futures to the Commodity Exchange 

Administration. Substantially all of Cargill's position during this period was 

reported to the Commodity Exchange Administration as a spread, a small amount 

having been reported as a hedge. During this same period Cargill also filed 

with the Commodity Exchange Administration reports as to its holdings of cash 

grain, including its open, unfilled purchases of cash corn. 

143. During June, 1937, the total of the "open interest" in September 1937 

corn futures increased from slightly less than 14,000,000 bushels to about 

17,200,000. During July 
Page 52 

 

1937, the "open interest" ranged between approximately 16,000,000 bushels. and 

approximately 18,500,000 bushels, showing an increase of more than 2,000,000 

bushels during the month. During August 1937, the "open interest" remained 

constantly at approximately 19,000,000 bushels and declined slightly in the last 

few days of the month to about 18,500,000 bushels. In September, 1937, the 

"open interest" declined very slightly during the first few days. By September 

9 it had decreased to approximately 16,000,000 bushels. By September 14, it had 

decreased to approximately 15,500,000. By September 18 it had decreased to 

approximately 11,000,000 bushels. At the close of trading on September 24, 

1937, it was approximately 8,000,000 bushels. (The daily "open interest" and 

"volume of trading" in the September 1937 corn futures during the life of the 

futures is as set forth in Appendix C.) 

144. Normally during July and August the open interest in the September corn 

futures is steadily declining, as it did on the Kansas City Board of Trade 

during this period in 1937. 

145. Speculative longs generally do not want to handle cash grain and as they 

liquidate prior to and during the delivery month, merchandizing or other longs 

who do want grain are left with an increasingly larger percentage of the total 

"open interest." 

146. During July, August and September, 1937, the daily volume of trading in 

the September 1937 corn futures was substantially greater than normal. The 

daily volume of trading in the September 1937 corn futures during the life of 

the futres is as set forth on Complainant's Exhibit No. 156. 

147. All during August, 1937, cash corn at Chicago remained at a substantial 

premium over the price of September 1937, corn futures. 

148. Some time between August 24 and the end of August, 1937, the Chicago 

representative of the Commodity Exchange Administration called at the office of 

Continental and examined the contracts which Continental had made with Cargill 

up to that time. 

 

had made with Cargill up to that time. 

148. The aggregate of the lines of long September 1937 corn futures of 

Cargill, Uhlmann and Continental, was approximately 9,567,000 bushels on 

September 1, 1937, and by September 23, 1937, had been reduced to approximately 

6,440,000 bushels. 

149. On numerous occasions in August and September, 1937, a price decline in 

the September 1937 corn futures was accompanied by a large volume of trading, 

the "open interest" either remaining approximately the same or increasing. 

150. During August and September, 1937, Cargill's long position in the 

September 1937 corn futures, plus its net long domestic cash position, was 

substantially below the 10,000,000 bushel estimate which Cargill had made 

earlier in the summer as to its customers' needs during the period from about 

September 1 to about November 15, 1937. During this same period Cargill's long 

position in the September 1937 corn futures, plus its net long cash position, 

foreign and domestic, did not exceed this 10,000,000 bushel estimate. 

151. During the first half of September, 1937, Cargill's actual stocks of 

domestic cash corn, exclusive of open purchases, were continually less than its 

open sales of domestic cash corn. 

152. The average daily price of No. 2 yellow corn at Chicago during the 

period from April 1 to September 18, 1937, inclusive, was $ 1.22 1/4. The 

prices of No. 2 yellow corn at Chicago during the period from April 1 to 

September 24, inclusive, are as set forth on Complainant's Ex. No. 163. 
Page 53 

153. Cargill, from July 27 to August 6, sold short 7,765,000 bushels of the 

Chicago December 1937 corn future. These sales of the December future had the 

effect of widening the price spread between the September corn future (which, as 

above shown, Cargill was long) and the December future (which, as above stated, 

Cargill was going short) from 23-7/8 cents per bushel on July 27 to 33 1/2 cents 

per bushel on 

 

August 6. Complainant's short sales of the December corn future and the 

resultant widening of the price spread between the Chicago September and 

December corn future prices are shown by the following table: 

Date 

(1937) Sales Spread 

July 27 385,000 bu. $ .23-7/8 

28 895,000 bu. .25-1/2 

29 645,000 bu. .23-5/8 

30 1,005,000 bu. .22-1/8 

31 915,000 bu. .24-1/8 

August 2 1,595,000 bu. .28-1/2 

3 805,000 bu. .29-1/2 

4 225,000 bu. .31 

5 450,000 bu. .32 

6 845,000 bu. .33-1/2 

The price spread between the Chicago September corn future and the Chicago 

December corn future continued to increase during the month of September, 1937, 

until, on September 17, the spread was 49-7/8 cents, and on September 24 was 46-

1/2 cents. The paper profit in the Chicago September-December corn future 

spread from July 27 to September 17 was the difference between the price spread 

on those two dates; namely, the difference between 23-7/8 cents, the spread on 

July 27, and 49-7/8 cents, the spread on September 17, or 24 cents. 

154. The members of the Business Conduct Committee acting during September, 

1937, and their firms, were as follows (Rec., 6588): 

M. R. Glaser, Chairman Rosenbaum Bros. (Large elevator firm) 

C. D. Sturtevant Bartlett Frazier Co. (" & commission firm) 

A. F. Lindley Clement, Curtis & Co.(Commission firm) 

T. E. Cunningham Winthrop, Mitchell & Co.(" ") 

T. C. Rodman Shields & Co. (" ") 

The members of the Business Conduct Committee had no position whatsoever for 

their own account, long or short, in September corn. 

The wives and children of the members of the Business Conduct Committee had 

no position whatsoever for their own account, long or short, in September corn. 

The partners in firms to which the membersof the Business Conduct Committee 

were identified or affiliated had no position whatsoever for their own account, 

long or short, in September corn. 

The corporations and partnerships with which members of the Business Conduct 

Committee were identified or affiliated had no position whatsoever for their own 

account, long or short, in September corn. 

155. There was no syndicate of shorts operating in opposition to Cargill in 

September corn futures, the short interest being widely scattered among a great 

many people in various parts of the country, the largest shorts being Daniel F. 

Rice and Daniel F. Rice & Company, who delivered all except 30,000 bushels of a 

short position and settled on the balance, and the Farmers National Grain 

Corporation, a farmers' cooperative association whose long position in in cash 

corn stocks and forward purchases exceeded its short position in September corn 

futures, although part of its cash corn position consisted of Argentine corn. 
Page 54 

Neither of these shorts had positions of a size comparable with Cargill's 

long position. 

There was no substantial evidence that the cease and desist order of the 

Business Conduct Committee of September 24, 1937, was made known to the shorts. 

156. The following action was taken with respect to shorts in September 1937 

corn: 

(a) That margins were increased during September by the Board of Trade 

Clearing Corporation from 3 cents a bushel to 8 cents and then to 10 cents a 

bushel. 

(b) That the Business Conduct Committee's chief auditor made personal calls 

on clearing members. 

(c) That the larger shorts, Rice and Farmers National, were personally called 

before the Committee and warned of the September situation, but without of 

course indicating Cargill's long position, and that all member firms, including 

those carrying margin accounts for short customers, were warned of the penalty 

of default. 

(d) That Farmers National advised the Business Conduct Committee that it 

would be able to deliver corn on its short September futures commitments and 

that Farmers National protested to the Commodity Exchange Administration and 

probably to the Secretary of Agriculture that Cargill was attempting to run a 

corner in September 1937 corn. 

157. Cargill's officials, during the September 1937 corn market, proposed to 

the Business Conduct Committee that the Chief or Assistant Chief of the 

Commodity Exchange Administration be asked to arbitrate their differences. This 

proposal was rejected by the Business Conduct Committee. The officials named 

advised Cargill's officials that they would consider a request to arbitrate if 

made by both parties. 

158. The transactions of the respondent's Business Conduct Committee with 

respect to September 1937 corn are briefly summarized as follows: 

(a) At the meeting of the Committee August 9, the position of Cargill as a 

merchandiser in September corn futures, of 7,697,000 bushels, was without any 

name drawn to the attention of the Committee, together with other important 

positions, long and short. 

(b) At the meeting August 18, Cargill's position in September corn futures, 

again without any name submitted, showed a reduction to 5,659,000 bushels, 

whereas the long positions of Uhlmann and Continental, likewise submitted 

without any name, first appeared. Also, the positions of other large longs and 

shorts were shown without name. 

(c) At the meeting August 26, Cargill's position, without any name, showed 

3,474,000 bushels long, whereas Uhlmann's and Continental's house accounts, 

without any name, showed 2,900,000 and 2,551,000 bushels, respectively. 

(d) At the meeting August 30, Cargill's position showed long September corn 

2,850,000 bushels, whereas the house accounts of Uhlmann and Continental were 

indicated at 3,755,000 and 2,791,000 bushels, respectively. (All still without 

designation). "The Committee felt there was something unusual in the 

substantial increases in these two accounts and directed that information be 

obtained regarding them." 

(e) At the meeting August 31, 1937, the Committee for the first time examined 

Simon Mayer of Continental Grain Company and Fred Uhlmann 

 

(since deceased) and Richard F. Uhlmann of Uhlmann Grain Company, and learned of 

the nature of those transactions. 
Page 55 

(f) On September 1 the Business Conduct Committee requested MacMillan to 

appear before it and upon MacMillan's expressing doubt if it would be convenient 

for him to attend, the Committee ordered him to appear. 

(g) The minutes of the meeting of September 2, 1937, as contained in the 

record, are quite extended in covering discussions between the Committee 

Chairman, Mr. Grimes, and Mr. MacMillan with reference to Cargill's position in 

corn and particularly with reference to Continental and Uhlmann. Later the 

Committee excused Messrs. MacMillan, Grimes and Sayles and after some 

deliberation, decided that Mr. Glaser should inform Cargill's officials that the 

Committee considered the three positions of Cargill, Continental and Uhlmann as 

one line and that one line Cargill's. Mr. MacMillan asked for further time to 

submit a written brief or statement to the Committee, and the request was 

granted. The Committee decided that the Cargill officials should appear before 

then again September 13. 

(h) On September 7, the Business Conduct Committee met and received a report 

from its chief auditor showing the position of Cargill, Uhlmann and Continental 

to be 9,411,000 bushels of corn long, and the short positions scattered. It 

directed its chief auditor to communicate verbally with all clearing members 

having an open interest of 100,000 bushels or over. The minutes contain a 

communication from the chief auditor under date of September 10, 1937, reporting 

the results of his verbal communications with clearing members as instructed by 

the Business Conduct Committee. 

(i) At the meeting September 13, MacMillan, Grimes and Sayles appeared before 

the Business Conduct Committee and filed their brief entitled "Operations of 

Cargill, Inc., in Corn for Crop Year 1936-1937", dated as of September 4, 1937. 

The Committee again expressed its concern over September corn and requested 

MacMillan and Grimes to appear before 

 

it on September 16, on their return from New York. The Chairman stated that 

although the Committee was reluctant to do so, it would, if necessary, take 

drastic action to protect the market. In this brief (Compl.'s Ex. 162), the 

complainant stated: 

"We come now to a review of events which are nearer at hand -- our operations 

concerning the Chicago September (1937) corn 'future' contract, and certain 

steps which we found it advisable to take in order to protect ourselves (in 

part) from loss, if the Business Conduct Committee should again see fit to issue 

orders of the type made in December 1936." 

(j) On September 14, the Business Conduct Committee, by communications to all 

members, ordered all members to report a list of customers showing the amount 

each customer was long or short. 

(k) At the meeting of September 15, it was pointed out that complainant held 

the same relative position in September rye as in corn. 

(l) At the meeting September 16, the following letter from complainant to the 

Chairman of the Business Conduct Committee was read to the Committee: 

"Will you please bring this letter to the attention of the Business Conduct 

Committee of the Board of Trade at its meeting this afternoon at two o'clock 

which is being held, as we are informed, for the purpose of considering the 

present situation in September corn. 

"Both we and Uhlmann Grain Company and Continental Grain Grain Company, who 

are under contract to make deliveries of cash corn to us, have a vital interest 

in procuring proper deliveries of corn under our September contracts. Any 

arbitrary action which would attempt to require abrogation of our contract 

rights to receive corn would not only affect our interests but might serve 

artificially to depress the price of corn with the resultant harm to hundreds of 

thousands of farmers who raise corn and hogs. 
Page 56 

"On the other hand, we have no desire to 'punish' anybody, even short 

sellers,and we are, therefore, willing to consider any solution of the problem 

to protect the best interests of the Chicago Board of Trade and its marketing 

structure which is consistent with fairness to us and which will not unduly 

depress the price of corn to the producers generally. 

"The Commodity Exchange Act pronounces that the public has an interest in 

transactions of this nature and provides for public officials to administer and 

protect such interests. We would be entirely willing to abide by any decision 

made by Dr. J. W. T. Duvel, Chief of the Commodity Exchange Administration, as 

to a proper solution of the problem now facing us and the Chicago Board of 

Trade. Accordingly, we suggest that you immediately join with us in requesting 

Dr. Duvel to act in the premises. 

"In the event that you feel that it is desirable to lay this matter before 

your Board of Directors prior to arriving at a decision, we assume that you will 

do so immediately and before the Business Conduct Committee has taken any 

further action. If you do not deem such reference to the Board of Directors to 

be necessary, we shall be pleased to join with you immediately in requesting Dr. 

Duvel to tender his good offices to work out the problem in a manner consistent 

with the public interest." 

Thereafter, MacMillan, Grimes and Sayles appeared and MacMillan stated that 

any solution must involve the price of September corn futures; that at certain 

prices Cargill intended to dispose of its long line; and that he was reluctant 

to reveal Cargill's full intention to the entire Committee. The Committee 

informed MacMillan, Grimes and Sayles that it was only interested in preventing 

manipulation and could not and would not discuss price. A subcommittee 

consisting of Mr. Lindley and Mr. Cunningham was appointed, with instructions to 

confer with Cargill's representatives in an endeavor to persuade them to reduce 

the line, but in any event not to discuss price or make any agreements. 

Thereafter, the sub-committee reported to the full committee, which on the 

same day sent to the defendants the following decision: 

The Committee, having considered all of the evidence submitted, finds and 

holds as follows: 

1. The long position of Cargill, Incorporated, and Uhlmann Grain Co. and 

Continental Grain Co. in the September corn future, constituting sixty per cent 

of the total open commitments, taken with the other factors involved, is or may 

become inimical to the best interests of the Board of Trade, and the Committee 

finds that the transactions separately entered into by Cargill, Incorporated, on 

the one hand and the Uhlmann Grain Co. and the Continental Grain 

 

Co. on the other hand do not change the essential nature of the situation as 

being one interest. 

2. The presumption of Cargill, Incorporated, that the present situation is 

the result of a bear raid is not borne out by the facts, and the Committee finds 

there has been no such bear raid. On the contrary, the Committee finds there is 

not now, nor has there been, short line or lines in the market even nearly 

comparable to the combined long line of Cargill, Incorporated, Uhlmann Grain Co. 

and Continental Grain Co. 

3. The Committee holds that it cannot be and will not be in any way involved 

in price fixing. The Committee is only interested in seeing that the rules of 

the Exchange and the laws governing the Exchange are not violated by any member. 

4. The Committee holds that past action of the Board of past action of 

previous Business Conduct Committees has no relation to the treatment of the 

problem before it. 
Page 57 

The Committee holds that it will not at this time enter a formal official 

order, nor will it recommend to the Board of Directors that the Board of 

Directors take present action. The Committee, on the contrary, recommends to 

Cargill, Incorporated, and notifies Cargill, Incorporated, as follows: 

(1) Cargill, Incorporated, has requested that the Committee take no action 

but should allow it to work out a solution. The Committee for the time being, 

is willing to let Cargill, Incorporated, work out a solution, in view of 

Cargill, Incorporated's assurances that Cargill, Incorporated, will now promptly 

proceed to liquidate the combined line of Cargill, Incorporated, Uhlmann Grain 

Co. and Continental Grain Co., having regard to fluidity, fluctuations and 

disturbances in the market, both in futures and cash. 

(2) The Committee recommends that Cargill, Incorporated, during each day's 

trading and at the close of each day's trading, will be prepared to have a 

responsible representative appear before the Committee and give to the Committee 

a complete account of that day's activities of Cargill -- both in cash and 

futures. 

(3) The Committee notifies. Cargill, Incorporated, that if it is at all 

times convinced that Cargill, Incorporated, is reasonably liquidating its line, 

or is attempting reasonably to liquidate such line, and so long as there are no 

violent price fluctuations or undue market disturbances, and there is no undue 

congestion in the market, it is the present intention of the Committee to take 

no formal 

 

official action, but the Committee reserves to itself at all times the right to 

take any action which to it seems desirable, if it feels that the proper 

progress is not being made in the orderly liquidation of the situation. 

(Compl.'s Ex. 161.) 

In response to this request, MacMillan informed the Committee that Sayles was 

the responsible representative of Cargill who would furnish information to the 

Committee with authorization to act for Cargill; but Cargill did not reduce this 

line substantially. 

(m) On September 17, the Chairman of the Business Conduct Committee informed 

MacMillan that the Committee felt it should receive assurances from Continental 

and Uhlmann that they would be willing to cancel the cash contracts with 

complainant and would not allow such cash contracts to stand in the way of the 

liquidation of the combined position and MacMillan advised Glaser that Uhlmann 

and Continentzl had already been so notified by Hendel. At the meeting 

September 17, Uhlmann and Continental assured the Committee that they were 

willing to cancel the cash contracts as the futures were taken off their hands 

by Cargill. 

(n) On September 18, 1937, the following decision was sent to MacMillan, 

Grimes and Sayles, and Cargill Grain Company of Illinois and Cargill, 

Incorporated: 

"Your percentage of the open long interest in September corn since our 

meeting Thursday has increased from about 60 per cent to about 73 per cent. 

While your bushelage has decreased, the Committee feels that the percentage 

increase is not in accordance with the recommendations made by us or the 

assurances given by you. We feel that you could have more sharply decreased 

your line and at the same time improved the factors of fluidity, steadiness and 

lack of congestion, so essential to this market. 

"We wish to have you present in Chicago, subject to this Committee's call at 

all times during next week so that complete cooperation will be assured." 

(o) At the meeting September 20, William Engel, of Farmers National Grain 

Corporation, informed the Business Conduct Committee that 

 
Page 58 

Farmers National had delivered 400,000 bushels of corn on its September futures 

short commitments and had 500,000 more available to deliver so that its net 

position was actually 1,500,000 short September corn futures. He asked if a 

corner existed and stated that any further purchases of cash corn would have the 

December corn future sold against them; that Farmers National could pick up 

enough corn to satisfy most of its September short future position; that Farmers 

National was fearful of a run of very high moisutre corn next week with only a 

few buyers. On September 20 the Committee met with MacMillan, Peterson and 

Sayles, and in reply to MacMillan's statement that there was an organized short 

interest, he was again advised that by far the largest part of the open short 

interest in September 1937 corn was scattered in a large number of very small 

accounts and there was no evidence of any organized short interest. The 

Committee requested that either MacMillan or Grimes be in Chicago during the 

balance of September trading, so that the Committee might have direct contact 

with one of them daily. 

(p) On September 21 the Committee sent to MacMillan, Sayles, Grimes, Cargill 

Grain Company of Illinois and Cargill, Inc., the following decision: 

"Our conference of yesterday afternoon leads us to believe that you may have 

misinterpreted our decisions of last Thursday and last Saturday. In order that 

all doubts may be eliminated, we invite you to reread those decisions in the 

light of developments, viz., your percentage of the total, open interest has 

steadily increased and has not decreased, and that further, you did not take 

advantage of the strong and active market Friday, September 17th, to liquidate 

any of your September-December corn spread. 

"It was and is our finding that your long line is or may become detrimental 

to the best interest of this market. It was and is our hope that full 

cooperation on your part will result in a reduction of your line without undue 

disturbance to market prices and liquidity. 

 

such cooperation we suggested, and now insist, must consist on your part of 

selling substantial amounts when such sales will not result in the market 

disturbances mentioned. You are not to wait for the market to reach or 

approximate the daily up limit before making sales; on the other hand, you are 

not required to dump, so as to result in the market disturbance mentioned. We 

are not concerned with the price at which you liquidate, so long as the 'market 

is free and open and undue fluctuations do not result; the welfare of this 

market demands that you be governed by these same considerations.' 

"You understand, of course, that if reasonable liquidation of your line is 

not accomplished without the disturbances above mentioned, or if the line at any 

time constitutes a squeeze or corner, this Committee will take or recommend that 

the directors take such steps as we think necessary. (Compl's Ex. 161, p 51, 

Rec., 2345; Def's Ex. 138, Rec., 2093) 

This letter was presented to Sayles, who stated that he was fully empowered 

to act for Cargill. In a letter dated September 21, addressed to the Chairman 

of the Committee, he replied, as follows: 

"I have just read your communication of even date to John H. MacMillan, Jr., 

President of our customer, Cargill, Incorporated, who is in Minneapolis. He is 

of the opinion that this 'decision,' together with those sent to us on September 

16 and 18, indicate some miscomprehension on your part of his views and his 

understandings with you. Accordingly, to clarify the record, he has asked me to 

address this formal communication to you. 

"First of all, please again refer to our letter of September 16, 1937, which 

states our conviction that Dr. J. W. T. Duvel should be invited to determine 

what abrogation of our contract rights, if any, should be required of us by your 

Business Conduct Committee as in the public interest. We are still convinced 
Page 59 

that such submission is timely and proper and reiterate our offer to join with 

you in submitting the matter to Dr. Duvel. 

"The long position of Cargill, Incorporated, in September corn is only 

approximately 700,000 bushels, and we do not concur in the views of your 

Committee that our cash transactions with Uhlmann Grain Company and Continental 

Grain Company are to be treated as a part of our futures position. These 

contracts call for an anticipated actual delivery of cash grain and, as we view 

it, being made by Cargill, Incorporated, a non-member of the Chicago Board of 

Trade, are not susceptible to alteration or impairment by that Board of Trade. 

"In our opinion there presently exists and has existed a bear raid in 

September corn. Activity in the market last Saturday when the price of 

September corn declined the limit without any substantial reduction in the open 

interest would indicate manipulation by the shorts and wash sales. 

"We cannot agree that past action of the Business Conduct Committee has no 

relation to the problem with which we are now confronted. The shorts are well 

aware of the orders issued by the Business Conduct Committee last December as to 

liquidation by Cargill of its long line. Accepting this as a precedent, they 

likely are inclined to feel that they have no obligation either to reduce their 

short interest or to be prepared to make deliveries of cash grain, but to the 

contrary can continue to hammer the market, and thereafter Cargill will be 

required to liquidate regardless of how low the price. 

"After all, Cargill purchased this grain for future delivery some months age 

for its normal merchandising purposes and is willing and able to accept 

deliveries. It is to be assumed that those who sold the grain were prepared to 

make delivery. In any event, to permit them to sell still more grain without 

any intention of making delivery whatsoever on futures already sold, and then to 

find protection against delivery through the Business Conduct Committee would be 

in our judgment not only unfair, but would be contrary to the Commodity Exchange 

Act which requires that the governing board of each exchange shall provide for 

the prevention of manipulation of prices, downward as well as upward. 

"Cargill has decreased its position in September corn since September 16, 

1937, as it advised the Business Conduct Committee it would do. Cargill never 

has made any commitments as to a specific rate of liquidation or as to price at 

which sales would be made. There have been 'no violent price fluctuations or 

undue market disturbances' due to any action on the part of Cargill nor any 

'undue congestion in the market,' and therefore it would seem that under the 

decision of your committee rendered on September 16, 1937, no present action is 

required of it. 

"It has been necessary in this letter to take issue with some of your 

statements so that our position will be clear. However, we again reiterate our 

earnest desire at all times to cooperate with your Committee in working out this 

or any other problem to the best interests of the public, the Chicago Board of 

Trade and all concerned." 

(q) On September 22, late in the evening, a meeting was held by the Business 

Conduct Committee at the University Club, which Sayles attended at the request 

of the Committee. The Chicago September corn futures market on the 22nd had 

opened at 1.04-3/4-7/8, reached a high of 1.12-1/2 and closed at 1.12-1/2-3/8. 

During the day Cargill had sold 820,000 bushels. There is a dispute between the 

records of the Business Conduct Committee and Sayles, as to what transpired at 

this meeting. It is admitted by Sayles that the 

 

Committee urged him to have large orders in the market at the opening next 

morning to sell at the same price, $ 1.12-1/2, as the day's close and also that 

the Committee was disappointed that only 820,000 bushels had been sold this day. 
Page 60 

(r) On September 23, at 2:00 o'clock P. M. Sayles informed the Business 

Conduct Committee that Cargill did not sell much September corn. Its percentage 

of the open interest increased from 73.3% to 76.6% and its combined long 

position decreased from 6,480,000 bushels to 6,443,000 bushels. The Committee 

requested Cargill, Incorporated, MacMillan, Grimes, Cargill Grain Company of 

Illinois, Sayles, Uhlmann Grain Company, Fred Uhlmann and Richard Uhlmann, 

Continental Grain Company and Simon Mayer to sign the following: 

"We agree to sell tomorrow, September 24, 1937, as much September futures as 

the market will absorb within the day's permissible trading limits. We 

understand we arc not required to offer corn down, but on the other hand, we 

will honestly endeavor to fill all bids, regardless of price, if within the 

day's permissible trading limits." 

This they refused to do. 

(s) During the morning of the next day, September 24, the following order 

(dated September 23) was served on MacMillan, Sayles, Grimes, Cargill Grain 

Company of Illinois, Fred Uhlmann, Richard F. Uhlmann, Uhlmann Grain Company, 

Simon Mayer, and Continental Grain Company: 

"In pursuance of Rule 82, the Business Conduct Committee of this Association 

has investigated the position of each of your companies and of Cargill, Inc., in 

September corn. We find that John H. MacMillan, Jr., is President, and E. J. 

Grimes is Vice President of Cargill, Inc., that they are in charge of and 

responsible for the long position of Cargill, Inc., in the September corn 

futures hereinafter mentioned. We further find that John H. MacMillan, Jr., E. 

J. Grimes, Philip C. Sayles and Cargill Grain Company of Illinois have combined 

and agreed together and with Cargill, Inc. to establish and maintain and have 

acted in concert to establish and maintain the long position of Cargill, Inc., 

in September corn mentioned below. 

"We further find that Continental Grain Company has present open long 

commitments in September corn aggregating 2,980,000 bushels for and in behalf of 

and in agreement with Cargill, Inc., that Uhlmann Grain Company has a present 

open long commitment in September corn aggregating 3,510,000 bushels for and in 

behalf of and in agreement with Cargill, Inc.; that Cargill Grain Company of 

Illinois has a present open short commitment in September corn aggregating 

50,000 bushels for and on behalf of Cargill, Inc.; that the total open net long 

commitment of Cargill, Inc., in September corn (hereinafter called the combined 

long position) is therefore 6,440,000 bushels. That Continental Grain Company, 

Uhlmann Grain Company and Cargill Grain Company of Illinois and their registered 

members in concert with Cargill, Inc., and in concert with each other, have been 

maintaining a combined long position for Cargill, Inc. in this market to the 

extent of 6,440,000 bushels or more. 

"We further find that the combined long position in September corn aggregates 

approximately 73% of the total open interest and exceeds the probable amount of 

corn deliverable on September corn contracts. 

"Under all the circumstances, we find that your conduct in accumulating and 

maintaining the combined long position under prevailing conditions is 

detrimental to the best interests of the Association, that it is unfair and 

unjust, and that your said conduct adversely affects non-member customers, the 

public at large, public opinion and the good name of the Association and the 

State and Federal Governments. 

"We therefore order and direct you, and each of you, forthwith immediately to 

cease and desist. 

"(a) from maintaining in this contract market the said present combined long 

position of Cargill, Inc., in September corn. 

"(b) from maintaining in this market a net long combined position for 

Cargill, Inc., in September corn which will at the close of business on Friday, 

September 24, 1937, exceed 5,400,000 bushels, reductions due to deliveries or 
Page 61 

tenders excluded. Full performance of this order shall be excused to the 

extent, and only to the extent, that it is impossible to comply therewith 

because of cessation of trading resulting from decline of the market to the 

permissible minimum price fixed by Regulation 1823. 

"(c) from maintaining in this market a combined long position in September 

corn which will detrimentally affect non-member customers, the public at large, 

public opinion, the good name of the Association or jeopardize the relationship 

between this Association and the State and Federal Governments; and, 

"(d) from doing any other act or acts which will hereafter have the effect of 

manipulating prices or promoting any corner or squeeze in September corn. 

"You are hereby notified to appear before the Committee at 2:30 P. M. Friday, 

September 25, 1937, to render an account of your compliance with this order at 

which time theCommittee will make such further order or orders as it may then 

deem best. 

Yours very truly, 

BUSINESS CONDUCT COMMITTEE OF THE BOARD OF TRADE OF THE CITY OF CHICAGO 

By Mr. M. R. Glaser, Chairman." 

The Committee received in reply the following letter from Cargill, 

Incorporated, by John H. MacMillan, President, by P. S. C addressed to the 

Chairman of the Committee: 

"This is in answer to your communication of the 23rd inst. 

"We categorically deny each and every charge of misconduct contained in your 

letter. 

"We further deny your jurisdiction to tell us when and at what price to 

cancel our contracts for purchase of corn for September delivery. 

"We have no intention of being coerced by any bear raids, whether condoned or 

not by the Business Conduct Committee of the Board of Trade of the City of 

Chicago, and therefore respectfully decline to follow the directions, or any of 

them, contained in your letter. 

"We believe that we are as zealous of the public interest and enforcement of 

law as you, as has been indicated by cur frequent requests, which unfortunately 

you have not heeded, to place our differences before Dr. J. W. T. Duvel, Chief 

of the Commodity Exchange Administration, for final decision 

"Kindly acknowledge receipt by signing a carbon copy of this letter as 

indicated." 

Prior to the receipt of said letter MacMillan had sent a telegram to A F. 

Lindley, a member of the Committee, as follows: 

347 - 

A F Lindley, GX 

To be delivered at Business Conduct Committee meeting room -- 

In order to avoid further misunderstanding, we confirm our telephone 

conversation as follows: 

We have been acting pursuant to agreement a week ago Thursday night in which 

we undertook to maintain a liquid market and be entirely out of our line at 

levels not far above those then prevailing. If market did not reach these 

levels we would be entitled to demand and receive delivery. We have not felt 

that any subsequent conversations modified this understanding in any way. Hence 

your order of this morning greatly surprised us. Under no circumstances did we 

have then nor do we now any idea of selling regardless of price except as 

regards hedging orders against cash purchases. In view of the fact that this is 
Page 62 

still our position we see no reason for any concern over the state of the 

market. copy Sayles. 

JOHN H. MacMILLAN 

After the service of the cease and desist order on the morning of September 

24, 1937, and after the refusal of MacMillan, Grimes, Sayles and Cargill Grain 

Company of Illinois to comply therewith, theDirectors of the respondent on the 

same day passed the resolution which stopped trading in September corn futures 

at the close of business September 24, 1937, and fixed the settlement price 

therefor at $ 1.10 1/2 cents per bushel. 

158a. Cargill acquired its September 1937 corn futures at a large discount 

under the high prices of both the May 1937 corn futures and the July 1937 corn 

futures. 

159. At no time during June, July, or August 1937, did the Board of Trade 

question Cargill about its acquisition of its September 1937 corn futures, 

although on June 16, 1937, Cargill's holdings for the first time exceeded 

5,000,000 bushels and from the middle of July until August 13, 1937, Cargill's 

line of long September 1937 corn futures ranged between 40 per cent and 50 per 

cent of the total "open interest" in the September futures. 

160. The Business Conduct Committee of the Board of Trade was not informed as 

to the contracts made between Cargill and Uhlmann, and Cargill and Continental, 

until August 31, 1937. 

161. The Business Conduct Committee of the Board of Trade held numerous 

meetings during August and September 1937. Cargill officials attended many of 

these meetings during September 1937, but none during 

August 1937. During August 1937, the Committee investigated the "open interest" 

in September 1937 corn futures, the Committee being furnished with figures as to 

positions held by traders without the names being disclosed to the committee. 

Early in September the Commitee decided to consider the three positions of 

Cargill, Uhlmann, and Continental as one. At this time the Committee was 

informed by Cargill officials that Cargill needed corn for its customers, that 

Cargill had entered into certain contracts with Uhlmann and Continental because 

it preferred these contracts to Board of Trade futures contracts, that under 

prevailing conditions Cargill wanted deliveries on its futures and on its 

contracts with Uhlmann and Continental. 

162. From September 2 to September 24, inclusive, Cargill officials furnished 

the Business Conduct Committee with certain information as to its aggregate past 

and present operations in cash corn and in the September 1937 corn futures, and 

at no time when requested to do so did Cargill refuse to reveal such information 

to the Committee. 

163. In the latter part of September 1937, although there was still the 

possibility that a rainy spell might delay the movement of the 1937-1938 corn 

crop until November, Cargill officials realized that as a result of excellent 

crop maturing weather to date the new crop might begin to move in volume by the 

last few days in September or early October. 

164. The production of corn in the United States from 1925-1926 to 1936-37 

with ten- and twelve-year averages is as set forth in Complainant's Exhibit No. 

2. 

165. The relationship of the prices of Chicago case No. 2 Yellow corn, the 

prices of Chicago new July 1937 corn futures, and the prices of Chicago 1937 

corn futures for the period from April 1, 1937, to September 22, 1937, is as set 

forth in Complainant's Exhibit No. 64. 

166. The relationship between the rail receipts of corn at Chicago and the 

prices of No. 2 yellow corn at Chicago during July, August, and September, 1937, 

is as set ofrth in Complainant's Exhibit No. 65. 
Page 63 

167. The prices, "open interest" and volume of trading daily in the Chicago 

September 1937 corn futures during July 1937 are as set forth in Complainant's 

Exhibit No. 67. 

168. The weekly receipts of corn at Kansas City during 1937 and the previous 

fifteen-year average are as set forth in Complainant's Exhibit No. 69. 

169. The "visible supplies of corn in Chicago and in the United States on the 

Saturday nearest July 1, 1937, togehter with the previous fifteen-year averages, 

are as set forth in Complainant's Exhibits Nos. 71 and 72. 

170. The stocks of corn on farms in the United States as of July 1, 1937, 

together with the previous fifteen-year average, are as set forth in 

Complainant's Exhibits Nos. 73 and 133-A. 

171. The decline in receipts of corn at certain primary markets in the United 

States from June 21, 1937 to August 31, 1937, is as set forth in Complainant's 

Exhibit No. 78. 

172. The "visible supplies" of corn in Chicago and in the United States July 

31, 1937, to September 4, 1937, are as set forth in Complainant's Exhibit No. 

79. 

173. The stocks of corn on farms in the United States on October 1, 1937 are 

as set forth in Complainant's Exhibits Nos. 80 and 133. 

174. Cargill's stocks of domestic cash corn, showing open sales and net 

stocks from August 1, 1937, to August 13, 1937, are as set forth in 

Complainant's Exhibit No. 81. 

175. The dates of arrival of the first car of new corn in Chicago for each 

crop year respectively during the period from 1900 to 1937, inclusive, are as 

set forth in Complainant's Exhibit No. 109. 

176. The rail receipts of cash corn at Chicago from September 7 to September 

13, 1937, are as set forth in Complainant's Exhibit No. 117. 

177. The dates and manner of the consummation of Cargill's contracts with 

Uhlmann and Continental, made during August, 1937, are as set forth in 

Complainant's Exhibit No. 139. 

178. The daily high, low, and closing prices of Chicago December 1936 corn 

futures, the Chicago New May 1937 corn futures, the Chicago new July 1937 corn 

futures, the Chicago September 1937 corn futures, the Chicago October 1937 corn 

futures, and Chicago December 1937 corn futures, and the "open interest" and 

volume of trading in Chicago September 1937 corn futures from December 1936, 

through September 1937, are as set forth in Complainant's Exhibit No. 157. 

179. The dates on which the September 1937 corn futures contracts, open at 

the close of trading on September 20, 1937, were entered into, are as set forth 

in Complainant's Exhibit No. 185. 

180. On and after September 17, 1937, Cargill had orders in the market to 

sell September futures at prices in most instances a fraction of a cent under 

the maximum permissible price for the day, which was eight cents above the 

previous close. 

181. Continental Grain Company received delivery of approximately 1,300,000 

bushels on the futures contracts which had been transferred to it by Cargill and 

delivered all of this corn to Cargill. The remaining futures held by 

Continental were settled at $ 1.10 1/2 per bushel and the corresponding cash 

contracts were cancelled at a price which allowed Continental 1/4 cents per 

bushel net profit on the combined cash and futures transactions. 

182. Cargill received approximately 800,000 bushels of corn on delivery and 

the remaining futures contracts held by Cargill were settled at $ 1.10 1/2 per 

bushel. 
Page 64 

183. The Business Conduct Committee did not issue any written orders to the 

holders of short contracts in the September 1937 corn futures, requiring them to 

buy in their commitments or forbidding them from acquiring further short 

contracts. The shorts were advised of their contract obligations and the rule 

prohibiting defaults. 

184. During the period from September 20 to September 24, 1937, there existed 

excellent maturing weather for the 1937-1938 corn crop. During this same period 

no changes of consequence occurred in corn supply conditions or in new corn crop 

conditions. 

APPENDIX A 

"Visible supply" is a term coined by the Chicago Board of Trade which it 

defines as: 

"Stocks of grain in regularly authorized warehouses at prominent grain 

centers of the United States east of the Rocky Mountains; including the 

quantities afloat on the Great Lakes and the Barge Canal, representing the 

commercial visible supply of grain in the United States." 

These figures are based for accurate actual figures on the points which they 

serve and are relied upon by the grain trade for current information. 

"Open interest" figures are compiled and published by the Commodity Exchange 

Administration to show the number of bushels of futures contracts for a delivery 

month which remain as yet unfulfilled by performance or offset and are, 

therefore, open. During all of the periods here involved a non-member 

correspondent of a clearing member, which non-member correspondent kept its own 

books, would only report its not position to the Commodity Exchange 

Administration. Studies by the Commodity Exchange Administration have 

demonstrated that the open interest held by each non-clearing member and branch 

office if reported in the aggregate instead of net would affect the open 

interest figures which are released by approximately 6% and not in excess of 

10%. 

APPENDIX B 

COMPLAINANT'S EXHIBIT NO. 28C 

CHICAGO DECEMBER 1936 CORN 

TRANSACTIONS AND NET POSITION OF CARGILL, INCORPORATED 

(In Thousands of bushels; i.e., 000's omitted) 

DATE TRANSACTIONS NET 

POSITION 

1936 Purchases Sales Long Short

July 15 100 100

16 200 300

17 275 5 30

18 225 195 

20 50 245 

21 65 45 265 22 50 200 115 23 115 

24 115 25 10 105 

27 125 20 

28 20

29 395 375 

30 315 1290 600

31 160 135 575

Aug. 1 380 220 415
Page 65 

DATE TRANSACTIONS NET 

POSITION 

1936 Purchases Sales Long Short 3 640 235 10 4 300 290 5 565 855 6 265 1120 7 40 1080 8 1080 

10 1080 

11 1080 12 450 15 1515 

13 325 1840 14 75 10 1905 15 135 2040 

 

DATE TRANSACTIONS NET POSITION 

1936 Purchases Sales Long Short 

Aug. 17 10 2030 18 310 2340 19 220 5 2555 20 155 90 2620 21 5 2625 

225 2620 24 5 2625 

25 2625 26 215 2840 27 125 60 2905 

28 10 2915 29 2915 31 25 2940 

Sept. 1

5 2935 

2 2935 3 5 2930 4 3 2927 5 83 3010 8 85 3095 9 20 3115 10 5 15 3105 11 245 3350 12 5 3345 14 95 3440 15 60 5 3495 

16 135 3630 

17 210 3840 18 190 5 4025 

19 150

5 4170 

21 55 4225 22 605 4830 

23 340 5170 24 15 5185 25 70 5115 

26 945 70 5990 

285 5995 29 5 6000 

30 230 6230 

Oct. 1 210 6440 2 135 6475 3 70 6645 

 
Page 66 

DATE TRANSACTIONS NET POSITION 

1936 Purchases Sales Long Short 

Oct. 5 80 6725 6 50 6775 7 115 5 6885 8 85 10 6960 9 35 5 6990 

10 505 7035 13 5 7040 

14 85 7125 

15 75 7200 16 115 7315 

17 110 20 7405 19 60 7465 20 55 40 7480 

21 15 7495 

22 20 7515 23 7515 

24 25 10 7530 26 5 7535 27 35 7570 28 5 5 7570 29 85 7655 30 155 10 7800 31 15 7785 

Nov. 2 45 7830 4 175 10 7995 5 50 8045 6 10 5 8050 7 5 8045 9 10 8055 10 25 8080 12 10 8090 

13 8090 14 15 8105 16 8105 17 225 7800 

185 7885 19 10 7895 

20 7895 21 50 7945 

DATE TRANSACTIONS NET POSITION 

1936 Purchases Sales Long Short 

Nov. 23 90 8035 24 5 5 8035 

25 50 7985 

27 7985 28 35 7950 

30 40 7910 Dec. 1 35 7875 2 20 425 7470 3 60 460 7470 4 165 6905 5 150 6755 7 20 135 6640 8 135 6505 9 80 6425 

10 250 6175 

11 35 205 6005 12 10 465 5550 

14 250 5300 
Page 67 

DATE TRANSACTIONS NET POSITION 

1936 Purchases Sales Long Short 

15 30 685 4645 16 5 65 4585 

17 10 240 4355 18 10 315 4050 19 370 3680 

21 75 1025 2730 22 10 650 2090 

23 200 1890 

24 290 1600 26 565 1035 

28 5 925 115 29 10 105 30 50 55 

31 55 -- 

(From Daily Recapitulation Sheet Account 38, and Futures Records of Line, 

Leased Line and Commission Departments, Cargill, Incorporated.) 

APPENDIX C 

CHICAGO SEPTEMBER 1937 CORN FUTURES 

DAILY VOLUME OF TRADING AND OPEN INTEREST 

December 17, 1936, to September 30, 1937 

(In thousands of bushels; i.e., 000's omitted) 

Date Volume Open Date Volume Open 

of trading Interest of trading Interest

December 1936 January 1937 

17 20 15 25 847 4960

18 100 115 26 1001 5324

19 - 115 27 1711 5682

28 942 5742

21 - 115 29 1379 5625

22 - 115 30 756 5636

23 - 115 24 - 115 February 1937 26 8 123 1 934 5724

28 30 153 2 2089 6079

29 382 394 3 1441 6135

30 303 586 4 1006 6191

31 607 904 5 1232 6177

6 850 6232

January 1937 8 1457 6297

4 795 1328 9 1018 6479

5 943 1781 10 1252 6629

6 601 2058 11 834 6673

7 423 2141 13 536 6633

8 486 2426 9 317 2552 15 604 6681

16 982 6689

11 358 2741 17 761 6932

12 977 3036 18 904 6901

13 836 3286 19 447 6907

14 1023 3501 20 858 6654

15 991 3861 

16 353 3835 23 1144 6650

24 1037 6590

18 811 4232 25 819 6649
Page 68 

Date Volume Open Date Volume Open 

 of trading Interest of trading Interest

19 887 4403 26 611 6568

20 1021 4549 27 231 6556

21 514 4638 22 1177 4708 23 516 4764 

 

Date Volume Open Date Volume Open 

of trading Interest of trading Interest

March 1937 April 1937 1 505 6583 12 1681 12,106

2 555 6570 13 3032 12,228

3 868 6652 14 2127 12,426

4 741 6726 15 2298 12,324

5 757 6645 16 4553 11,778

6 733 6669 17 2426 11,699

8 913 6692 19 3540 11,618

9 1765 6710 20 2928 12,254

10 2182 7121 21 2647 12,479

11 962 7008 22 2571 12,707

12 1508 7067 23 2829 13,023

13 604 7101 24 1597 13,160

15 943 7261 26 2752 13,258

16 862 7213 27 3176 13,457

17 1467 7334 28 4272 13,577

18 1069 7409 29 3874 13,748

19 1007 7538 30 2290 14,137

20 800 7658 May 1937 22 1424 7755 

23 1008 7894 1 1825 14,323

24 918 8001 25 1743 8224 3 1529 14,486

27 2009 8278 4 1556 14,588

5 1644 14,498

29 2491 8296 6 1752 14,462

30 1837 8287 7 1709 14,805

31 2002 8548 8 1882 14,956

April 1937 10 2129 15,154

11 3279 14,911

1 1737 8810 12 2214 14,909

2 2231 8935 13 1713 14,722

3 2764 9111 14 2165 14,692

15 3715 14,727

5 6190 10,813 

6 3725 11,092 17 1677 14,407

7 4563 11,794 18 1767 14,395

8 3412 12,291 19 4078 14,495

9 2003 12,143 20 1331 14,429

10 1555 12,009 21 1461 14,584

22 5055 14,375 

Date Volume Open Date Volume Open 

of trading Interest of trading Interest

May 1937 July 1937 

24 3730 14,199 6 4196 16,092

25 3630 14,210 7 3580 16,187

26 2363 14,130 8 7261 16,527

27 7838 14,065 9 4628 16,433
Page 69 

Date Volume Open Date Volume Open 

 of trading Interest of trading Interest

28 6246 13,537 10 2828 16,486

29 3003 13,791 

12 3508 16,305

June 1937 13 5160 16,487

14 3568 16,498

1 4825 13,875 15 2685 16,638

2 3046 14,078 16 3948 16,933

3 3468 14,230 17 1811 17,105

4 2234 14,214 5 2739 14,335 19 4810 17,640

20 7167 18,040

7 6978 14,446 21 6808 18,164

8 5978 14,764 22 8414 17,847

9 4225 14,943 23 7781 17,653

10 3677 15,171 24 4764 17,924

11 3774 15,251 

12 3937 15,345 26 6815 18,053

27 5820 18,296

14 5786 15,424 28 5129 18,400

15 5507 15,632 29 8958 18,264

16 4043 15,883 30 17,958 17,977

17 4110 15,914 31 5759 18,112

18 6867 16,834 

19 2973 16,884 August 1937 21 5089 17,226 2 6790 20,008

22 4610 17,111 3 7520 19,903

23 4740 16,793 4 5848 20,059

24 3572 16,712 5 6104 19,843

25 5926 16,383 6 5613 19,834

26 4159 16,592 7 3714 19,608

28 6873 16,458 9 4067 19,917

29 8235 15,952 10 7402 19,605

30 5385 16,259 11 5430 19,478

12 6134 19,579

July 1937 13 7664 19,872

14 4116 19,839

1 5146 16,235 

2 5473 15,886 3 2624 15,939 

Date Volume Open Date Volume Open 

of trading Interest of trading Interest

August 1937 September 1937 16 3416 19,424 7 3903 18,261

17 3843 19,336 8 7672 18,432

18 3471 19,156 9 2756 16,045

19 3229 19,188 10 2622 15,925

20 6494 18,693 11 2424 15,320

21 3881 18,453 13 3357 15,754

23 7249 18,252 14 2553 15,485

24 3782 13,441 15 2425 15,214

25 3318 18,579 16 5219 13,447

26 5068 18,568 17 7280 11,084

27 5378 18,759 18 2140 10,932

28 3834 19,119 

20 2454 10,642

30 4989 19,032 21 1509 10,225

31 4112 18,580 22 4555 8839

23 1802 8400
Page 70 

Date Volume Open Date Volume Open 

 of trading Interest of trading Interest

September 1937 24 5102 8012

25 -- 8012

1 3464 18,502 2 2401 18,333 27 -- 1600

3 2535 18,366 28 -- 1600

4 1681 18,365 29 -- 1538

30 -- --

(From "Trade in Grain Futures," issued monthly by the Commodity Exchange 

Administration, for the months of December, 1936, through September 1937.) 

APPENDIX D 

RELATION OF KANSAS CITY DECEMBER WHEAT 

FUTURES TO CHICAGO DECEMBER WHEAT FUTURES 

DAILY JULY THROUGH DECEMBER, 1936 

(Cents per bushel) 

Date Chicago K.City to 

 Chicago 

K. City 

July, 1936 1 98 3/8 94 1/4 4 1/3 under

2 103 1/3 99 1/4 4 1/4 "

3 102 1/2 98 4 1/2 "

6 107 1/2 103 4 1/2 "

7 106 7/8 102 5/8 4 1/2 "

8 105 5/8 101 1/2 4 1/8 "

9 107 1/8 103 1/8 4 "

10 110 1/2 106 1/4 4 1/4 "

11 105 5/8 101 1/4 4 3/8 "

13 105 1/4 102 3 1/4 "

14 103 1/2 100 3 1/2 "

15 105 3/4 103 3/8 2 3/8 "

16 107 104 1/8 2 7/8 "

17 106 103 7/8 2 1/8 "

18 102 3/4 100 7/8 1 7/8 "

20 104 101 5/8 2 3/8 "

21 104 1/4 101 7/8 2 3/8 "

22 104 5/8 102 2 5/8 "

23 105 1/2 l02 3/4 2 3/4 "

24 104 1/8 102 2 1/8 "

25 104 1/8 102 1/4 1 7/8 "

27 105 1/2 103 1/4 2 1/4 "

28 106 3/4 104 3/8 2 3/8 "

29 109 3/8 107 1/2 1 7/8 "

30 110 7/8 109 3/8 1 1/2 "

31 111 1/4 110 1/8 1 1/8 "

August, 1936 

1 113 1/4 113 1/4 "

3 114 1/4 114 3/8 1/8 over

4 111 3/8 112 5/8 "

5 114 114 3/8 3/8 "

6 113 1/4 112 1/2 5/8 "

7 110 3/4 111 1/4 1/2 "

8 111 3/4 112 3/8 5/8 "

 

Date Chicago K. City K.City to 

Chicago 

August, 1936 
Page 71 

Date Chicago K. City K.City to 

 Chicago 

10 110 3/8 111 1/4 7/8 over

11 108 1/8 109 3/4 1 5/8 "

12 110 1/4 111 3/4 1 1/2 "

13 111 3/4 113 3/4 2 "

14 110 1/4 112 1 3/4 "

15 110 7/8 113 1/4 2 3/8 "

17 112 3/4 114 1/2 1 3/4 "

18 113 114 7/8 1 7/8 "

19 113 114 3/8 1 3/8 "

20 112 1/8 113 1/2 1 3/8 "

21 112 3/8 113 5/8 "

22 112 3/8 113 5/8 "

24 110 1/8 110 3/4 5/8 "

25 109 7/8 110 1/8 1/4 "

26 110 1/8 110 1/8 Even

27 110 3/4 110 7/8 1/8 "

28 107 3/4 108 1/4 "

29 108 7/8 109 3/8 1/2 "

31 108 1/8 108 3/4 5/8 "

September 1936 1 107 1/8 109 1 7/8 "

2 107 1/4 106 5/8 5/8 under

3 108 1/2 107 1/2 1 "

4 109 7/8 109 7/8 "

5 110 3/8 109 7/8 1/2 "

8 110 3/4 110 5/8 1/8 "

9 110 3/8 109 3/4 5/8 "

10 110 1/2 109 7/8 5/8 "

11 111 7/8 111 3/8 1/2 "

12 112 111 1/4 3/4 "

14 111 1/2 110 7/8 5/8 "

15 111 3/8 110 3/4 5/8 "

16 112 5/8 111 7/8 3/4 "

17 113 1/2 112 3/4 3/4 "

18 112 3/4 112 3/8 3/8 "

19 113 112 1/2 1/2 "

21 113 3/4 113 3/8 3/8 "

22 115 3/4 115 3/4 "

23 115 1/2 114 7/8 5/8 "

24 117 116 1/4 3/4 "

25 115 1/8 114 3/4 3/8 "

26 115 1/8 115 1/8 Even 

Date Chicago K. City K.City to 

Chicago 

September, 1936 28 113 3/8 112 7/8 1/2 under

29 113 3/8 114 1/8 3/4 over

30 112 7/8 112 1/4 5/8 under

October, 1936 1 113 1/8 111 7/8 1 1/4 "

2 114 112 5/8 1 3/8 "

3 114 7/8 113 3/8 1 1/2 "

5 113 3/4 112 1/4 1 1/2 "

6 114 1/4 112 5/8 1 5/8 "

7 113 111 1/2 1 1/2 "

8 114 1/8 112 1/4 1 7/8 "

9 115 113 1/4 1 3/4 "

10 116 1/4 114 1/2 1 3/4 "

13 115 3/8 113 3/4 1 5/8 "

14 116 3/4 115 1/8 1 5/8 "
Page 72 

Date Chicago K. City K.City to 

 Chicago 

15 115 7/8 114 3/8 1 1/2 "

16 116 3/8 114 1/2 1 7/8 "

17 115 7/8 114 1/4 1 5/8 "

19 114 1/2 113 1/4 1 1/4 "

20 114 3/8 113 1/8 1 1/4 "

21 114 1/2 113 1/8 1 3/8 "

22 114 7/8 113 1/4 1 5/8 "

23 114 1/2 112 5/8 1 7/8 "

24 114 7/8 112 3/4 2 1/8 "

26 115 3/8 112 5/8 2 3/4 "

27 115 7/8 112 7/8 2 "

28 115 3/8 112 5/8 2 3/4 "

29 114 3/8 111 1/2 2 7/8 "

30 113 5/8 111 1/8 2 1/2 "

31 114 1/8 111 1/4 2 7/8 "

November, 1936 

2 114 110 1/2 3 1/2 "

4 114 5/8 111 5/8 3 "

5 115 3/8 112 1/8 3 1/4 "

6 114 3/4 111 7/8 2 7/8 "

7 115 1/8 112 3/8 2 3/4 "

9 115 1/8 111 3/4 3 3/8 "

10 114 5/8 111 1/2 3 1/8 "

12 115 1/4 112 3 1/4 "

13 115 7/8 112 1/2 3 3/8 "

14 116 5/8 113 1/4 3 3/8 " 

Date Chicago K. City K.City to 

Chicago 

November, 1936 16 118 1/8 114 1/8 4 under

17 118 1/4 114 4 1/4 "

18 117 1/2 113 3/8 4 1/8 "

19 116 1/2 112 7/8 3 5/8 "

20 117 113 3/4 3 1/4 "

21 117 5/8 113 7/8 3 3/4 "

23 116 7/8 113 3/8 3 1/2 "

24 117 1/4 113 1/2 3 3/4 "

25 117 5/8 113 1/4 4 3/8 "

27 118 3/8 113 7/8 4 1/2 "

28 119 5/8 114 3/4 4 7/8 "

30 120 1/8 115 3/4 4 3/8 "

December, 1936 1 123 1/2 117 6 1/2 "

2 124 1/8 118 1/4 5 7/8 "

3 125 1/4 118 5/8 6 5/8 "

4 124 3/4 118 3/8 6 3/8 "

5 124 3/4 117 5/8 7 1/8 "

7 125 7/8 118 1/2 7 3/8 "

8 125 3/4 118 3/4 7 "

9 128 120 1/8 7 7/8 "

10 128 3/8 120 5/8 7 3/4 "

11 127 1/2 120 1/8 7 3/8 "

12 128 5/8 121 1/4 7 3/8 "

14 135 126 1/4 8 3/4 "

15 133 3/4 126 3/8 7 3/8 "

16 134 1/4 126 3/8 7 7/8 "

17 135 1/4 127 1/4 8 "

18 139 3/8 138 1/2 8 7/8 "

19 138 1/2 129 1/2 9 "
Page 73 

Date Chicago K. City K.City to 

 Chicago 

21 138 1/4 129 3/8 8 7/8 "

22 135 1/4 126 7/8 8 3/8 "

23 135 7/8 128 1/8 7 3/4 "

24 139 1/4 131 8 1/4 "

26 141 3/4 132 5/8 9 1/8 "

28 137 1/4 131 1/4 6 "

29 

30 31 

APPENDIX E 

Rules and regulations of the Board of Trade of the City of Chicago referred 

to and involved in those hearings. 

"251. Emergencies. - The Board shall have power to declare any day to be a 

holiday or to close the Exchange or to stop trading in any security or in any of 

the future contracts of any commodity, by reason of any emergency or otherwise, 

and to make such Regulations in regard to deliveries and settlement prices as it 

may deem proper because thereof. All Exchange contracts shall be subject to the 

exercise of such power. Such contracts shall also be subject to the exercise by 

the Clearing House of the powers reserved to the Clearing House by its Charter, 

By-laws, and Resolutions." 

Rule 602 of the Board of Trade provides: 

"Judges must be disinterested. - A member may not serve upon the Board or 

upon any committee upon any trial or hearing where he has a financial interest 

in the result thereof, or where he is connected with a firm or corporation 

having such an interest." (See Answer, Paragraph 1.) 

During 1936 and up to December 9th, 1936, Rule 82, the Business Conduct 

Committee Rule of the Board of Trade, was as follows: 

"Business Conduct Committee. -- The President with the approval of the 

Board, shall appoint from the general membership three members of a Business 

Conduct Committee who are not serving as Directors or officers of the 

Association, one for a term expiring February 1, 1935, one for a term expiring 

February 1, 1936, and one for a term expiring February 1, 1937, and thereafter 

at the first meeting of the Board of each year, the President, with the approval 

of the Board, shall appoint one member of such Committee for a period of three 

years dating from February 1 in each year. In cases of vacancy the President, 

with the approval of the Board, shall fill the vacancy for the unexpired term. 

The three members thus appointed, together with the President of the 

Association, or in his stead, a Director of the Association, and the President 

or Treasurer, or in their stead 

a Director of the Clearing House, shall constitute the Business Conduct 

Committee. Five members of the Committee shall be required to constitute a 

quorum, but in the absence of one or more members from a particular meeting, the 

members present may fill the Committee by temporary appointments for that 

particular meeting. All regular members of the Committee shall pledge 

themselves to the Association that they will not speculate for their personal 

account in any commodity which is traded in on the Chicago Board of Trade during 

the period of their service. The Committee shall be charged with the duty and 

authority to prevent manipulation of prices as provided in Section 5 (d) of 

theGrain Futures Act and shall have general supervision over the business 

conduct of members, particularly in so far as such conduct affects (1) nonmember customers; (2) the public at large; (3) the State Government; (4) the 

Federal Government; (5) public opinion; and (6) the good name of the 

Association. The Committee may investigate the dealings, transactions, and 

financial condition of members, and may examine their books and papers upon 
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request. The Committee may employ such auditors and other assistants as they 

may deem necessary, and all expenses incident thereto shall be payable from the 

funds of the Association. Members under investigation shall be advised of the 

nature of the investigation, and [ILLEGIBLE TEXT] appear before the Committee 

and offer such testimony, explanation, or justification as they may wish. If, 

as the result of any investigation, theCommittee finds that a particular course 

of conduct is, or thereafter would be, unfair or unjust, or in violation of the 

law or the Rules of the Association, or calculated to impair the good name of 

the Association, the Committee shall notify the member in writing of its 

conclusions, and direct such member to desist from such past or proposed 

conduct. The findings and conclusions of the Committee in the premises shall be 

final and without appeal. Any member who fails to appear before the Committee 

pursuant to its request, or to submit his books and papers to the Committee for 

their examination, or who conducts himself in violation of any order of the 

Committee after having been duly notified thereof, shall be charged with an 

offense against the Association, and if found guilty shall either be expelled or 

suspended for any specified period by the Board." (See Answer, Paragraph 1.) 

From December 9, 1936, to the present time, Rule 82, the Business Conduct 

Committee Rule of the Board of Trade has 

remained the same except for the deletion of the following sentence: 

"Five members of the Committee shall be required to constitute a quorum, but 

in the absence of one or more members from a particular meeting, the members 

present may fill the Committee by temporary appointments for that particular 

meeting." (See Answer, Paragraph 1; Record: MacMillan, 2342-45, 3005.) 

The Commodity Exchange Act (7 U. S. C., 1934 ed., Supp. IV, § 1-17a) requires 

that all trading for future delivery in commodities covered by the act be 

conducted on Board of Trade designated as contract markets under the provisions 

of the act and makes the designation of a Board of Trade as a contract market 

dependent upon its meeting certain requirements of the act and further makes the 

designation subject to revocation or suspension, upon the contract market 

failing to perform the duties imposed upon it as a condition of its designation. 

Persons who avail themselves of the facilities of a contract market do so 

subject to the rules of the contract market and any actions taken under such 

rules in performance of the market's duties under the Commodity Exchange Act. 

The Commodity Exchange Act, Section 5a (5) reads as follows: 

"Each contract market shall -- * * * Require the party making delivery of any 

commodity on any contract of sale of such commodity for future delivery to 

furnish the party obligated under the contract to accept delivery, written 

notice of the date of delivery at least one business day prior to such date of 

delivery. Whenever, after due notice and opportunity for hearing, the Secretary 

of Agriculture finds that the giving of longer notice of delivery is necessary 

to prevent or diminish unfair practices in trading in any one or more 

commodities or markets, he shall by order require such longer notice of delivery 

(which shall be not more than ten business days) applicable to such commodities 

and markets as he finds will prevent or diminish such unfair practices: 

Provided, however, That such order shall not apply to then existing contracts;" 

Prior to the passage of the Commodity Exchange Act, the time for giving 

notice of delivery was subject to no restriction by law and could be fixed at 

any length of time at the discretion of the contract market, even to the extent 

of requiring no time to elapse between the giving of notice and the making of 

delivery, at which time the person receiving delivery would be required to pay 

for the grain delivered. It can be seen that this condition might and no doubt 

did give rise to confusion and abuses by denying the buyer the benefit of any 

time after 

 
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receiving notice, in which to make banking arrangements to take care of the 

payment for the commodity delivered. In fact Rule 285 of the Board of Trade of 

the City of Chicago, the respondent, which was in effect during September 1936, 

provided for notice of delivery as follows: 

"Notices of the delivery of grain must be issued and delivered to the 

Clearing House before twelve o'clock noon on the business day preceding the day 

of delivery except during the last three business days of the month during which 

deliveries may be made without notice given the preceding day." 

The purpose of Section 5a (5) is to eliminate the confusion and possible 

abuses that existed and assure the buyer of an opportunity to make banking or 

credit arrangements between the time when notice of delivery is received and the 

time when the buyer is required to make payment for the commodity delivered. A 

contract market has complied with this provision if it requires notice of the 

date of delivery to be served the business day preceding the day upon which 

delivery is to be made. 

Section 5 (d) of the Commodity Exchange Act reads as follows: 

"Section 5. The Secretary of Agriculture is hereby authorized and directed to 

designate any board of trade as a'contract market' when, and only when, such 

board of trade complies with and carries out the following conditions and 

requirements; * * * 

"(d) When the governing board thereof provides for the prevention of 

manipulation of prices and the cornering of any commodity by the dealers or 

operators upon such board." 

This section places upon the contract market the duty of providing for the 

prevention of manipulation of prices and the cornering of any commodity by the 

dealers and operators upon such contract market. This duty, it is noted, does 

not relate only to members of the contract markets, but must be performed as to 

any one who may deal or operate on the market and it follows if the market has 

the duty to perform with respect to any one dealing on the market it must have 

the right and authority to control the activities of such persons, and a person 

 

dealing or operating on the market does so subject to the jurisdiction of the 

market in performing its duties under the act. 

The failure of a contract market to perform this duty is sufficient grounds 

for the revocation or suspension of the designation of the market. The 

Secretary of Agriculture has the duty and authority to take steps to prevent 

manipulation and corners and to discipline those who have been guilty of 

manipulating prices or cornering a commodity. However, because of the necessity 

of notice and public hearings, which require considerable time, where the 

Government is the acting party, Congress realized that a contract market was in 

a better position to take quick action at the time an emergency in the nature of 

threatened manipulation or corner arose and thereby more effecitvely prevent 

manipulation of prices or a corner from occurring. Although this duty has been 

imposed on contract markets, the act is silent as to the means to be used by the 

contract market in performing the duty, therefore, the responsibility of 

determining the means to be used rests with the contract market and this 

responsibility must be taken seriously by the contract market with a view to 

having the action to be taken by the contract market determined by experienced 

men capable of intelligently analyzing a situation calling for action and 

determining the action to be taken in a practical and judicial manner free from 

prejudice or personal considerations. When a contract market has acted 

reasonably under this responsibility and action has been taken by the contract 

market, through its governing board, or those designated by the contract market 

to act for and on its behalf, to prevent manipulation of prices or the cornering 

of any commodity, in the absence of ulterior motives or arbitrary action on the 

part of the contract market, such action taken by it in good faith in 

performance of this duty when it has reason to believe that manipulation of 
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prices exists or is threatened, or a corner of a commodity exists or is 

threatened, does not constitute a violation 

 

of Section 5, Subsection (d) of the Commodity Exchange Act. This is true 

although other or different action on the part of the contract market might 

better effectuate the purpose of the action taken and any price fluctuation 

attributable to such action taken by the contract market does not constitute 

manipulation of prices by the contract market within the meaning of the 

Commodity Exchange Act. 

Based upon the findings of fact, the Commission has determined and concluded: 

1. The complainant has failed to establish that the respondent violated 

Section 5 (a) 5 of the Commodity Exchange Act in September 1936, by failing to 

require the parties making delivery of corn on September 1936 corn futures to 

furnish the parties obligated under such contracts to accept delivery, written 

notice of the date of delivery at least one business day prior to such date of 

delivery. 

2. The orders issued by the Business Conduct Committee of the respondent in 

December 1936 and September 1937, requiring the complainant to reduce its 

positions in the futures market, were justified in the performance of the duty 

of the respondent to prevent manipulation of prices or corners of commodities, 

as the Business ConductCommittee had reason to believe that manipulation of 

prices existed or was threatened, and corners were threatened, due to the 

operations of the complainant in those markets. 

3. The complainant has failed to establish that the respondent violated 

Section 5 (d) of the Commodity Exchange Act in December 1936, as to December 

1936 corn and wheat futures, by its governing board failing to provide for the 

prevention of manipulation of prices therein, or by permitting the Business 

Conduct Committee of respondent to attempt to manipulate prices downward, to 

attempt to aid and abet manipulation of prices downward, to manipulate prices 

downward, or to aid and abet manipulation of prices downward. 

4. The complainant has failed to establish that the respondent violated 

Section 5 (d) of the Commodity Exchange Act in September 1937, as to September 

1937 corn futures, by its governing 

 

board failing to provide for the prevention of manipulation of prices therein, 

or by permitting the Business Conduct Committee of respondent to attempt to 

manipulate prices downward, to attempt to aid and abet manipulation of prices 

downward, to manipulate prices downward, or to aid and abet manipulation of 

prices downward. 

ORDER 

NOW, THEREFORE, upon consideration of the motion to dismiss the record 

including all documents filed by the parties, the referee's report, exceptions 

filed by the complainant, and the findings of fact and conclusions set forth 

herein, 

IT IS ORDERED that the respondents motion to dismiss the complaint, filed on 

June 5, 1939, be, and the same hereby is, granted, and the complaint be, and the 

same hereby is, dismissed. 

IT IS FURTHER ORDERED that a copy hereof shall be served upon the attorneys 

of record for the parties to this proceeding by registered mail. 

IN WITNESS WHEREOF, the Secretary of Agriculture, the Attorney General, and 

the Secretary of Commerce, constituting the Commission designated by the 

Commodity Exchange Act, have hereunto set their hands in the city of Washington, 

District of Columbia, this 16th day of August, 1940. 
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(Signed) H. A. Wallace 

Secretary of Agriculture 

Chairman of Commodity Exchange Commission. 

(Signed) Robert H. Jackson 

Attorney General 

Member of Commodity Exchange Commission 

(Signed) Harry L. Hopkins 

Secretary of Commerce 

Member of Commodity Exchange Commission 

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