The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1903-03-30
'TWOULD HIT
THE FARMERS
The Proposed Law to Stop All Trad
ing in Futures in Min
nesota. 1'%~
The System Is Method Made Nee
essary by Present Economic
Conditions. s
Something About Its History and
It's Effects Upon the North
VESTS Growth.

AS a substitute for the Gjertsen anti
bucket shop bill. a house committee or
the Minnesota legislature has evolved a
bill which, if literally enforced. would
practically abolish all trading In grain
futures in Minnesota. Many are inclined
to think the committee members had lit
tie to do with the drafting Of the bill
Either the committee, wholly unacquaint-
ed with the basic principles or the great
system which their bill attacks. have put
1t forward in ignorant good faith. or else,
If thew really expect their measure to
pass, they are actuated by desire to put
upon one of the greatest industries OF the
northwest such handicap as will bring
on general paralysis. ''-.'''''-
The effect of such a law would be felt
first by the grain trade but although Sc
we're it would be temporary. The final
effect would be upon the farmer. and with
the law in force it would be permanent
A New Economic Method.
Americans have devised, perfected and
given to the world many new ideas in
economics. The growth of our country
has been so rapid that business men, to
keep pace, have frequently found 1T nee
essary to discard old world ideas and
substitute new ones. AS the center or
population Sas moved westward and the
center Of grain production has followed
great quantities of cereals have been pro-
duced in new localities far removed from
consuming or exporting points. How to
handle the ever extending and increasing
crops eXpeditiously and economically was
n problem to tax the ingenuity Of man.
For years the grain trade in the interior
was conducted in manner crude and
unsatisfactory, especially disadvantageOus
to the farmer who bare the brunt Of it..
In the striving for some improved method
that would eliminate the element OF
chance which made the grain trade a
most uncertain and hazardous business,
there has been evolved, slowly and over
q period of years. the present system of
trading in futures. one of the most COM
prehensive all-American economic sys-
TENS ever devised.
The Farmer Pays the Bill
Forty years ago or more, buyers bought
grain from the farmers on q margin so
wide as to seem almost absurd In our day.
The farmer suffered. There We're then
no futures. The buyer insured himself
against loss from decline by putting the
price low enough. The farmers paid for
this insurance and the premiums were
very heavy, ,......,......,....'..
George D. Rogers of Minneapolis. whose
experience in the grain trade runs far
back, was buying wheat through Iowa
years ago. for a. Chicago firm. Whenever
he bought he first figured the cost of
getting the wheat to. Chicago, deducted
this. and then took off 10 cents a bushel
additional, this last to protect his house
against possible loss by decline in the
price before the grain could reach Chi
cago Colonel Rogers once ran line OF
elevators in Iowa. and his instructions
were to allow g. 12-cent difference on all
purchases. 1t happened that there was
no decline one year, but rather an ad-
vance, and on the thousands Of bushels
bought his house made the IL cents ad-
81 ,,,,1o loo YoTnS o1f
system. would have gone to the farmers.
But If the buyers margin for protection
in ordinary times was wide, 1t was espe-
cialIy wide when a long delay In reach
ing Chicago was certain. James Mafshal
recalls a year when. after the close OF
river navigation, wheat buyers along the
upper Mississippi put prices down 40 cents
q bushelbetween Chicago and river points
During the period from the beginning OF
the ,Austro-T Turkish to the close OF the
Franco Prussan war wheat SOLD ABOVE
50 in Chicago several times, but few
farmers received the full benefit, as the
American exporters we're AFRAID or heaV3
reaction buyers everywhere doubled ane
trip]ed their safety margins and the farm
er. as usual, had to stand it. Things are
vastly different to-day. and by the pres:
ent system producer and consumer are
brought closer together, to the advantage
Of the producer.
The First Pure FIXTURES"
The first trades in wheat futures were
made in Chicago in the fall of 1862. The
initial transaction was in May wheat, thu
contract STIMULATING delivery in May, 1868
This was by no means the first time agr1
! cultural products were bought and solt
for future delivery. The Japanese. a, hun
dred years earlier had a system of buyin,
and selling rice for future delivery; Will
I'm Liverpool and other European market
# was common practice for millers ant
cotton goods manufacturers to anticipat
requirements of raw material by pur
chases far ahead But the trade In Chi
cago in 1862 was probably the first wher
=. seller who neither owned nor had 1
his possession any grain, yet sold quaint
ity for delivery in May, thus placing him
self in a position analogous to the presen
day short seller, although the terri
.'short' as applied IN the grain trace ma
not vet been coined. .-. ,.
Two men were talking business in Chi
cago, the one q country merchant tn
other Chicago grain exporter. TIL
countryn1an was leaving for his home
then a remote point and was complainin
Of business conditions. --..r .s'- IT,.
when a. farmer comes In with whea
after the river Closes" he said, II am non
pIussed. I want to buy his wheat an
hold his trade, but I cannot ship tn
wheat until spring. I must pay til
farmer for it, pile it up and take chance
finally market it in the spring. TIL
farmer thinks. he should have the curren
Chicago price less freight and charge
and when stand out for lower figur
for self protection he thinks he1s unjustl
treated
How much wheat will you probably re
Ceive during the winter" asked the Chi
cago man.
"About 10000 bushels
''Then will buy that wheat now at tc
days market for delivery to me ne7
May" -,
This was the beginning. In time a
enormous business was built up. Buffal
took up futures and New York, Detroi
Toledo. Cleveland. Cincinnati and Dulut
came into line. also st. Louis and In late
years Kansas City and other points.
New York for a, long time maintaine
5000 bu as the trading unit, since th
is the quantity understood in the tern
"boatload,'' meaning the quantity carrie
by one barge on the Erie canal. But cor
yenient as this unit was for the seaboar
exporter New York had to change
finally and place herself in line with ir
terror futures markets, where the un
was 5000 bu.
Continued on Second Faye.