Emmons County record. [volume] (Williamsport, D.T. [i.e. N.D.]) 1884-current, 1920-12-23

from school teacher of the Dakem
neighborhood disagreeing with a re-
cent Record editorial which called for
the protection of hedging" in what
ever steps were taken to cut out
gambling" in grain. The writer of
the letter holds that hedging must be
done away with, that it is gambling
and that gambling is prohibited by
the constitution.
The Record believes that those who
demand the abolition of hedging are
spending too much time on theories
and not enough time on facts. Call
hedging what you like, it remains u
fact that hedging is the only feasible
method of providing a cash market
at all times for wheat, one of the
main sources of revenue of the far
mer. Just do away with hedging
and what will be the result? It is
impossible to control the law of sup
ply and demand by statute. hence,
without hedging, there would still be
a fluctuation in the prices. And
how would the grain then be market
ed?
Cut out hedging and elevator men
would either refuse to buy the wheat
outright or they would demand a
"spread" so large that they could pro-
tect themselves against fluctuat.ng
prices.
Take the facts as they actually are.
A farmer harvests his crop. He
doesn't raise it to use himself. He
raises it to sell. He brings it to a
local elevator, and the local elevator
man pays him the Minneapolis price,
less enough to cover freight, hand
ling, and margin of profit. How
can he do that when the price of
wheat may have dropped twenty-five
cents in the few days that are re-
ouired to get that wheat to market?
He does it by hedging. He buys all
the wheat the farmer wants to SELL
He issues storage tickets for thou
sands of bushels hauled in by far
mers who want to do little gam
bling on prices themselves. Of
course, he doesn't actually hold all
that stored grain in his elevator. He
couldn't. Now, how does it come
that with thousands of dollars worth
of business on his books, the fuctu-
ating markets do not bankrupt the
elevator man? Simply because he
"hedges." And he hedges just like
some men hedge who have bet on a
ball game. The elevator man figures
up the amount of grain he has on
hand or for which he has issued stor-
age tickets. And he telegraphs an
order to some commission man to
sell" an approximately equal amount.
He has hedged. And what happens.
If the market slumps before he can
get the farmers grain to the ter
minal, he has lost the amount of the
slump on the grain. But is he hurt
financially? No. Then why? Be-
cause he had sold an imaginary
amount of grain at the former price,
and when the market dropped he can
buy back to balance his account at a
figure just as much lower as the loss
sustained on the actual wheat he had.
Hence, the loss sustained on the
wheat purchased from the farmer is
just exactly balanced by the profit
made on his imaginary deal.
Now, how could the elevator man
have sold imaginary wheat if some
other fellow hadn't bought imaginary
wheat? This is commonly known as
dealing in futures, and is gambling.
How to cut it out without cutting out
the protection for the local elevator
whether it be line, independent or
farmer owned, we do not know. Pos
sibly some means could be found to
limit the volume Of imaginary sales,
still leaving the buyer the chance to
hedge.
Our correspondent says hedging
simply benefits the buye. and, specula-
tor. In a sense he is right. But
the buyer who hedges is in no sense
Spectator. He is just the oppo-
site. He is playing absolutely safe,
and depending only on his actual
known margin of profit. The Record
has said that this is a protection for
the farmer. And we believe we are
right. Just remove this hedging and
what will happen to the farmer? His
wheat will be just like potatoes. It
will have an inherent value, all right,
but he can't simply take load to
town and know that he is going to
get the cash in return. Cut out the
future trading, and the farmer will
wait for his money until the wheat is
actually sold for use to somebody.
and it will be up to him to find that
somebody.