The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1917-06-30
SELLING WHEAT
THE TOPEKA STATE JOURNAL
IMPORTATION BUREAU
By Frederic J. Haskin. Director
Washington. ID. C.


death over grain exchanges and
boards of trade where grain is bought
and sold. The blu provides absolute
authority to regulate such exchanges,
or even to suspend their operation,
but it does not direct that the power
he used. What course will the ad-
ministration adopt toward the eX-
changes? And IN how far is board or
trade speculation in grain responsible
for excessive prices, and what would
be the effect of closing the exchanges!
These are questions of considerable
Importance today, bOth TO FARMERS
and to consumers.
Mr.. Hoover has stated that specula-
tors have robber the American publS
of $3.50, 100000 on the price of wheat
in the last few TloLths. The food
pirate has been denounced on every
hand, as is eminently fitting and
proper. The assistant secretary OF
agriculture has characterized the men
VINO force up food prices to their own
advantage as traitors as well as GRIM
inals. Such practices will be stern!y
dealt with; but there is considerable
confusion in the public mind, accord
ing to high authorities, as to just who
the offenders are.
Take, for example. the catch
phrase, gambling in futures" This
has come to stand with many people
as the last word in iniquity. A con-
siderable number cf patriotic Ameri-
cans would like TO see all trading in
futures put a stop to, without pauslng
to consider what the results may be.
Gambling in futures is wrong Trad
ing in futures is necessary-in certain
lines. In those lines it is beneficial
That is the case il a nutshell. And
wheat is one of the commodities IN
which future trading, or the existence
of a hedging market is beneflt TO
producer and consumer, if that trad
TO regu-
lated. So the idea that cheap bread
will return with the closing of the
grain exchanges is another illusion
that will not stand the test of scru-
tiny. Prices will come down Wheh
illegitimate speculation is abolished
Mr.. Charles J. Brand, who is chief
of the federal bureau of markets,
which attends to what federal regula-
ton of the grain trade is now in force,
noints out that a Spectator is not
necessarily a gambler. A gambler,
says Mr.. Brand, is man who creates
a risk in order to assume II A man
who offers to match you for SO IS
gambler, because he creates FISK
of losing SIS especially in order that he
may assume it, with the chance OF
winning a like amount. There is
nothing in the order of nature which
DEGREES that somebody must lose, and
somebody else must win, that much
V
you is q gambler and not a Spectator,
because, to complete Mr.. Brands def
milton, a Spectator is a man who as
sumes an already existing risk.
That is the situation in the wheat
market. because the wheat crop is
harvested in three months and mar
keted thruout all the twelve. Some
body has got to assume the risk of
carrying the surplus wheat from the
time of harvest until it is needed at
the mill. There are bound to be fluc-
tuations in price over that period. and
the man who holds it is either going
to gain or going to lose. The best in
terests of the farmer and the con-
sumner are conserved when the :isk is
made as small as possible, because it
is an economic law that large risks
demand large profits. and in this case
the profits go to the middleman.
The machine that has been evolved
to carry the threemOnthS' wheat har
vest over the twelve-months year
with a minimum of risk is the system
of future trading as practiced on the
grain exchange. This system pro-
vides a means whereby any man may
hedge his contracts, as the saying is,
or in other words insure himself
against the element Of uncertainty in
herent in future conditions.
A city baker, for example, knows
that on the first of August he will
need 10000 barrels of flour. That
flour may be existent; the butter
flies may be fluttering over the wheat
that will make it, to paraphraSe Gem
eral Goethals. But none the less your
baker can go to a miller and contract
for his flour at given price. The
risk is thus transferred to the miller.
He has bound himself to deliver flour
at a given rate. and if the price of
wheat should double in the interim
it might break him. But he can go
into the market and buy the unhar-
vested wheat for future delivery. He
consults the future price before he
makes his contract. He takes no risk
at all.
Because he takes no risk, he cannot
legitimately demand eXorbitant prof
it's. And the price he pays for his flu
ture wheat is fair to the farmer, be-
cause the future quotation is based
on the condition of the worlds wheat
! crop, and is normally the most ac-
curate possible forecast of the value
of the coming wheat crop. Many
farmers are under the impression
! that the trading in futures is opposed
to their own best interests. There is
a future market for wheat In q nor
! NAL year, 81 per cent of the ultimate
price of the wheat goes to the farmer.
| There is no future market for barley
| no, for potatoes In a normal year.
| 81 per cent of the ultimate price of
! the Darley goes TO the producer, and
only SIS per cent of the ultimate value
of the potatoes.
The consumer, the city man whose
! dealings are with the bakery, are
prone to think that the future trader
| is the man to whom all lis woes are
! due. Future trading in wheat is lust
as necessary from the ultimate con-
sumer's point of view as it Is from the
producers. By reducing the element
! of risk, it cuts down the profit of mid
dlemen. By its system of reachina
ahead, it smooths over the ups and
downs of prices that follow unexpect-
ed developments in the grain situa-
ton. 1t irons the price curve from a
Jagged line into long, smooth curve
This summary is not a defense OF
the board of trade or the grain ex-
change There nave been numerous
abuses of the system. and there are