The Manning times. [volume] (Manning, Clarendon County, S.C.) 1884-current, 1922-04-19
WHY THE FARMERS OPPOSE
THE GRAIN EXCHANGE
He Believes 1t Is Used to Manipulate
Prices at His Expense
(By Earl ChriStmas)

Farmers have made frequent pro-
test against the system through which
they must market their wheat. Diff
fercnt practices of the grain cX-
changes have stirred them to revolt
But nothing connected with the whole
system has aroused such discussion as
the excessive speculation that is car
ried on in grain futures"
A future" as the term is general
~ used, is a contract or the purchase
and sale of grain to be delivered dur
ing some future month. The agree
ment specifies the time and the price,
but payment, as we'll as delivc' v, is
postponed.
The man who sells the future may
not have the grain which he agrees to
deliver. He may never have the ac-
tual grain. He may think that the
market is going to fall before the
time for delivery and expect to buy
another future, or contract for wheat,
at cheaper price, and thus reap a
profit in balancing the two transac-
tions. In other words, he is speculat-
ing from day to day on the future
price of wheat. Trading in these fu-
lures may begin months before the
harvest, often long before the crop is
planted even. Settlements arc made
by the payment of differences when
the time for delivery arrives.
The future market is used also as
a protective measure. Since the price
of cash grain and the price of the
future usually rise and fall together,
dealers when making cash purchases
or sales protect themselves by stimuli
tancous future transactions on the
other side Of the market. This is
called "hcdging."
A country elevator may buy 5000
bushels Of wheat one day at the mar
ket price for that day. Before it can
get that grain sold on the Minneapol-
is market, however, the price may be
10 cents lower, or even more. TO
guard against that, the elevator man,
when he makes his days purchase,
wires to his broker in Minneapolis to
sell 5000 bushels of futures. When
his actual grain arrives at the market
some time later, he also closes out
the future transaction by buying 5000
bushels in other futures to satisfy his
earlier contract
If the market has risen, the clcva-
tor man has made money on his cash
wheat, and lost on his futures. If the
price has fallen, he has lost ON his
money on the future transaction. In
any event, the gain on one usually
Just about balances the loss on the
other. The "hcdgc" thus acts as
kind Of insurance. The dealers at the
terminal and the millcrs use the same
plan OF hedging their purchases.
But hedging forms a small part Of
the trading in futures. How cNtcn-
SiVc speculation on the grain CX-
changes is, has been the subject of
much discussion. 1t reaches sums
that are astounding TO those mfamil-
iar with the practice of the pit"
The Federal Trade Commission, after
a study Of the 1911 revenue tax on
futures, determined that the trading
IN grain futures for the average year
for the Chicago Board Of Trade was
l8,l III 400, 900 bushels. l.. +. Gates,
former president of the Chicago
Board Of Trade and Professor James
f. Boyle, Of Cornell University, who
made Il study Of the question, put the
number at 100000 900 bushels.
The amount Of actual grain shipped
into the Chicago market is about 3d.
100000 bushels a Yca". In other
words, the number of bushels Of fu-
lures dealt in on the Chicago market
- ~ times as great as the number Of
bushels Of grain received. Half this
trading is in wheat. I'm this Chicago
pit--just a little bit Of space filed
with gcSticulating and shouting men
three times as much wheat is
bought and sold on these futures as
is produced in the whole world. The
average yearly receipts of wheat at
Chicago do not exceed G5,OOO,O
bushels. Yet at least 10000, 100000