CEREALS IN COMMERCE 575 



to pay that price on any day in the month that the wheat 

 is delivered, and, if at Minneapolis, he must accept No. 1 

 Northern Spring or No. 1 Hard Spring ; or No. 2 Northern 

 Spring at a discount of 3| cents a bushel under No. 1 

 Northern. The delivery is in the form of a warehouse 

 receipt, which must represent actual wheat in a terminal 

 elevator. 



If B had agreed to pay 80 cents a bushel in May, and 

 wheat is actually selling then at 75 cents, he loses 5 cents 

 and A gains 5 cents a bushel. If in the meantime, B 

 has sold the wheat to C at 78 cents, the warehouse re- 

 ceipt passes to C, and B receives no wheat, but gains 

 3 cents over C, and loses 5 cents to A, a net loss of 2 cents 

 a bushel; while A gains 5 cents and C loses 3 cents a 

 bushel. 



Contract grades may differ somewhat at different 

 exchanges. The contract grades for other cereals at 

 Minneapolis are No. 3 corn, No. 3 white oats, and No. 1 

 flaxseed. At Chicago, St. Louis, and Kansas City, the 

 contract wheat grade is No. 2 Red Winter, to which is 

 now added No. 2 Hard Winter at the two last named 

 markets. The usual months during which grain sold on 

 contract is made deliverable, are May, July, September, 

 and December. 



636. Hedging. It may not have happened that B 

 lost in his entire business, even though his net loss in this 

 deal was 2 cents a bushel. At the same time of his 

 purchase from A, he may have wisely put a check on a 

 possible loss, by contracting to sell to D the same amount 

 of wheat the same month, that he purchased from A, and 

 at the same price. This operation is called " hedging/' 



The practical advantage of hedging in regular business 

 is great. A miller may make a sale of flour for delivery 



