Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1917-05-01
TRADING IN FUTURES

There are few subjects around which more contro-
versy has centered than that of trading in futures. e-
pecially grain futures. That the practice has been char
acterized by abuses will be conceded by everyone who
mas any knowledge of the subject. But as to the extent
of these abuses, and as to the best means of preventing
them, opinion differs widely.
There are those who would put an end to the abuses
by ending the practice itself, a solution which has the
merit in simplicity. But there are others who maintain
that trading in futures has it's legitimate and useful place
II the work OF marketing. and that the proper course is
to eliminate the bad features as they are recognized,
while retaining the main plan itself.
All trading in futures is not gambling. And such
trading is not always to the disadvantage of the producer.
as is often supposed. Take the case of the elevator man
who wishes to confne himself to the business of buying
and shipping wheat, and receiving fair compensation for
his work. That man is not interested in the price of
wheat, He does not wish to become interested. If he can
be assured of a certain price he can afford to do bust
ness on just the margin that will compensate him prop
erly. Men Of this type, and there are many of them,
have awaited themselves Of the opportunity to trade IN
futures. not for the purpose of specializing, but in order
to remove the speculative element entirely from their
business When such a man buys ten thousand bushels
OF wheat at his elevator he Immediately sells an equal
quantity at the current market price. He is protected
IN this manner against price fluctuations. If he were
not able to do this he would be obliged, for his own pro-
lection, to allow himself a wider margin as a protection
against possible loss between the time of his purchase
and the time when the wheat arrives at the terminal.
In this instance. therefore. the tendency of the f-
ture business is to insure to the farmer the full value
OF his product at the days price. OF course it appears
that this is merely transferring the speculative element
it when he sells to the local dealer. The latter in re-
lteved when he sells in the terminal market for future
delivery. But the man who buys on the exchange be-
comes a Spectator in that he has bought at a price which
he believes to be a low commodity whose price he hopes
will advance. to his profit.
1t has been urged that the situation might be rem
edied by prohibiting tho sale Of grain which the seller
does not own. That looks simple; but there are some
complications. Not only In the grain trade, but in all
other lines Of merchandise, dealers in good faith often
nnd it necessary to make sales before making purchases.
That is, the dealer finds a market for the goods before
taking the risk Of stocking up with them.
If some way could be devised of preventing trans
actions in imaginary grain. grain which the seller does
not own, and which the buyer does not expect or desire
to receive. wheat which has not existence, and which
Is used merely as a fictitious basis for betting, pure and
simple, there would be little difficulty in the rest Of the
problem. But 1t is no easy manner to devise a plan
which will distinguish with certainty between the trans
action which has for its basis actual grain and actual
money, and the legitimate exchange Of the one for the
other, and the transactions in which gambling is the only
element.