THE PRICE OF WHEAT 245 



are settled through the clearing house, which is the same in 

 principle as that of a bank or stock exchange. If A buys 

 wheat from B and sells the same quantity to C, the clearing 

 house settles both contracts for him by having B deliver to C. 

 The great bulk of transactions are settled in this manner, which 

 involves only the payment of differences. The latter may arise 

 from differences in amount or grade of wheat bought and sold, 

 or from differences in price. Thus, if a speculator buys May 

 wheat in April, he can avoid having the actual grain delivered 

 to himself by selling the same quantity of wheat before the date 

 of maturity of the contract. The man who buys wheat for 

 May may do so in two different ways : he may buy actual wheat 

 and store it until May, or he may buy a future. In the same 

 way, the seller for future delivery may sell actual wheat, or 

 he may sell short and cover the sale before the date of maturity. 

 If the speculator has bought May wheat, and wishes to hold the 

 grain longer than until that date, he can do so by selling his 

 May wheat at the date of maturity, and at the same time buy- 

 ing July wheat. He will pay the cost of storage, and he will 

 pay or receive the difference in price, according as July wheat 

 is higher or lower than May wheat. Speculators as well as 

 dealers sometimes buy actual wheat and store it in anticipation 

 of a rise in price. Contracts calling for immediate delivery are 

 called "cash" or "spot" sales. 



General Warehouse Receipts. It is obvious that a commodity 

 can be the subject of extensive "future" dealings only on 

 condition that it has the representative quality. Early lake 

 and canal shipments of wheat were sold ahead by sample "to 

 arrive" and "for shipment" as an insurance against fluctuating 

 prices, but the system of grading and general receipts alone 

 made possible the real future, which is the great modern con- 

 tribution to the machinery of speculation. These general re- 

 ceipts are usually reliable, although at least one gigantic swindle 

 has been perpetrated by means of fraudulent warehouse re- 

 ceipts. From the beginning, however, the receipts have been 

 considered as good as the wheat which they represented. In 

 other words, wheat had become a perfect representative com- 

 modity. Being a staple article when classified, receipts issued 

 against graded wheat are as current and negotiable as a bank 

 check. They have the same meaning in Liverpool or Antwerp 



