Evening star., 1926-09-26

New York now has a new trading
exchange in the form of a grain
futures market. Hitherto Chicago
has been the great grain market
of the United States, hut it seems
more than likely that New York will
supersede the Western city because
of its greater wealth and greater
numbers of traders.
Trading in futures. whether OF
graf cotton. or any other commodity.
has been much criticized as a form of
gambling. but economists defend the
practice as tending to stabilize the
price and inure to the benefit of both
producers and consumers.
The theory on which this is based
is that the traders are willing to carry
the risk of holding the product, or
At least contracts calling for delivery
They put up the money and assume
the liability. This system provides
a market and takes from the farmer
the burden Of financing his crop
Were it not for the futures market
II would he necessary for the farmer
to advance much more money than
now is required of him. In view of
the impoverished condition of many
farmers this would be out of the ques-
tion.
Under the prevailing system of
trading In grain futures the farmer
need assume no risk whatever: the
risk of finding a market is borne by
the traders.
The new wheat pit in New York will
t,, tI.hn l1It
also in the Cana dia n crop. Deliveries
are to he made al Buffalo. which has
ca pa cious elevator facilities and is
convenient shipping point both for
the American and the Canadian wheat
fields. The American wheat can
come down the Great Lakes to Buff
falo and the fields of Canada also are
contiguous. Buffalo ia an important
milling point. where wheat may he
ground into -four. and also it is ad-
vantageously situated for export. The
st. Lawrence River and the Erie
Canal afford access Of the sea.
Canadian wheat will he brought In
in bond. Under existing law it Is pos
sible TO bring commodities into the
United States without payment of
duty. provided they are to he re-ex-
ported. Thus. the Canadian wheat
NAV he traded in on the new grain
futures exchange in New York and ac-
tually delivered at Buffalo. there to
he miled into -four and re-eXported,
without payment Of duty.
Buffalo has elevator capacity for the
storage Of thirty million bushels Of
grain. The city also has milling
capacity equal to that of Minneapo-
lis, for many years the leading city
of the country in that respect.
Trading in Futures Intricate.
Trading in futures is a rather in
tricate business. but there are certain
funda mental rules governing It..
Hedging Ia one Of the more important.
A cotton spinner. for example, will
buy A cargo of cotton to spin into
cloth He will pay for 1t price which
he thinks will nable him to realize
profit. However. knowing the ex-
isencies Of business. he recognizes
the possibility Of the price of cotton
and. therefore. Of cotton cloth. declin-
ing. So he goes into the market and
buys cotton futures: that is. cotton
for future delivery. II, by the time
he has spun his cotton into cloth. the
price Of bulk cotton has declined. he
can sell his future contract and re-
coup his losses.
Dealing in any sort of futures is
somewhat artificial A trader will buy
100 bales Of cotton without the re-
motest idea Of ever having it deliv-
cred. There doubtless are many deal
ers In cotton and wheat who never
have actually beheld bushel of wheat
or a bale Of cotton In their lives. What
the purchaser has is a slip of paper
saving that he owns certain wheat or
cotton. What he sells when he is
ready to is not the wheat or the cot
ton but the slip Of paper. But his
operations establish the market price
and. in the long run, doubtless dc
much good TO the producer. II the
farmer had to depend on the cross
roads store to buy his wheat he would
live in considerable uncertainty With
the Chicago and the New York wheat
pits in operation he can be assured
that there always will he an active
market for his product and orga nized
facilities for handling it.
An interesting feature of the New
York. grain pit ia that all grades of
wheat below No. 2 have been barred.
This simplifies the trading materially.
Grades have been established by the
United States Department of Agri-
culture and are enforced by law. The
grades below No. are of inferior
quality and are unlikely to be ac-
lcepted BY -four millers or by foreign