Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1922-04-25
MANIPULATION OF wheat
Why Farmers Object to the Social
ed Exchange,
SYSTEM The SAME As With COTTON

and Commissions Amount to Twelve
BiIiions-eambIers Object to Sales
of the Real Article by tho Farme-:
Themselves
Earl Christmas in the Dearborn 1ndc-
pendent.
Farmers have made frequent protest
against the system through which they
must market their wheat. Different
Z practices of the grain exchanges with
the whole system has aroused such
discussion as the excessive speculation
that is carried on in grain futures"
A future" as tho term is generally
used, is contract for the purchase
and sale of grain to be delivered dur
ing some future month. The agree
iIfnent specifics the time and the price,
but payment. as well as delivery, is
postponed ..-.
The man who sells the future may
not have the grain which he agrees to
deliver. He may never have the actual
? grain.r He may think that the market
I is going to- fan before the time for
deliver and expect to buy another
future, or contract for wheat, at a
cheaper price, and thus reap profit
in balancing the two trapsacttcns In
other words. he is speculattng from
day to day on the future price OF
wheat. Trading IN these futures may
begin months before the harvest, often
y long before the crop is planted even
Settlements are made by the payment
of differences when the time for deliv
cry 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 simultaneous
future transactions on the other side
of the market. This is called "hedg-
% ing" h
A country elevator may buy 5000
bushels Of wheat one day at the market
yplice for that day. Before it can get
that grain sold on the. Minneapolis
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 con-
o'tract..' - ". - =. ''-- 81. =! .. .....
sIs'If the market has risen, the elevator
=, man has made money on his cash
wheat, and lost on his futures. If the
jeprice has fallen, he has lost on his cash
transaction. In any event, the gain on
. one usually just about balances the
% loss on the other. The hedge" thus
. acts as kind, of insurance. The
-. dealers at the terminal and the millers
& use the same plan Of hedging their
purchases.
But hedging forms spall part of
the trading in futures. How extensive
: speculation on the grain exchanges is,
has been the subject Of much discus
sion. 1t reaches sums that are. as
founding to those unfamiliar with the
practice Of the pit" The Federal
-" Trade Commission, after a study of the
1914 revenue tax on futures, determin-
y ed that the trading in grain futures for
the average year for the Chicago
Board of Trade was 1S,414,OOO,O00 bu
shells. L. F. Gates, former president of
the Chicago Board of Trade, and Prof
essor James E, Boyle, Of Cornell Uni
versity, who made study of the ques
tion, put the number at 10000, 900, 900
bushels. 49,.
The amount of actual grain shipped
into the Chicago market is about $685.
100000 bushels year. In other words,
the number of bushels of futures dealt
in on the Chicago market is 81 times
as great as the number Of bushels of
grain received. Half this trading is in
wheat. In this Chicago pit-just
little bit Of space filed with gesticulat-
ing and shouting men-three times as
much wheat is bought and sold on
stneSe futures as Is produced In tne
whole world. The average yearly re-
ceipts of wheat at Chicago do not eX-
ceed 65,OOO,OOO bushels. Yet at least
10,OOO,0OO,000 bushels are bought and
sold in the pit. Deliveries are rarely
made on the contracts. Some traders
have estimated the actual deliveries of
wheat at less than one per cent.
Minneapolis is greater cash wheat
market than Chicago, but trading in
futures is much smaller, amounting to
about 1,4OO,OOO,OOO bushels a year, ac-
cording to the Federal Trade Commits
sion. The great futures market is CEN
tered in the Chicago pit.
We have the statement of Senator
Arthur Cappers paper that "it is be-
coming more and more evident that the
grain pit of the Chicago Board of
Trade is the most colossal gambling
hell the world has ever known" Sen
ator Capper says the 1920 corn crop
was sold 10 times over before it was
marketed, that farmers lost millions
and the lambs" who played the game